Those Golden Jeans
An internet application of Lesson 11, "Those Golden Jeans,"
from Master Curriculum Guide in Economics, Teaching Strategies 3-4.
Teacher Edition
Go to the Student 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.

Grades: 3 - 5

Content Standard: 1  7

Concepts:

• Productive Resources
• Natural Resources
• Human Resources
• Capital Resources
• Demand
• Supply
• Market Clearing Price
• Shortages and Surpluses

Objectives:

• Identify productive resources as natural resources, human resources, and capital resources
• Explain the laws of supply and of demand
• Explain how a market clearing price is established
• Define surplus and shortage

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.

Students build a demand schedule and analyze a supply schedule for slices of cheese pizza and then determine the market clearing price. They analyze what happens in the market if prices are set above or below the market clearing price and how the problem created in each instance can be eliminated. Using the internet students learn about Levi Strauss and his use of canvas to supply pants for miners during gold rush. Then, students use what they have learned about supply and demand to determine the market clearing price in a market for blue jeans.

Materials

Copies of Activity 1, 2 and 3, one per student

Procedure

Part I

Tell students that many things are needed to make a good or a service. These things are called productive resources.

Tell students that productive resources include human resources, natural resources and capital resources.

Define human resources as the workers. Define natural resources as things that come from nature and are unchanged by human hands. Ask students for examples of natural resources. (water, air, trees, minerals, animals)

Define capital resources as man-made tools and equipment used to produce a product. Ask students for examples of capital resources. (factories, equipment, and tools such as hammers and saws)

Instruct students to categorize types of productive resources by dragging each resource to the type of resource it represents.

Review student answers. [Blender, mixing spoon, delivery van are capital resources. Water and walnuts are natural resources; truck driver and baker are human resources.]

Tell students that many productive resources are needed to make pizza.

Instruct students to go to http://www.smithsonianmag.si.edu/smithsonian/issues97/jun97/pizza.html

Tell them to use this site to find the following:

1. an example of a human resource in the first paragraph. [baker]
2. an example of a natural resource in the second paragraph. [herbs, tomatoes, garlic, onion]
3. an example of capital resources in the fourth paragraph. [mixers, oven]

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

Part II

Tell students that pizza is a very popular food. Americans eat 350 slices every second and consume100 acres of pizza daily.

Inform students that they have ten dollars to spend. Be sure to tell then they don't have to spend all ten dollars but they cannot spend more than ten dollars. Ask them to think about how many slices of pizza they would be willing and able to buy at each of the following prices? Instruct them to write the number of slices they would be willing and able to buy at each price in the chart.

Ask students to print a copy of Activity 1. Explain they are to ask three of their friends how many slices of cheese pizza they would be willing and able to buy at each of the various prices, if they had an extra ten dollars to spend.

After students have completed Activity 1, have them transfer the information to the Demand Schedule for Cheese Pizza. Point out that the amounts each student is willing and able to buy is already in the table. Ask students to add how many slices their three friends are willing and able to buy at each price and determine the total amount demanded at each price and record it under the column labled total.

Alternatively, the student version of this lesson has the activity below availble online:

Tell students that the demand schedule for Slices of Cheese Pizza can be shown in a graph. Instruct students to study the graph and answer the questions.

Instruct students to look at the schedule, Market for Slices of Cheese Pizza.

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

Ask students to look at the alternative prices for slices of cheese pizza and use the information to answer the questions. Review student answers.

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?
   [1000]
2. How many slices are consumers willing to buy at $2.50?
   [200]
3. Ask students what problem this creates.
   [At a price $2.50, the pizza owners will find that they are unable to sell all the pizza slices they produce. They will have a surplus of 800 pizza slices.]

Explain a surplus exists in a market when the quantity supplied exceeds the quantity demanded at a particular price. Ask students how the surplus can be eliminated or reduced. (Decrease price.) Explain (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 at a price of $2.00 and businesses are willing and able to supply less.)

Review with students their answers to the following questions.

1. How much would the surplus be at $2.00? (400) Explain how you determined this amount of surplus.
   [To determine the surplus subtract the quantity demanded at a price of $2.00 from the quantity supplied at $2.00. The surplus would be 800-400=400.]
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?
   [400]
3. At a $1.00, how many slices are consumers willing and able to buy?
   [800]

Explain that 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 slices of cheese pizza 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?
   [Raise the price.]
   Explain.
   [Consumers are willing and able to buy less and businesses are willing and able to supply more at each increase in price.]
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?
   [$1.50]
   Explain.
   [At a price of $1.50, the quantity of slices of pizza demanded equals the quantity of slices of pizza supplied. At this price there are no shortages or surpluses.]

Tell students this price is called the market clearing price or equilibrium price.

Part III

Tell students that they are now going to apply what they have learned to blue jeans.

To learn more about the gold rush and blue jeans, direct students 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

Inform students that mining for gold required many productive resources. To find some of the resources used, direct students to http://www.isu.edu/~/trinmich/home.html

Have students look at the picture and find an example of each type of productive resource-natural, human, and capital.

Review their answers. (natural-water, human-miners, both men and a woman, capital-shovels, trough)

Tell students that 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.

Review student answers.

1. What is the market clearing price or equilibrium price for blue jeans?[$40]
   Ask students to explain why this is the equilibirum price.
   [The market clearing or equilibrium price is the point where the quantity supplied equals the quantity demanded. At that price all the consumers willing and able to buy A pair of jeans can do so and the producers willing and able to sell can do so.]
2. At what price would there be a shortage?
   [$20]
   Why would there be a shortage?
   [A shortage occurs when the quantity demanded is greater than the quantity supplied at a given price.]
3. At what prices would a surplus occur?
   [$50 and $60]

Closure

To review, instruct students to complete Activity 3.

Review students answers.

1. goes down; goes up
2. market clearing price or equilibrium price
3. quantity supplied
4. goes up, goes down
5. quantity demanded
6. shortage
7. surplus
8. income
9. substitute

Assessment

Instruct students to 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.

[No. At $499 ACE Electronics will have a surplus. The quantity supplied at that price is greater than the quantity demanded. ACE should sell the DVD for $279. At this price , the quantity demanded equals the quantity supplied.]