Economics Vocabulary

Goods – tangible items that people wantStudent definition – a good is something people want that they can touch and hold.Example: Any item you can buy at a store is a good.

Services – activities that satisfy people’s wantsStudent definition – a service is something that one person does for someone else.Example : Washing a car, fixing a lawn mower, cutting hair, or teaching students are examples of services.

Consumers – people who satisfy their wants by using goods and servicesStudent definition – people who buy goods and servicesExample: When Sarah purchased a dress, she was a consumer.

Producers – combine productive resources to make goods and provide servicesStudent definition – people who make goods and provide servicesExample: A mechanic is a producer of car repair services.

Productive Resources – all natural, human, and capital resources used in the production of goods and servicesStudent definition – the natural, human, and capital resources we need to produce goods and servicesExample: Steel, plastic, different types of workers, and many kinds of tools and equipment are some of the productive resources necessary to produce a car.

Natural Resources – “gifts of nature” necessary for production, present without human interventionStudent definition – things found in nature that we use in productionExample: Oil, water, air minerals, wild animals, and land are examples of natural resources.

Human Resources – “labor”, represents the quantity and quality of human effort used in productionStudent definition – the people who work in jobs to produce goods and servicesExample: Line workers, secretaries, managers, and engineers are examples of the human resources used to produce an automobile.

Capital Resources – goods that are produces and used

to make other goods and servicesStudent definition – special goods such as tools, equipment, machines, and buildings which are used to produce other goods and servicesExample: The school building and all the equipment in it are capital resources needed to produce education.

Entrepreneur – people who organize other productive resources to make goods and services. He/she assumes the risk of economic lose and gain profits if they are successfulStudent definition – people who take risks to start a business. They have to organize all of the productive resources to produce goods and services.Example: Henry Ford was an entrepreneur who used his personal savings to design a factory which produced automobiles on an assembly line.

Scarcity – not being able to have all of the goods and services that one wants, it exists because there are not enough productive resources to produce all that people want. Because of scarcity, people must make choicesStudent definition – not being able to have everything that we want. Scarcity forces us to make choicesExample: When you go shopping, your limited income forces you to make choices. You can’t buy everything you want.

Opportunity Cost – a choice is the value of the best alternative given upStudent definition – when you make a decision, the most valuable alternative that you don’t choose is your opportunity costExample: Shanika wants to be a nurse and teacher, but she can’t be both. She decides to be a nurse, so being a teacher is her opportunity cost.

Trade-Offs – means getting a little more of one option in exchange for a little less of something else. Few choices are all-or-nothing decisions; most involve trade-offsStudent definition – getting a little less of one thing in order to get a little more of anotherExample: Jethro loved to buy baseball cards. So when he used part of his birthday money to buy some candy instead, he was trading off cards for candy.

Money – anything used to exchange goods and services, to be effective money must be scarce, durable,

portable, and divisibleStudent definition – money is what people use to buy goods and servicesExample: Many different items have been used as money throughout history including gold, silver, shells, tobacco, and paper.

Price – what people pay when they buy a good or service and what they receive when they sell a good or service; in a free marker, price is determined by supply and demandStudent definition – amount of money that people pay when they buy a good or service. It is determined by the buying and selling decisions of consumers and producersExample: Tabitha paid a price of $1.50 for the pack of gum.

Specialization – when people produce a narrower range of goods and services than they consume; specialization increases productivity and results in greater interdependenceStudent definition – people specialize when they work in jobs where they produce a few special goods and services. When people specialize, they produce more but they also depend more on one anotherExample: Jason is a mechanic. He gets his hair cut at Joe’s Barber Shop. Joe goes to Jason to get his car fixed. Jason and Joe earn more by specializing, but they must depend on one another.

Interdependence – when people and nations depend on one another to provide for each other’s wantsStudent definition – occurs when people and nations depend on one another to provide the goods and services they want; more people specialize and trade – the more interdependent they becomeExample: Canada and the United States are very interdependent because they trade so much with one another.

Productivity – ratio of output (goods and services) produced per unit of input (productive resources) over some period of timeStudent definition – measures how many goods and services are produced over a period of time; usually measured as output per hourExample: When Maurice purchased a snowblower he greatly increased his productivity – he was able to clean many more sidewalks each day.

Profit – the difference between the sales revenues and all the costs of producing a good or service

Student definition – produce or sell a good or service, your profit is the difference between the money you make when you sell it and all your costs of productionExample: Beatrice received $200 from selling lemonade. She figured all her costs were $125. Her profit was $75.

Role of Government – main role of government in a market economy is to : provide a legal framework; ensure competition; provide public goods, such as road and national defense; and control “market failures” such as pollution and animal extinctionStudent definition – important roles of government in an economy are:

1) Provide laws to help the economy run smoothly2) Make sure there is enough competition among

businesses3) Provide public goods, such as roads and

national defense4) Control bad effects of production (such as

pollution and protect endangered resources)The government gets money by collecting taxes.Example: Enforcing business contracts through the legal system is an important role that government plays in the United States economy.

International Trade – exchange of goods and services among people and institutions in different nationsExports are domestic goods and services that are sold to buyers in other nations.Imports are goods and services that are bought from sellers in other nations.Quotas (limits on imports) and tariffs (taxes on imports) are common barriers to trade.Example: The United States imports coffee and exports wheat.

Additional terms:

Vocabulary Words

3rd grade - Unit 4

GoodsServices

ConsumersProducersProductive Resources

Natural Resources

Human Resources

Capital Resources

EntrepreneurScarcity Trouble is Brewing in Boston –

Colonial Voices: Hear Them Speak

Trade-OffsMoneyPrice

SpecializationInterdependence

ProductivityProfit

Role of GovernmentInternational

Trade

It’s December 16, 1773 and many of the citizens of Boston are furious with King George’s new tax on tea. Young Ethan, a printer’s errand boy, has been given the task of conveying information concerning an upcoming protest meeting. As he makes his rounds through the city the reader is introduced to the goods and services provided by colonial merchants.

A great reference for this lesson is the book, Colonial Voices: Hear Them Speak by Kay Winters. However it is not necessary for the students to have read the book to successfully complete the activities.

Key Concepts: choice, goods, incentive, opportunity cost, producers, scarcity, services, specialization, wants

Introduction

The printer’s errand boy, Ethan, knows that Boston’s 18th Century merchants work hard to provide the growing city with its many goods and services. He also knows that they have many problems and must make choices. If the merchants make the choice to throw the highly-taxed tea into the harbor, will this cause an unsolvable scarcity situation? Will it be possible to meet the wants of the Boston citizen? The solutions to these problems have many possible outcomes as each merchant has his own incentives for dealing with this unique and history making situation. Each time a choice is made an opportunity cost is incurred. Opportunity cost is the next best alternative that is given up when a choice is made.

Resources

A copy of “Colonial Voices: Hear Them Speak” by Kay Winters, Dutton Juvenile (May 15, 2008) ISBN 978-0525478720. If you do not own a copy of this book, you may find it in your school or local library. It is available for purchase online as well.www.amazon.com/Colonial-Voices-Hear-Them-Speak/dp/0525478728

“Daily Life in the Colonies”: An interesting interactive PBS activity.www.pbs.org/ktca/liberty/perspectives_daily.html

Harcourt Brace: This site contains excellent interactives that the students would enjoy.www.harcourtschool.com/

Life in New England: Learn about productive resources in Colonial New England.www.harcourtschool.com/ss1/adventure_activities/interactives/gr5_unit3.html

"What Is It": This site invites students to participate in a guessing game.www.harcourtschool.com/activity/what_is_it/index.html

Economic Glossary: As an economic resource this site defines goods and services.Economic Glossary

Goods or Services: This activity gives the students a chance to demonstrate an understanding of goods and services, and specialization.Good and Services

Colonial Voices Jobs: This activity tests the student's knowledge of the jobs that were popular in Colonial Boston.Colonial Voices Jobs

Making a Choice: This visual activity helps the students gain a better understanding of opportunity costs.Colonial Voices Opportunity Costs Visual

Opportunity Costs Cards: To explain different merchants in Colonial Boston and opportunity costs students will complete these activities.Colonial Voices Opportunity Costs CardsColonial Voices Opportunity Cost Student Question Sheet

PROCESS

Introduce the lesson, if possible, by reading the book “Colonial Voices: Hear Them Speak” by Kay Winters. [NOTE: Reading the book takes about 12 minutes. It is not necessary to read the book to successfully complete these activities.]

2. Inform the students that the merchants in Colonial Boston had to make some very important choices. For example, if they chose to help the Sons of Liberty dump the highly taxed tea in the harbor they would give up the possibility of drinking a favorite beverage.

3. Display the visual "Colonial Voices Opportunity Cost Visual" . (http://www.econedlink.org/lessons/docs_lessons/911_Colonial%20Voices%20Opportunity%20Cost%20Visual.pdf)

Read the introduction on the visual to the students. Then ask them to vote, using show of hands, as to what they think the errand boy will choose to drink with his hot apple pie. Tally the results and record them. Ask the students how they came up with the vote they did. What was their decision-making process? Review incentives as any reward or benefit, such as money, advantage, or good feeling, which motivates people to do something. Ask if they had any incentives to vote the way they did. If so, what were they? Stress to the students that the most voted on option is the errand boy’s choice and that the option that came in second is his opportunity cost. Define opportunity cost as what is given up when a choice is made. When deciding how to spend a resource it is one’s second best alternative; the alternative given up. In other words this is the beverage

he would choose to purchase if the he could purchase his first choice.

4. Explain to the students that they will now assume the role of three different merchants in Colonial Boston as they complete and opportunity cost activity. “Colonial Voices Opportunity Cost Cards” http://www.econedlink.org/lessons/docs_lessons/911_Colonial%20Voices%20Opportunity%20Cost%20Cards2.pdf

and “Colonial Voices Opportunity Cost Student Question Sheet.” http://www.econedlink.org/lessons/docs_lessons/911_Colonial%20Voices%20Opportunity%20Cost%20Student%20Question%20Sheet2.pdf

5. Instruct students to complete the interactive activity.

6. Check for understanding, stressing the economic concept of opportunity cost and acknowledging answers will vary.

CONCLUSION

Upon completion of these activities students should be confident in their understanding of the featured economic concepts of opportunity cost, goods and services, producers, specialization, and scarcity. After this lesson, students should also have a better understanding of decision making, incentives, and wants/needs. This interdisciplinary lesson has the potential to combine the content areas of literature, history, and economics. 

ASSESSMENT ACTIVITY

1. Economic Concepts Anagrams and Definitions

Read the directions to the students concerning the printable activity assessment. http://www.econedlink.org/lessons/docs_lessons/911_Colonial%20Voices%20Edited%20Assessment%20.pdf

Allow enough time for students to complete the 10 questions.

Check for understanding.

[Part I 1. B, 2. C, 3. D, 4. E, 5. A

Part II 1. Specialization, 2. Good, 3. Scarcity, 4. Opportunity Cost, 5. Service]

2. Extension 1. The students will demonstrate an understanding of goods and services and specialization as they complete the “Goods & Services Activity.” You may wish to quickly review the definitions for the concepts as:

Goods- Tangible things such as food, shoes, books, and toys

Services- Actions such as medical care, music lessons, and

haircuts

Specialization - Being an expert in one job, product, or service

[1. service, 2. service, 3. good, 4. good, 5. good, 6. service. 7. service, 8. goods, 9. good, 10. service.]

EXTENSION ACTIVITY

Ask students to check out Life in New England to learn about productive resources in Colonial New England. This is an enrichment activity for students who complete the lessons ahead of others in the class. Here “Colonial Voices Jobs” the students test their knowledge of the types of jobs that were popular in Colonial Boston but may not be well known today.

[1. E, 2. D, 3. F, 4. g, 5. B, 6. H, 7. A, 8. C.]

Source: econedlink

http://www.econedlink.org/lessons/index.php?lid=911&type=educator

Economic Spotter:

Trade in Colonial History

Students take a trip back in time and spot economic concepts in a historical fiction tale. This time frame features Boston Harbor around 1680.

Key Concepts: exchange, specialization

INTRODUCTION

Would you like to go back in history in a time machine? Would you be able to spot economic concepts? We know that economics helped shape our history, but can you recognize those concepts when you read about history? You are going to take a time machine back to Boston Harbor in 1680. Your job is to be an economic spotter and see if you can recognize trade as it happened in 1680. You are going to keep a list of different kinds of trade that you find in the story. Then you are going to explain in paragraph form what trade is and how trade and specialization might have helped people in the colonies.

RESOURCES

Time Machine-U.S. Mint Activity: This website discusses the history of coins and contains various information regarding current and past coins while including activities about coins. (This link requires the use of Internet Explorer, if you are not using Internet Explorer use the colonization activity).www.usmint.gov/kids/timeMachine/

Colonization Activity: For more information about trade and trade specialization students can participate in this interactive activity. Colonization activity

Boston Online: History: This site provides links to webpages that will provide history on the Boston and Boston Harbor.www.boston-online.com/History/

PROCESS

1. Tell the students that they are going to be given a chance to go back in history on a time machine. This journey is going to take them back to Boston Harbor in 1680, but their job is to be an economic spotter. Can they spot and explain economic concepts within a historical time frame?

2. Discuss trade. When two people exchange goods and services or money, it is called trade.

And trading goods and services with people for other goods and services or money is called exchange.

Have you ever traded something with another person?

Were you and the other person happy after you traded?

3. Explain that when people trade voluntarily -- because they want to -- both parties usually think that they are better off after the trade. You should never trade something when you are going to be unhappy after the trade. You should be better off after the exchange, or you shouldn't have traded.

Did you ever use money as an exchange for candy or gum?

Were you happy that you exchanged money for those goods?

Was the store happy with the money that you exchanged for the candy or gum?

4. Time Machine-U.S. Mint Activity. (This link requires the use of Internet Explorer, if you are not using Internet Explorer) use this Colonization activity) and keep a list of all the ways trade is used in the story. (http://www.econedlink.org/lessons/index.php?lid=301&type=educator)

CONCLUSION

Discuss the following questions with the students:

[NOTE: Click here to learn more about Boston's history.] (http://www.boston-online.com/History/)

1. Why was Boston Harbor important to the colonies? [It was a good harbor city and many goods were exchanged there.]

2. What were the ships coming into Boston carrying? [Goods from other countries and ports, such as tea, and maybe furniture, cloth, dishes, rum, etc.]

3. What were the ships leaving Boston carrying? [They were carrying furs, animal hides, and crops.]

4. Where did the furs come from? [Fur traders traded wampum for animal pelts and then the father bought them from the fur traders. The father then sold the pelts to merchants.]

5. Why could the Massachusetts Bay Colony specialize in beaver pelts? [There were a lot of animals in the colonies and the Indians would trap them to trade for wampum.]

6. What is a shilling and what did it get exchanged for? [A shilling is a coin and it was used to buy a packet of tea.]

ASSESSMENT ACTIVITY

Go back to the Time Machine activity and review what you have learned. (http://www.usmint.gov/kids/timeMachine/)

Write a paragraph in which you tell what exchange is and what sort of exchanges took place in Boston, 1680. Tell how specialization helped people in the colonies trade with England.

This is ELA Common Core informational/explanatory writing. Examine a topic and convey ideas and information clearly.

o Introduce a topic and group related information together; include illustrations when useful to aiding comprehension.

o Develop the topic with facts, definitions and details.

o Use linking words and phrases (e.g., also, another, and, more, but) to connect ideas within categories of information.

o Provide a concluding statement or section.

Source: econoedlink

http://www.econedlink.org/lessons/index.php?lid=301&type=educator

Economic Spotter: In Revolutionary Times

Students take a trip back in time and spot economic concepts in a historical fiction tale. This time frame features Valley Forge in 1778. Take a look at the money used by the patriots and find out why some money couldn't buy a dime!

Key Concepts: Functions of Money

INTRODUCTION

What does money look like? What is it worth? Can we take our money to other countries and spend it? What did our money look like a long time ago? To explore these questions, you are going to travel in a time machine back to Valley Forge in 1778. Your job is to be an economic spotter and see if you can discover why some money could not be spent back then. If you couldn't spend it, is it money? That's an economic mystery!

RESOURCES

U.S. Mint Time Machine Activity: This website contains information about current and past coins and includes coin related activities.(This link requires the use of Internet Explorer, if you are not using Internet Explorer use this activity)www.usmint.gov/kids/timeMachine/

History of Money: The Federal Reserve Bank of Minneapolis provides a more detailed history of money.www.minneapolisfed.org/community_education/teacher/history.cfm

50 State Quarters Program: This page on the U.S. Mint website provides information on the 50 state quarters program as well as images of each states quarter.www.usmint.gov/kids/coinNews/50sq/

Colonial and Continental Currencies: Images of Colonial and Continental Currencieswww.sf.frb.org/currency/independence/initial/index.html

PROCESS

People have used many different items for money including seashells, beads, tea, fish hooks, fur, cattle. As long as both parties accepted these items in trade, everything was fine--although paying someone in cattle is pretty messy if you need change! Practical difficulties of this sort prompted people to devise better forms of money.

People in different countries tried different things. Coins were made and traded. That worked pretty well because the coins were made with valuable metals and were worth the amount of gold and silver they were made with.

Paper money was a different story. It was made with paper, obviously, and

paper was not very valuable. It was called REPRESENTATIVE money and it REPRESENTED a certain valuable item, like gold or silver. REPRESENTATIVE money was a lot easier to carry than what it represented!

At one time paper money represented tobacco leaves in United States. It was a lot easier to carry around than those big tobacco leaves! Do you think the "tobacco note" would have been accepted in Europe? [Probably not, because there would not have been a way to trade it in for the valuable tobacco. However, if Europeans could have found another party that would accept tobacco notes, then they could have used such notes in transactions.]

After people started to accept paper money, governments started to issue the currency and declared it to be legal. "Fiat money" is money declared by a government to be valid.

Countries create their own money. Even though Canada uses dollars, and the United States uses dollars, those dollars look different. The dollar of Canada is issued in Canada and it is accepted everywhere in Canada. The United States dollar is issued in the United States and is accepted everywhere in the United States. When you leave the United States and enter Canada, you need to exchange your United States dollars for Canadian dollars if you want to shop, buy gas, or eat in a restaurant. Then when you return to the United States, you need to exchange your Canadian money for American money so that you can buy goods and services here.

At one time in America, people used money of all kinds, from different countries, and the money issued in America was not accepted! If it was not accepted, was it money? Let's look at the purposes, or functions, of money.

Money serves these three purposes (functions):

Money is a "Medium of Exchange." That means people accept money in trade for goods and services. You cannot take play money and buy your school lunch, because the cafeteria won't accept it. You can't put play money in a vending machine and get a snack because the machine won't take your play coins. Money is money only when both parties will accept it as a trade.

Money provides a "Standard of Value." That means that you can use money to measure the value of an item. A video game that costs $40 takes twice as much money to buy as a $20 video tape. That only makes sense! But what if our money didn't provide a standard of value? We would not be able to compare prices and find the best buy!

Money also provides a "Store of Value." This means that you can save your money and use it in the future--its value will still be there. Wouldn't it be horrible if one day someone told you that no stores or banks would accept your pennies? What about all that money in your piggy bank?

Now that you know all about the functions of money, let's see what purposes money served at Valley Forge during the Revolutionary War.

Go to the time machine website (http://www.usmint.gov/kids/timeMachine/)

and think about the money you hear about in the story. (This link requires the use of Internet Explorer, if you are not using Internet Explorer use this activity)

[NOTE: Click on the following link for a longer explanation of the history of money .] (http://www.minneapolisfed.org/community_education/teacher/history.cfm?)

CONCLUSION

At Valley Forge, the Continental wasn't a medium of exchange. This lesson teaches us that, for any item, if people accept it as money, if it has a standard of value, and if it can be saved and used in the future, then it is performing the functions that money should perform and it can be counted as money.

Extension

Check out the following link for images of Colonial and Continental Currencies . (http://www.frbsf.org/currency/independence/initial/index.html)

Source: econedlink

http://www.econedlink.org/lessons/index.php?lid=315&type=educator

Week One – Video Clips

Video Clip – Trade, Exchange, and Interdependence

Econedlink

http://www.econedlink.org/interactives/index.php?iid=196&type=educator

Video Clip – Productive Resources

Econedlink

http://www.econedlink.org/interactives/index.php?iid=191&type=educator

Video Clip – Demand

Econedlink

http://www.econedlink.org/interactives/index.php?iid=210&type=educator

Money Phrases:

Words That Mean Money

small change dough

funny money rainy day fund

big money bread

one G payoff

nifty fifty wad

a buck score

loose change pile

pin money loot

spare change lump sum

a clam haul

purse strings found money

nest egg

Words That Mean No Money

broke zip

on the dole penniless

Words or Phrases that Adults Use

When Talking About Money

investment tightwad

money market account

allowance penny-pincher

money doesn’t grow on trees

cash taxes

ask your father

check credit card

ask your mother cheap

bank account

rich savings account

Additional Glossary

Bank seal – seal on bill that shows the federal district where the bill comes from

Bonds – a loan you make to a company in return for interest

Bureau of Engraving and Printing – part of the Treasury Department that makes bills

Capital – money you invest

Compound interest – interest paid on capital and interest calculated daily

Counterfeit – imitation or fake

Credit history – record of how you spend your money and pay your debts

Diversification – method of spreading portfolio risk

Dividend – sum of money paid to investors out of company profits

Federal Reserve System – national banking system in charge of money supply in the US

Great Seal – seal on bills that symbolizes different parts of the US government

Interest – money paid when you loan your money for use by a bank or company

Mint – part of the Treasury Department that manufactures coins

Mint mark – letter on some coins that shows at which mint they were made

Mutual Funds – pools of money used to buy stocks, bonds, and other securities for a group of investors

Profit – money that’s left after a person or company has paid its bills and expenses

Risk – the possibility that you’ll lose money when investing

Secretary of the Treasury – head of the Treasury Department

Securities – general term referring to stocks and bonds

Serial number – Series of one prefix letter, eight numbers, and one suffix letter on each bill; newer bills have two prefix letters

Share – the unit of a company that you uy as an investment

Simple interest – interest paid on capital only

Stockbroker – an expert in buying and selling securities

Stockholders – people who own shares in a company

Stocks – shares of a company that you may buy

Treasurer of the US – Assistant to the Secretary of the Treasury

Treasury Department – Federal government department in charge of money in the US

Money - Additional Activities

When were the State Quarters released? What is unique about each quarter? Research and share your findings.

There are five phrases stamped on every American coin. See if you can find out all five and share your findings. Why do you think these five are on every coin?

Economics and Financial Literacy Web Sites

COLONIAL DAY MARKETPLACE

http://www.ga.k12.pa.us/academics/ls/3/Colonial/ColonialDay/market/index01.htm

Money (video)

http://www.econedlink.org/interactives/index.php?iid=189&type=educator

Incentives (video)

http://www.econedlink.org/interactives/index.php?iid=188&type=educator

Trade, Exchange and Interdependence (video)

http://www.econedlink.org/interactives/index.php?iid=196&type=educator

Entrepreneurs (video)

http://www.econedlink.org/interactives/index.php?iid=212&type=educator

Demand (video)

http://www.econedlink.org/interactives/index.php?iid=210&type=educator

Productive Resources (video)

http://www.econedlink.org/interactives/index.php?iid=191&type=educator

Opportunity Cost (video)

http://www.econedlink.org/interactives/index.php?iid=190&type=educator

Costs and Benefits of Saving (video)

http://www.econedlink.org/interactives/index.php?iid=250&type=educator

Never Too Young: Personal Finance for Young Learners (video)

http://www.econedlink.org/interactives/index.php?iid=265&type=educator

Arthur’s Pet Business by Marc Brown

To prove he is responsible enough to own a pet and to repay a debt of money to his sister, Arthur decides to start a pet business – providing pet care service to community members. He advertises by putting up signs around the neighborhood. Business is very good. Arthur not only earns a profit (from which he pays his debt) but also gains a pet when one if his “clients” has puppies under his bed.Key Economic Concepts: Goods, Income, Choices, Profit, Services, Wages, Entrepreneur

Describe the differences and similarities between goods and services. Have students brainstorm and share aloud. Post this on an anchor chart.

As students read the story, have them identify goods and services shown in the illustrations or mentioned in the story.

Define entrepreneur. Discuss how Arthur fits this definition.

Give each student a copy of the attachment – Income Interview. Students should interview a minimum of five people at home and/or in the community. They should ask what work the people do to earn an income and then complete the interview form.

As a class, analyze and discuss the data collected in the interviews. Create a bar graph using the data. Determine which people provide a good and which provide a service. Were any of the people interviewed entrepreneurs? Be sure to specify this information in your graph and label it correctly.

Questions to Ask Students about the book:

1) What were Arthur’s job choices?2) Why did Arthur start a business?3) What is the difference between a good and a

service?4) Was Arthur providing a good or a service?5) Is Arthur considered an entrepreneur? Why?6) Do you think it more difficult being an entrepreneur

or working for someone else? Why? Why do people want to be entrepreneurs?

Key:

1) (work in a bank or a junkyard)2) (to earn income so he could repay a debt and prove

he was responsible enough to own a pet)3) (a good is a tangible item; a service is something

someone does for another person)4) (service)5) (yes; he made the choice to organize and manage a

business)6) (probably more difficult being an entrepreneur;

must organize all the productive resources. Must be willing to take a risk. Always requires long hours and much dedication. People like being their own boss. Possibility for much profit)

Extension Activities

Invite an entrepreneur from your community to your school/classroom. Ask he/she how they decided to become an entrepreneur and what gave he/she the idea to create the business.

Charades: On slips of paper, put examples of goods and services. Have a student draw a slip and act out how to produce the good or service. The class guesses what job it is and whether it provides a good or a service.

Start a Classroom Business: Try one that provides a good and then one that provides a service. Compare

and contrast. For example: 1) make packets of note cards with matching envelopes. 2) Be “envelope stuffers” for the principal, school secretary, lunch

supervisor, or other teachers. What was the end result? How would this activity affect the outcome of choosing a job? Have students write about it.

Arthur’s Pet Business – Income Interview

Reporter’s Name __________________________________ Date _________________________

Person Interviewed

(family or community)

What GOOD or SERVICE do you produce to earn an income?

Do you work by yourself? Group? Advantages of working in a group? Disadvantages?

What CAPITAL RESOURCES do you use?

What special training or skills (HUMAN CAPITAL) do you need to do your job well?

How did you decide to do this kind of work? Would you recommend this kind of work to others? Why or Why not?

Spotlighting Entrepreneurs: The Sweet Success of Milton Hershey

Looking for a lesson that ties Common Core Standards in Reading Informational Text with Economics? This lesson spotlights the life of Milton S. Hershey and allows students to learn about the risks and rewards of entrepreneurship through a biographical sketch of one who experienced many bitter disappointments and sweet successes.

Key Concepts: benefit, business, capital, costs, entrepreneur, entrepreneurship, profit, risk

INTRODUCTION

Can you remember to the last time you ate a Hershey's Kiss, a Reese's Peanut Butter Cup, or a Hershey's Milk Chocolate Bar? While enjoying it, did you stop to think about the successes and failures of the clever entrepreneur who made it possible to buy those yummy treats? This lesson will introduce you to the economics of entrepreneurship through the story of Milton S. Hershey.

RESOURCES

Discover Hershey: Milton S.Hershey www.thehersheycompany.com/about-hershey/our-story/milton.aspx (Optional: The story will be provided in the "Process" section of the lesson.)

A&E Biography of Hershey: Runtime 45 min

www.biography.com/people/milton-hershey-9337133

NOTE: This website may be difficult for students to understand. Please use it as a resource. Post on Entrepreneurship from the Library of Economics and Liberty.

www.econlib.org/library/Enc/Entrepreneurship.html

PROCESS

Tell students that the goal of this "Spotlighting Entrepreneurs" lesson is to help them learn the economics of being an entrepreneur by introducing them to a famous American.

Ask students to describe an entrepreneur. (Allow time for students to share thoughts.) Explain an entrepreneur is a person who accepts the risk of business failure and success. This person discovers new ways to combine resources to provide goods and services that others value in profitable ways.

Ask students if they have ever thought of starting their own business like a lemonade stand. (Allow students an opportunity to share.) Continue the discussion by asking why someone would want to start his or her own business. (Encourage students to share. Responses may include they: see opportunities to help others, like being their own boss, want to earn profits, like being creative, want to introduce new goods in the marketplace, and want to find ways to reduce costs.) Ask students if they think it is easy or hard to start a business and explain why. (Allow students to share but many will probably feel it is hard or challenging. Entrepreneurs do not know if (1) they will be successful or fail, (2) they do not know if consumers will value their product, (3) they do not know if others will help them finance their business to produce/provide goods and services, pay expenses, etc.)

Tell students that today they will learn the economics of entrepreneurship by researching the background of a gentleman who overcame many obstacles and persevered, "kept on keeping on," becoming a successful entrepreneur.

The Sweet Success of Milton Hershey

Milton Hershey was born September 13, 1857, in Lancaster, Pennsylvania. As a child, his family moved a lot as his father started several businesses across the United States. In eight years, he attended seven different schools.

In the 1800's, young boys were often trained to develop skills for a particular job or trade. The training was called an apprenticeship. An apprenticeship allowed boys to learn by watching and practicing a craft. Eventually they would grow into a job they would have throughout their lifetime.

In 1871, Hershey was apprenticed to a local printer who published a German-English newspaper. The printing business was not a good match for Hershey's given his likes, skills, and passions.

Hershey's mother helped him find another apprenticeship. It was with a local confectioner or candy maker, named Joseph Royer. Hershey was 14 years old at the time. Soon, it became obvious that he had a natural talent for candy making and he liked what he was learning. Over the next four years, Milton learned the art and science of creating tasty treats.

When Milton Hershey turned 18, he took a risk and started his first candy business in Philadelphia. As an entrepreneur, there are many costs and risks involved in starting a business. Entrepreneurs work long hours to cover payroll, keep abreast of consumers' changing preferences, and need much financial funding from others. After six years, his first business failed.

Did Milton Hershey give up? No! He had a passion for candy making! So he moved to Denver, Colorado, and took a job with a Denver candy maker to learn more about the candy making business. This time, in addition to developing his skills and receiving great training, he developed a new skill making caramels with fresh milk. After a few months of working in Colorado, he traveled to New York City.

New York City was the largest candy market in the world at this time. People from all over the world traveled to and from New York. Hershey decided to start another business given this large market. Even though he tried hard and invested many hours, his business failed.

In 1886, he returned to Lancaster, Pennsylvania. He was 28 years old, penniless, but still the entrepreneurial spirit lingered.

Milton Hershey took another risk and started a company to manufacture caramels using the methods he had learned in Denver. He needed more tools and equipment. Economists call this capital things used to produce something else. He looked for financing. It was difficult given his past failures.

Hershey began to look for backers who valued his business enough to cover his costs, including the value of his labor and skills. He found one. A British importer of US Candy offered to market Milton's candy outside the United States. Milton received a large order to export. With this order, a local bank found Hershey credit worthy and he had the financing he needed to expand his operation. The risks Hershey and his lending institution had taken finally paid off.

In four years, Milton Hershey and the Lancaster Caramel Company became one of the leading manufacturers of caramels in the United States. The company employed over 1,400 workers. Finally, Milton was able to see a profit in his business. Profit is determined after taking total sales and subtracting all expenses. So, for Milton, that meant he calculated the sales of caramels (prices times quantity) and subtracted all the expenses necessary to run a business (ingredients, tools, equipment, wages for workers, salary for Hershey and other supervisors, rental for the factory, taxes, etc.). The money remaining after expenses was the profit.

Milton Hershey and his cousin, Frank Snavely, attended the World's Columbian Exposition of 1893 in Chicago, an event that changed Milton Hershey's life. A German company was showing how chocolate was produced, and Milton was convinced that this was the future of candy making. Hershey took another risk as he purchased an entire assembly line of chocolate making equipment that was on display, had it crated up and shipped back to Lancaster. Milton, as an entrepreneur, was a change agent in the candy business. When he returned home, he installed the machinery in part of his caramel factory and began making chocolate at a lower cost, making it affordable to more people.

Milton named his company Hershey Chocolate Company. At first, he produced sweet chocolate and cocoa for the flavoring and coating on his caramels.

Then, Milton began mass producing his candy products and selling them to other candy makers for them to profit.

Milton's company was experiencing great success; however he didn't stop and rest. He considered his production alternatives and determined that his resources could best be used in producing chocolates. So, he sold his caramel company for $1,000,000 and shifted his production focus from caramel to chocolate.Hershey continued working long hours to develop the best formula for producing milk chocolate. It was a challenge that would take years of trial and error to perfect. For Milton, money was not his only incentive. He wanted the satisfaction of creating the best quality product for the marketplace at the most affordable price to his customers.

In 1900, Milton Hershey became the first American to discover a formula for manufacturing milk chocolate, introducing the molded milk chocolate bar. It was affordable to the masses, tasted good, and remained fresh for a long time. In the past, chocolate had been a luxury, something only very wealthy people could afford.

Hershey knew that many other industries had utilized mass production to increase the production process, and he decided to apply it to the chocolate business. In 1907, the company added Hershey's Kisses to its product line and followed up a year later with Hershey’s milk chocolate bar with almonds. Hershey packaged his candy to sell in grocery stores, newsstands and vending machines.

In the meantime, Hershey had searched for a suitable location to expand his chocolate company. He decided on Derry Township, Pennsylvania as the perfect location since it was convenient to the port cities that could provide cocoa beans and sugar and was surrounded by dairy farms and a hardworking labor force. Later, the town would be named Hershey in honor of the town's founder.

Hoping to provide for the quality workers he wished to employ and their well being, Milton built the Cocoa House, in the town center which included a store, bank, post office, boarding rooms and a lunchroom. He also provided for a laundry, a blacksmith shop, a printing plant, a café, a department store and a barber shop. Companies were started to supply water, electric power, sewage and telephone service. In 1909, Hershey

even launched a weekly newspaper, the Hershey Press.

Now, let's review what we can learn about entrepreneurs from Milton Hershey:

Earlier we learned that an entrepreneur is "one who draws upon his or her skills and initiative to launch a new business venture with the aim of making a profit. Often a risk-taker, this person is inclined to see opportunity when others do not."

Assessment:

1) What special skills and initiative did Milton Hershey have?

2) What risks did Hershey encounter as an entrepreneur?

3) Entrepreneurs aim at making a profit. Earlier in the lesson, we learned that profit is the money remaining after expenses have been subtracted from sales. Did Hershey always earn a profit? How do you know? (What evidence can you find?)

4) How was Milton Hershey successful?

5) If Milton Hershey had not taken the risks to become an entrepreneur, how might your life be different?

Assessment Key

1) What special skills and initiative did Milton Hershey have? (He had a special talent and much experience in candy making and was determined to create the best products for the market. Candy making was his passion. He invested many long hours and persevered through many challenging times.)

2) What risks did Hershey encounter as an entrepreneur? (He worked long, hard hours. He invested his personal money and financial backing into each business he started. He didn’t know if his product would be in demand.)

3) Entrepreneurs aim at making a profit. Earlier in the lesson, we learned that profit is the money remaining after expenses have been subtracted from sales. Did Hershey always earn a profit? How do you know? (What evidence can you find?) (No, several businesses he started suffered financial losses which caused him to lose those businesses. He did earn a profit in the Lancaster Caramel Company and Hershey Chocolate Company.)

4) How was Milton Hershey successful? (He earned a profit in his last business. He developed a quality product that was affordable to many customers. He shared his success with his employees. He spent his life doing something he loved.)

5) If Milton Hershey had not taken the risks to become an entrepreneur, how might your life be different? (We might not have the chocolate products we have today. His long hours and vision made chocolate affordable for us today and provided consumers with a quality product.)

Milton Hershey is a wonderful example of an entrepreneur. He was a very creative man who was driven to succeed. Even though he faced great challenges, he considered the risks worth the rewards of entrepreneurship. We, as consumers, are the sweet recipients of his hard work. Thank you, Mr. Hershey!

CONCLUSION

This lesson provided us with an opportunity to look at the life of an entrepreneur and learn about the risks and rewards of entrepreneurship. An entrepreneur is a person willing to take a risk to start a business, hoping to make a profit. The rewards of creating new products, recognizing a profit and being successful, tend to outweigh the costs of long hours, responsibility, stress, and the potential of financial loss that an entrepreneur faces when starting a business.

Milton Hershey was a man who loved candy making and was sure he could create a product that the average consumer could afford. It was worth the risks and the costs to produce his product for the marketplace.

EXTENSIONS

Interview a local entrepreneur.

Each student will interview an entrepreneur and find out the risks and rewards associated with starting a business. Challenge students to find out when and why the entrepreneur decided to start his or her own business. (If it is not easy for students to find entrepreneurs to interview on their own time, invite one to class.)

If I Were an Entrepreneur

Challenge students to develop a plan for a business they would like to start. Have them identify the product they would provide in their business, their target market, and "how" they would get started in business.

Investigate Hershey Chocolate Company.

Find out more about Hershey's Chocolate . (http://www.hersheys.com/ads-and-videos.aspx?ICID=HER1266)

Source: Econedlink.org

http://www.econedlink.org/lessons/index.php?lid=1069&type=educator

Entrepreneurs – How to Get Your Ideas “Out There”

As a class, brainstorm ideas that students could choose from to create their own business.

Have the students choose one money-making idea and create a flier that advertises what they are selling. Emphasize the elements that they will want to include in their flier.

Pictures, words and other things that catch people’s attention.

What they are offering. Their qualifications for doing the job. Why customers might like or use what they

are selling. What their good or service costs. How to contact them -- usually a phone

number if they are providing a service.

This is an ideal project for helping students to build word processing, publishing and

other computer technology skills. It is your choice whether the entire project or selected elements of it-such as creating graphics and text-will be completed on the computer. If access to computers is limited, the fliers can also be completed in a more traditional manner with

colored markers and paper. Students can draw pictures or cut them out of magazines.

Post students' completed fliers. Have them report to their classmates their money-making idea and how they would use the flier they have created. Discuss appropriate locations for the fliers.

If your students want extra money, becoming an entrepreneur may be a solution for them. Have them keep their eyes and ears open -- they will be surprised how many opportunities for making money will pop up at home, at school, and in their neighborhood! Keys to a successful entrepreneurial experience are finding something they like to do that is safe and that others are willing to buy; it is also crucial to set a price that will yield a profit, and to spread the news on what they are selling.

Entrepreneurs - Video

This video teaches the concept of Entrepreneurs. Entrepreneurs are willing to risk their own resources in order to sell them for financial gain or profits. They are successful when they provide consumers with goods and services that consumers highly value.

http://www.econedlink.org/interactives/index.php?iid=212&type=educator

Key Concepts: entrepreneur, producers, human capital, profit, risk

How Competition Works

Competition in the marketplace is good for consumers and good for business. Competition from many different companies and individuals through free enterprise and open markets is the basis of the U.S. economy. When firms compete with each other, consumers get the best possible prices, quantity, and quality of goods and services. Antitrust laws encourage companies to compete so that both consumers and businesses benefit.

One important benefit of competition is a boost to innovation. Competition among companies can spur the invention of new or better products, or more efficient processes. Firms may race to be the first to market a new or different technology. Innovation also benefits consumers with new and better products, helps drive economic growth and increases standards of living. Products that are commonplace today once were technological breakthroughs: cars, planes, phones, televisions, the personal computer, and modern medicines all show how innovation can change your life, and increase prosperity.

Competition can lead companies to invent lower-cost manufacturing processes, which can increase their profits and help them compete—and then, pass those savings on to the consumer. Competition also can help businesses identify consumers’ needs—and then develop new products or services to meet them.

For example, your aunt or grandmother probably grew up listening to music played on a bulky cassette or CD player. They might even remember vinyl records or eight-track tapes! Innovation made those players obsolete. Now people—maybe even your parents—are downloading music from the Internet onto small digital audio players. You might have a digital media player that lets you listen to music AND watch music videos and movies. Adults today probably never dreamed of anything like that when they were kids. And who knows what innovations in technology will be available 20 years from now!It’s the Federal Trade Commission’s (FTC’s) job to make sure that businesses are competing fairly—and within the law. The FTC is a law enforcement agency that promotes competition and challenges business practices that could harm competition. It’s their job to make sure consumers have access to quality products and services, and that businesses compete on the merits. The FTC challenges business practices that could result in higher prices, lower quality, fewer products or services for consumers, or those that create unfair advantages in the marketplace. The FTC has lawyers and economists who monitor business

practices, review potential mergers, and challenge conduct that might prevent consumers from getting choice and quality at a fair price. They make sure the marketplace works according to consumer preferences, not illegal or anti-competitive practices.

When the competitive system is operating well, there’s no need for government intervention.The law knows that some arrangements between firms—like competitors cooperating to perform joint research and development projects—may be good for consumers. In these cases, the agreement may even lead to greater competition.

The law doesn’t try to stop all agreements between companies. It disapproves of agreements that hurt competition—for example, that could raise prices for consumers or keep them from getting new and better products. When the FTC sees practices or merger proposals that could harm the consumer or competition itself, the staff acts quickly to protect the interests of American consumers.

Things to Talk About and Do What are some products that have changed in your

lifetime? What role did competition play in those innovations?

Think of a product that you use that your parents didn’t have when they were kids. How has it made your life different or better?

Find a story in the news about a competition issue in the marketplace. What does the industry say about it? What does the government say about it? What do you think?

What to Find Out More?

Federal Trade Commission—Guide to theAntitrust Lawswww.ftc.gov/bc/antitrust

U.S. Department of Justice—Antitrust Divisionwww.usdoj.gov/atr

Kids.gov—Links to sites on money, selling,and marketingwww.kids.gov/6_8/6_8_money_selling.shtml

American Antitrust Institute—Fair Fight in theMarketplace (Video and resources)www.fairfightfilm.org/index.html

National Council on Economic Education—Online lessonswww.ncee.net/resources/lessons.php

Why Competition Matters

Competition in the marketplace is good for consumers—and good for business, too. It benefits consumers by keeping prices low and the quality and choice of products and services high. It benefits businesses by promoting innovation—improvements to make products different—and often, to make them better in ways that consumers want.

More choices, better prices, and higher quality are good for you. But did you know that you have a lot to do with what companies decide to produce and sell? Companies are in business to make money. To do that, they need to make products you want to buy, and sell them at a price you’re willing to pay.

A lot of companies make the same kind of products. How many companies can you think of that make computers, cell phones, cameras, bikes, jeans, or sneakers? And how many stores sell those brands? They all want your business. They compete for your money—and your loyalty—on many levels: price, selection, service, and quality, to name a few. These are probably things you think about, even if you don’t always know you do. Say you want to buy a new cell phone. How would competition help you—and how might companies compete for your business?

• Price: how much does it cost? If the company offered a cheaper phone, might you buy it?

• Selection: does one company offer more kinds of phones that you like? Would you choose the company with the best selection, even if they cost more?

• Service: does one cell phone company have better coverage where you live? Or might they have a store near you, or an easy-to-use online site? Would you choose a phone based on having better coverage and service?

• Quality: is it a great-looking phone but won’t hold a charge? Or maybe you’ve heard it has a reputation for breaking. Would you pay extra for a high-quality phone?

Competition doesn’t mean that everybody wins, though. Take a look at what’s going on at the mall. It may have several “anchor” stores—usually department stores—that sell everything from clothes to cosmetics, toys to televisions, and boots to bedding. The mall also may have clothing and shoe stores formen, women, and kids; specialty stores with furniture, sports equipment, jewelry, make-up, games... you name it. And there’s usually a food court, with pizza, burgers, salads, tacos, egg rolls, ice cream, and blah, blah, blah.

So many choices. How do all these places stay in business?

The answer is (drum roll, please): Not all of them do.• Some don’t offer what consumers want to buy.• Some consistently charge higher prices for merchandise you can get for less elsewhere.• Some are just too much like other stores.• Some don’t have a good selection of merchandise, or appeal only to very specialized tastes.• Some may have low prices, but bad customer service.

So while competition doesn’t mean that every single business wins, it means that every singlebusiness tries to put their best foot forward to win your business—and stay in business. That means it’s good for businesses as a whole—and good for consumers like you!

Things to Talk About and Do• Think about a product you buy. Among price,

selection, service, and quality, what’s most important to you in deciding exactly which one to buy? Does it change depending on the product? Why or why not?

• Imagine you’re selling a product. What would you do to make sure your product can compete and you succeed in your business?

• Think about the last thing you bought, and where you bought it. Why did you choose to buy it there? Is there anything that other stores or online sellers could do to win your business? Why or why not?

Want to Find Out More?Federal Trade Commission—Guide to theAntitrust Lawswww.ftc.gov/bc/antitrust/

U.S. Department of Justice—Antitrust Divisionwww.usdoj.gov/atr

Kids.gov—Links to sites on money, selling,and marketingwww.kids.gov/6_8/6_8_money_selling.shtml

American Antitrust Institute—Fair Fight in theMarketplace (Video and resources)www.fairfightfilm.org/index.html

National Council on Economic Education—Online lessonswww.ncee.net/resources/lessons.php50

Competing for Customers

At the mall, you probably have some favorite stores. Maybe they sell clothes or games; maybe they have a great selection, great prices, or really low prices every once in a while.

How else might stores get your business? Think about what you see when you’re in the mall. Some stores might have special promotions, like “Buy One, Get One Free.” Or frequent shopper programs that let you earn points for discounts on future purchases. Other stores might guarantee they have the lowest price, or offer a free gift with a minimum purchase. Still others may have generous return policies.

For many people, price is the biggest factor in deciding where to shop. Prices are based on many things, such as the cost of materials, but prices are also affected by supply and demand. Prices usually are higher for products that are in high demand or low supply. Think about the holiday shopping season. Isn’t there always a “hot” toy or “gotta have” game or gadget that everyone wants? Sometimes, companies can’t manufacture enough of whatever’s hot to satisfy the demand—or they underestimatethe demand. With supply low and demand high, sellers can charge full price for the items, rather than putting them on sale to move them out the door.

Sometimes, a product is so popular that consumers will put themselves on a waiting list for it. You may have seen news stories about people standing in line and paying top dollar for certain kinds of gaming systems.

Prices also can be related to product quality —and the materials used in production. For example, your rich uncle’s shoes that are handmade from genuine leather are going to cost more than a pair of canvas shoes, mass-produced on an assembly line. Other factors that can affect prices are weather and the availability of supplies used in manufacturing.

Say your dad asks you to buy a loaf of whole wheat bread at one of the bakeries in the mall.He says he paid about $2.50 a loaf a couple of weeks ago. You check out the two bakeries and now, both are charging $3.79 a loaf. That’s more than your dad paid and might show that the two bakeries are not competing based on price.

Could the two bakeries have agreed to charge the same price? Sometimes businesses (illegally) make agreements about price— called “price fixing.” These are some of the most serious business practices the FTC looks at.

But not all price similarities, or price changes that happen at the same time, are the result of price

fixing. They often result from normal market conditions. For example, if you want to buy wheat from a farmer, the price probably will be the same, no matter what farmer you buy from. The prices farmers charge rise and fall without them agreeing on what to charge. That’s because they’re all selling the same product that is affected by the same kinds of conditions. If there’s a drought, the supply of wheat falls, and the price of the available wheat goes up. Bakeries have to pay more for their flour, and that means the price they charge you also will go up.

Things to Talk About and Do Think about places that you often shop. Why do

you go to those places and not others? Can you think of a product that people actually

waited in line to buy? Why was it so hot? Did the idea of supply and demand have anything to do with its popularity? Or its price? Why or why not?

Want to Find Out More?

Federal Trade Commission—Guide to theAntitrust Lawswww.ftc.gov/bc/antitrust

U.S. Department of Justice—Antitrust Divisionwww.usdoj.gov/atr

Kids.gov—Links to sites on money, selling,and marketingwww.kids.gov/6_8/6_8_money_selling.shtml

American Antitrust Institute—Fair Fight in theMarketplace (Video and resources)www.fairfightfilm.org/index.html

National Council on Economic Education—Online lessonswww.ncee.net/resources/lessons.php

Playing by the Rules

Most businesses compete fair and square. They’re tough competitors, but they don’t try to cheat the system – or the consumer. Once in a while, though, business might decide to try to beat the system in ways that break the law: for example, they might try unfairly to keep other competitors out of the market, or work together with a competitor to make more money or corner the market. Illegal practices harm consumers: prices go up and there are fewer choices. The FTC keeps its ear to the ground and investigates when it suspects one of these practices, taking action in court to stop illegal business practices when necessary.

Every contest needs rules, and the antitrust laws are the rules of the competitive marketplace. The FTC enforces the antitrust laws to promote competitive markets and protect consumers from harmful business practices. Here are some examples of business practices that may break the law:

A monopoly is when one company has control over an entire market – like the trusts did over steel and oil. It’s not illegal to have a monopoly; it is illegal to sue unreasonable methods to get a monopoly. For example, if your competitor goes out of business because you sell better stuff at better prices with better service – that’s fair enough. But you can’t sabotage your competitor’s store to put them out of business. That would count as an unreasonable method, and you’d be breaking the law.

Price fixing occurs when competing sellers agree on what to charge. Take the example of three companies that made shoes: they got together to agree on a price for the shoes they’d supply to shoe stores – and prices went up! But these shoe-makers got caught and ended up paying some hefty fines. Companies can get in serious trouble for price fixing…fines, probation, even jail. It’s no joke.

Supply restrictions happen when competitors agree with each other to sell fewer products. That creates a shortage and drives up prices.

Customer-allocation agreements are when competitors agree to divide up customers, maybe by

geographic area. For example, they might say, “You take all the customers east of the Mississippi River, I’ll take all of those west of the Mississippi.” This reduces – and may even eliminate – competition….and that’s illegal. Business owners who make these kinds of agreements can face heavy fines or possible jail time.

Things to Talk About and Do

Imagine you own the only shoe store in town – and that you got there by taking over all the other shoe stores, one by one. Now you have no local competition. Is this good for your business?

Think about the reasons why no competition might not be good for your business: do you have pressure to keep prices down? To keep high-quality shoes, and a variety of styles? To give good customer service? After all, you’re the only game in town, right?

If your store now has higher prices, less selection, poor quality, and not-great service, what other options do consumers have?

Among all of these illegal practices, which do you think would be most likely to make your company the most money in the short-term? What about in the long-term? Why?

Want To Find Out More?

Federal Trade Commission – Guide to the Antitrust Lawswww.ftc.gov/bc/antitrust

American Antitrust Institute – Fair Fight in the Marketplace (Video and resources)www.fairfightfilm.org/index.html

US Department of Justice – Antitrust Divisionwww.usdoj.gov/atr

Antitrust Laws: A Brief History

Once upon a time, way back in the 1800s, there were several giant businesses known as “trusts.” They controlled whole sections of the economy, like railroads, oil, steel, and sugar. Two of the most famous trusts were U.S. Steel and Standard Oil; they were monopolies that controlled the supply of their product—as well as the price. With one company controlling an entire industry, there was no competition, and smaller businesses and people had no choices about from whom to buy. Prices went through the roof, and quality didn’t have to be a priority. This caused hardship and threatened the new American prosperity. While the rich, trust-owning businessmen got richer and richer, the public got angry and demanded the government take action. President Theodore Roosevelt “busted” (or broke up) many trusts by enforcing what came to be known as “antitrust” laws. The goal of these laws was to protect consumers by promoting competition in the marketplace. The U.S. Congress passed several laws to help promote competition by outlawing unfair methods of competition:

• The Sherman Act is the nation’s oldest antitrust law. Passed in 1890, it makes it illegal for competitors to make agreements with each other that would limit competition. So, for example, they can’t agree to set a price for a product—that’d be price fixing. The Act also makes it illegal for a business to be a monopoly if that company is cheating or not competing fairly. Corporate executives who conduct their business that way could wind up paying huge fines—and even go to jail!

• The Clayton Act was passed in 1914. With the Sherman Act in place, and trusts being broken up, business practices in America were changing. But some companies discovered merging as a way to control prices and production (instead of forming trusts, competitors united into a single company. The Clayton Act helps protect American consumers by stopping mergers or acquisitions that are likely to stifle competition.

• With the Federal Trade Commission (FTC) Act (1914), Congress created a new federal agency to watch out for unfair business practices—and gave the Federal Trade Commission the authority to investigate and stop unfair methods of competition and deceptive practices.

Today, the Federal Trade Commission’s (FTC’s) Bureau of Competition and the Department of Justice’s

Antitrust Division enforce these three core federal antitrust laws. The agencies talk to each other before opening any investigation to decide who will investigate the facts and work on any case that might be brought. But each agency has developed expertise in certain industries. Every state has antitrust laws, too; they are enforced by each state’s attorney general. There’s an office in your state capitol that helps consumers or businesses who might be hurt when businesses don’t compete fairly. Antitrust laws were not put in place to protect competing businesses from aggressive competition. Competition is tough, and sometimes businesses fail. That’s the way it is in competitive markets, and consumers benefit from the rough and tumble competition among sellers.

Things to Talk About and Do• What if these laws had never been passed and

trusts were allowed to exist? How would things be different today?

How would a monopoly affect you personally? Imagine that all the companies that make jeans were bought up by one company. Now there’s only one place that supplies jeans. What might happen to the selection and quality of what you can buy? What about the price?

Want to Find Out More?

Federal Trade Commission—Guide to the Antitrust Lawswww.ftc.gov/bc/antitrust

U.S. Department of Justice—Antitrust Divisionwww.usdoj.gov/atr

Kids.gov—Links to sites on money, selling, and marketingwww.kids.gov/6_8/6_8_money_selling.shtml

American Antitrust Institute—Fair Fight in the Marketplace (Video and resources)www.fairfightfilm.org/index.html

National Council on Economic Education—Online lessonswww.ncee.net/resources/lessons.php

Literature Connections to Entrepreneurship

The following books have economic and/or entrepreneurial themes. The list is not inclusive, however, it will help you find books that reinforce classroom business activities.

Fiction

Benny’s Pennies by Pat Brisson (1995)

Agatha’s Feather Bed by Carmen Agra Deedy (1991)

Little Nino’s Pizzeria by Karen Barbour (1990)

A Day’s Work by Eve Bunting (1997)

Market Day by Eve Bunting (1996)

How the Second Grade Got $8,205.50 to Visit the Statue of Liberty by Nathan Zimelman

Mel’s Diner by Marissa Moss (1999)

The Paperboy by Dav Pilkey (1999)

A Basket of Bangles by Ginger Howard (2002)

Double Fudge by Judy Blume (2002)

Freckly Juice by Judy Blume (1984)

Lunch Money by Andrew Clements (2005)

Stock Market Pie: Grandma Helps Emily Make a Million by J.M. Seymour (2003)

101 Ways to Bug Your Parents by Lee Wardlaw (1996)

Lawn Boy by Gary Paulsen (2007)

Nonfiction

Out and About at the United States Mint by Nancy Garhan Attebury (2004)

Brainstorm! The Stories of Twenty American Kid Inventors by Tom Tucker (1995)

What Color Is Your Piggy Bank?: Entrepreneurial Ideas for Self-Starting Kids by Adelia Cellini Lunecker (2004)

The New Totally Awesome Money Book for Kids by Arthur & Rose Bochner (2007)