Louisiana: The History of an American State Chapter 3 Louisiana’s Economy: Resources and Rewards Study Presentation ©2005 Clairmont Press

Chapter 3 Louisiana’s Economy: Resources and Rewards Section 1: Basic Economic Concepts Section 2: Louisiana’s Economic History Section 3: Louisiana’s Resources Section 4: Providing Louisiana’s Goods and Services

Section 1: Basic Economic Concepts ESSENTIAL QUESTION: How do people satisfy their wants and needs in our economic system?

Section 1: Basic Economic Concepts What words do I need to know? goods services consumer producer natural resources human resources capital resources scarcity

Section 1: Basic Economic Concepts 9. opportunity cost 10. supply 11. demand 12. profit 13. traditional economy 14. command economy 15. market economy

Wants and Needs goods: physical items – food, clothing, cars, housing, etc. services: activities people do for a fee producer: person or business – makes goods or provides a service

Resources and Scarcity natural resource: gift of nature – part of the natural environment, - water, trees, minerals human resources: people – those who produce goods & provide services capital resources: money & property – used to produce goods and services scarcity: available resources – demand greater than supply

Making Choices Scarcity vs. producers & consumers Unlimited needs vs. wants Limited resources vs. limited amounts of goods & services Basis of an economic system choosing how to use resources Those making choices in United States individuals, businesses, & communities

Costs and Benefits Opportunity benefit Choices (getting a job vs. going to college) Immediate salary vs. getting an education Opportunity cost – cost of choice not taken Other choices of opportunity benefits & costs Using resources or using time Value of non-chosen alternative

Trade-Offs Either/or choice: not always the best May combine parts of choices as trade-off Trade-off choices to get wants & needs

Supply and Demand supply: quantity of a good or service offered for sale demand: quantity of a good or service consumers are willing to buy Lower prices: consumers buy more, producers make less $ per item Higher prices: consumers buy less, producers make more $ per item profit: amount left after costs are subtracted from price (motivator for producers)

Basic Economic Questions Four basic economic questions: 1) What do we produce? 2) How can it be produced? 3) How much will it cost to produce? 4) For whom will we produce?

Making the necessary decisions What to Produce Making the necessary decisions Meeting needs & wants How to make the capital resource (money) Human resources Natural resources Finally, deciding what to produce

How to Produce Plan of action: Overall production schedules: How to carry out plan Process of implementation Supplies needed Overall production schedules: When to start production When to end production

Items to consider for plan How Much to Produce Items to consider for plan Time involved Resources needed Market demand for product (s) and/or service (s) Decisions affected by scarcity

For Whom to Produce Develop knowledge of consumers Study needs of consumers Consider supply & demand Analyze & plan for competitors Consider advertising

Economic Systems economist: one who studies the economy Three basic kinds of economies Traditional Economy Command Economy Market Economy Economy may function as combination of all three

Traditional Economy Customs, habits, & beliefs determine and answer the four basic economic questions Continues in the way it has always been done

Command Economy The government … controls the economy answers the four basic questions makes the decisions has power & authority negotiates input & output controls competition

Market Economy Individuals… Answer the four basic economic questions based on supply & demand Also known as free enterprise Based on private ownership Freedom of choice Click here to return to Main Menu.

Section 2: Louisiana’s Economic History ESSENTIAL QUESTION: What were Louisiana’s early economic systems?

Section 2: Louisiana’s Economic History What words do I need to know? barter mercantilism smuggling indigo tobacco commerce

Louisiana’s Economic History 1st economic system: barter (trading goods & services without money) Then mercantilism: command economy controlled by the government Next, smuggling: illegal trade with colonies of other nations

Louisiana’s Economic History Louisiana Purchase: end of colonial period end of earliest crops tobacco & indigo beginning of agricultural market New market: sugar cane & cotton New Orleans: became a major port for North America 1801 described as “the grand mart of business, Alexandria of America”

Louisiana’s Economic History Early years of statehood: a continuing agricultural economy 20 years before Civil War: a booming economy End of Civil War till after WWII: a struggling economy Growth and survival of war-developed industries

Louisiana’s Economic History New equipment & machines brought by technology Human labor replaced by machines Many farms deserted by workers 1880 – 1920: most old growth trees cut or gone

Louisiana’s Economic History Oil (another resource) Became valuable in early 20th century Economy base changed by new industry Agricultural economy changed due to WWII & demands for oil New economic direction: interdependent global economy 21st century: seeks diversity & less dependence on oil industry Click here to return to Main Menu.

Section 3: Louisiana’s Resources ESSENTIAL QUESTION: What roles do natural resources, capital resources, and human resources play in the economy of Louisiana?

Section 3: Louisiana’s Resources What words do I need to know? mineral resources nonrenewable lignite biological resources renewable pulpwood labor union

Natural Resources Economy supported by abundant natural resources Examples: air, water, & rich soil 21st century: agricultural shift from small farms/plantations to huge agribusiness systems Fewer people on farms Amount of crops not decreased

Natural Resources State ranking: 2nd in sugar cane & sweet potatoes Vital crops: rice, cotton, soybeans Soil & climate good for raising beef & dairy cattle (dairy farming diminished) Abundant water supply good for agriculture, industry, human use, transportation, & recreation

Mineral Resources Oil Natural Gas Salt Sulfur Lignite

Mineral Resources minerals: inorganic substances formed by Earth’s geological processes Important to Louisiana’s economy nonrenewable: not replaced by nature once extracted (taken) from the environment Mineral resources found in Louisiana oil (“black gold”), natural gas, salt, sulfur, lignite Construction resources in Louisiana sand, gravel, limestone

Oil Oil for today’s energy created by decayed plants from millions of years ago 10% of US oil reserves in Louisiana Louisiana: one of top oil-producing states in United States 1901 – 1st oil well in Louisiana 1947 – 1st platform in Gulf of Mexico More oil deposits beneath Gulf of Mexico

Natural Gas Larger deposits than oil ¼ of the nation’s supply 1st burned as waste 1917: “carbon black” developed used in making tires, ink, & more Important energy for homes & industry

Salt Needed for human & animal survival Used by Native Americans in trade A form of money, later Relied on by the Confederacy during the Civil War Used in chemicals & other products polyvinyl chloride plastic PVC pipe for plumbing

Sulfur Major ingredient in: matches, gunpowder, medicine, plastic & paper 1869 – “richest 50 acres in the world” town of Sulphur in Calcasieu Parish Decrease in value foreign import changed importance unprofitable to mine in Louisiana

Lignite Soft, brownish-black coal Burns poorly Mined since 1970s Found mostly in DeSoto Parish Used for electric power station near Mansfield

Biological Resources Biological resources Common term: plants & animals Scientific term: flora & fauna renewable: replenish over time Main divisions: Forests Wildlife Fish

Forests 50% of Louisiana in forests 2nd largest income producer 90% pine trees 75% trees cut for pulpwood Large trees cut for sawtimber

Forests Hardwood sawtimber used for furniture & flooring Paper mills, lumber mills, & plywood plants Christmas tree farms started by the Office of Forestry in the LA Dept. of Agriculture

Wildlife Variety of wildlife Economic resources Hunting regulations History of trapping & hunting tradition Economic resources Fur pelts: Once sold more than a million pelts annually Hunting regulations State Department of Wildlife and Fisheries

Wildlife Hunting Timber cutting Source of food Recreation Millions of dollars for state’s economy Timber cutting Reduced forest land Forest animals decreased Increase in recent years

Wildlife White-tailed dear Black bear Wild turkey Population has increased Black bear Largest wild animal in Louisiana Endangered: not legal to hunt Wild turkey Classified as a game bird Efforts have been made to increase its numbers

Wildlife Dove Quail Migratory waterfowl Alligators 1963: placed on the federal protected species list 1981: hunting under strict rules Millions of dollars in hides & meat

Freshwater bream, bass, perch, catfish Game fish: Fish (Recreation) Freshwater bream, bass, perch, catfish Game fish: trout, redfish, drum, mackerel, blue marlin, amberjack, grouper, & tarpon (illegal to sell commercially)

Fish (Commercial) Crawfish raised on crawfish farms Catfish sold: freshwater & farms Commercial fishing: tuna, sea trout, red snapper

Capital Resources Human-made products used to produce goods or services Examples: rice mills, sugar refineries, oil refineries, cotton gins, & meat-packing plants Others include: transportation facilities – bridges, highways, & airports

Human Resources People who supply the labor Physical or mental Paid for goods or services Requirements new skills & specialization education & training Labor unions – workers’ organization to protect workers’ rights 1976 – right-to-work law passed – workers could not be forced to join a union Click here to return to Main Menu.

Section 4: Providing Louisiana’s Goods and Services ESSENTIAL QUESTION: What is Louisiana’s place in the global economy?

Section 4: Providing Louisiana’s Goods and Services What words do I need to know? 1. private goods & services 2. public goods & services 3. interdependent 4. Superport 5. tariff 6. economic indicators 7. gross domestic product (GNP) 8. consumer price index 9. inflation 10. unemployment rate

Providing Louisiana’s Goods and Services free market: private goods & services Limited services & benefits to the owners Provided by the government: public goods & services Usually available to everyone highways, police, education, libraries

Manufacturing Louisiana-made goods include… Ships, trucks, electrical equipment, glass products, automobile batteries, & mobile homes Chemicals industry Ranks 2nd in USA Petrochemicals (chemicals made from petroleum) More than 100 chemical plants in LA Fertilizers & plastics

Manufacturing Billions of gallons of gas from petroleum refineries each year Shipbuilding transport ships & merchant vessels Coast Guard cutters, barges, tugs, supply boats, fishing vessels, & pleasure craft

Aerospace and Aviation Louisiana workers part of the United States space program Space shuttles assembled in New Orleans Lake Charles aircraft assembly for military use

Biotechnology Combines biological research with engineering Pennington Biomedical Center leader in research

Service Industries Adds billions of dollars to the economy Tourism sightseeing eating shopping fishing & hunting Mardi Gras Movie-making 1908 – 1st film made in Louisiana 1917 – 1st Tarzan film made More recent – “Steel Magnolias”

Economic Institutions Joint effort to produce & sell goods and services Groups known as economic institutions Include Businesses large and small Corporations: owned by investors, banks, & labor unions Banks important: allow producers & consumers to trade, save, & invest

Louisiana in the U.S. and Global Economies 1st economic systems: simple barter economies Today’s systems interdependent overlap producers & consumers rely on each other Louisiana’s offshore port: Superport

Trade Policies North American Free Trade Agreement (NAFTA) changes trade policies & agreements Trade restrictions removed Foreign countries offer cheap labor abroad Companies moving abroad Tariffs lessened Imported goods & low prices hurting Louisiana

Gross domestic product Consumer price index Inflation Measuring the Economy Economic indicators Gross domestic product Consumer price index Inflation Unemployment rates Click here to return to Main Menu.

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