How our Economy Works
In this engaging video students learn that people work to earn money so that they can satisfy their basic needs and wants, and that everything we spend money on is either for goods or services. They learn what a job is and the difference between production workers and service workers. They are introduced to the concepts of saving and banks.
Learn why we work and why we spend.
- Students will know how people earn money. People earn money by working at jobs.
- Students will understand the difference between producers and consumers.
- Producers are those people who make or grow goods to sell, or those people who sell services. Goods include computers, automobiles, food, and clothing. A service is a job that is performed to help others. For example, police officers, mail carriers, dentists, and teachers all perform services.
- Consumers are those people who buy goods and services. Note that a person can be both a producer and a consumer. The money producers earn for the work they do is called income. This income allows producers to become consumers and buy goods and services.
- Students will know that because money is scarce, consumers must choose between buying things they need and buying things they want. Every consumer should ask himself, "What is most important?" and "What can I do without?"
- First, consumers should make sure they have the basic needs; these are food, clothing and shelter.
- Wants are things that people would like to have, but they don't need them to live. Wants include computers, vacations, and haircuts.
- Students will understand that consumers have to make tradeoffs. This means that they have to forego buying certain goods and services, so they may be able to afford other goods and services.
- Students will realize that consumers must make informed decisions when they buy goods and services. In the video, Kelsey was looking for a bicycle helmet. However, there were a variety of helmets from which to choose. So she had to compare the price, quality, and features of each of the helmets. In order to do that, she had to inform herself by reading and asking questions about the different helmets. Another way consumers can get information is through advertisements. However, people should understand that advertisements are tools used by producers to entice consumers into buying their products. So consumers may not want to depend on advertisements as their sole source of information.
- Students will understand the importance of saving money. People save money so they can pay for goods and services that are expensive. For example, people may need to save for weddings, cars, computers, houses, and/or college. People also save so they have money to spend in case of an emergency, like a flat tire.
- Students will realize that banks allow people to save money in a safe environment. A bank will keep a large or small sum of money for an individual. However, it will not simply store the money it is given. The bank will use the money to make loans. In turn, the bank will pay a fee to its customers for letting it use their money.
- Students will understand it is important not to waste money. Wasting money includes buying things that will not be used.
- To spend or not to spend: Prepare three pictures of items the students may wish to purchase: one should cost $150 (a 13" television); one should cost $2500 (a trip to Hawaii); and one should represent an unplanned expense (a $90 automobile tire). The unplanned expense should remain hidden from the class. Tell the students that they each have $150, and ask them what they will do with the money. Will they buy the television immediately? Or will they save their money, so they can pay for the vacation some time in the future? Some students may decide to save for a long time, so they can purchase both the television and the vacation. Once the students finish making their plans, pull out the picture of the tire and inform them that while they were driving home from the electronics store/travel agent, they had a flat. Did they save any extra money to pay for unexpected expenses?
- Advertisements: Have the students bring in advertisements. Select a few and show them to the entire class. Ask the students to note the similarities and differences. Do they use bright colors and pictures? How much information about the product do they actually provide? Have the students discuss if they think advertisements with bright colors and cool pictures influence consumers. Then, ask the students if they should always depend on advertisements as their source of product information. See if they can come up with different sources of product information.