Those Golden Jeans
Student Version
Go to the Teacher Version

Introduction

Everyday bread arrives at grocery stores, toys are sent to toy stores, and raw materials are delivered at manufacturing facilities. Yet, students have little understanding of how decisions are made on how much of a good or service should be produced and at what price. In this lesson students review the productives resources used to produce goods and services and learn how decisions are made in a market economy through the interactions of both the buyers and the sellers. With an understanding of how markets work, students will be better prepared to make decisions both as consumers and producers.

Lesson Description

This lesson is designed to review the three types of productive resources-natural resources, human resources, and capital resource-needed to produce variety of goods and services. Students use the internet to identify examples of each first in the production of pizza and then the mining of gold during the California gold rush. These concepts are further reinforced through an interview with Joe Tigue who talks about the use of productive resources in the publishing industry.

Part I

Many things are needed to make a good or a service. These things are called productive resources.

Productive resources include human resources, natural resources and capital resources.

Human resources are the workers.

Natural resources are things that come from nature and are unchanged by human hands. Examples of natural resources are water, air, trees, minerals, animals.

Capital resources are man-made tools and equipment used to produce a product. Examples of capital resources are factories, equipment, and tools such as hammers and saws.

Many productive resources are needed to make pizza.

IGo to http://www.smithsonianmag.si.edu/smithsonian/issues97/jun97/pizza.html

Use this site to find the following:

1. an example of a human resource in the first paragraph.
2. an example of a natural resource in the second paragraph.
3. an example of capital resources in the fourth paragraph.

Listen to an interview with Joe Tigue to learn more about productive resources used in a publishing business.

Part II

Pizza is a very popular food. Did you know that Americans eat 350 slices every second? They consume100 acres of pizza daily. Complete the activity below:

This is called the Law of Demand.

Why is it that consumers are willing to buy more at lower prices than at higher prices? When prices go up, consumers can't afford to buy as much of a product. With $10.00, you could buy five slices of pizza at $2.00 per slice. If the price per slice goes to $5.00, you can only buy two slices. Price increases are like a reduction in your income. The reverse is true, too. Price decreases are like an increase in income.

As price of a product decreases, that product becomes cheaper relative to other goods and services. Consumers usually substitute relatively cheaper products for relatively more expensive ones. As the price per slice of pizza rises, you might substitute a less expensive good such as a small hamburger.

A pizza shop is interested in opening near your school. The owners conducted a survey of a sample of students at your school to determine how many slices of cheese pizza they would be willing and able to buy if the shop is open to students after school. The demand schedule looked like this.

The Market Schedule for Slices of Cheese Pizza shows the quantity supplied and the quantity demanded at various prices. This information can be shown as a graph.

Look at the alternative prices for slices of cheese.

1. The pizza owners would like to sell the pizza at $2.50 a slice. How many slices are the pizza owners willing and able to supply at $2.50?
   
2. How many slices are consumers willing to buy at $2.50?
3. Ask students what problem this creates.

The surplus can be eliminated or reduced by a decrease in price. When price decreases, both consumers and businesses will respond. At a price of $2.00, the quantity supplied would decrease to 800 and the quantity demanded would increase to 400. Consumers are willing and able to buy more that a price of $2.00 and businesses are willing and able to sell more.

1. How much would the surplus be at $2.00?
   Explain how you determined this amount of surplus.
2. What would happen if the price is set at $1.00. How many slices are the pizza owners willing and able to supply at $1.00?
3. At a $1.00, how many slices are consumers willing and able to buy?

At a price of $1.00 consumers want to buy 800 slices of cheese pizza but producers are willing to offer only 400 slices for sale. At a price of $1.00 there won't be enough slices available for everyone who is willing and able to buy at a $1.00. This is called a shortage. A shortage exists in the market when quantity demanded exceeds the quantity supplied at a particular price.

7. How could this shortage be eliminated?
   Explain.
8. A surplus exists at a price of $2.50 and a shortage exists at a price of $1.00. The pizza owners need to find a price to charge for their slices of pizza where there won't be a shortage or a surplus. What would this price be?
   Explain.

Part III

We are now going to apply what they have learned to blue jeans.

To learn more about the gold rush and blue jeans, direct go to:

• http://web.mit.edi/invest/www/inventorsR-Z/strauss.html
• http://www.pbs.org/weta/thewest/people. Click on Levi Strauss
• http://www.ideafinder.com/history/inventions/story013.htm

Mining for gold required many productive resources. To find some of the resources used, go to http://www.isu.edu/~/trinmich/home.html

Look at the picture.

• Find an example of a natural resource.
• Find an example of a human resource.
• Find an example of a capital resource.

During the Gold Rush, Levi Strauss made durable pants for the miners out of canvas. Later he made the pants from a heavy blue denim called genes in France, which became "jeans" in America. Even today, consumers love to wear jeans.

Print a copy of Activity 2. Use the information from the Market Schedule for Blue Jeans to make your own graph.

Your graph should look like this.

Review your answers.

1. What is the market clearing price or equilibrium price for blue jeans?
   Explain why this is the equilibirum price?
2. At what price would there be a shortage?
   Why would there be a shortage?
3. At what prices would a surplus occur?

Closure

Complete Activity 3 and review your answers in class.

Assessment

Use the information from the table, Market for DVD Players to answer the questions

To produce one DVD player costs ACE Electronics, a major producer of DVDs, at least $179.00. ACE Electronics wants to sell them at $499 each. Is this the price at which they should sell the DVD? Use what you know about markets to explain your answer.