Simple Economics

Do you like to earn money, save money or spend money? If you said that you like spending money, then you are contributing to our country’s economics. Economics is the process of making, buying and selling goods.

When you make a purchase, you are buying goods and services. See if you can identify which ones of these are goods and which are services. Are you ready?

Getting your hair cut Buying a new toy Purchasing a book Having your teeth cleaned Paying your cell phone bill

Remember, goods are things people make or grow and then sell. Services are jobs people do for others. Imagine this... You own a business that sells school supplies. Let’s see how you make your business decisions.

It is the beginning of the school year. What do most kids need at the beginning of the school year? That’s right – crayons!

As a business owner, you need to make money on the items that you sell. That is called a profit. So at the beginning of the school year, you might decide to sell your crayons at a higher price than what you actually paid for them. You have a large supply of crayons which means that if you sell a lot of them, you could make a good profit.

At the beginning of the school year, the demand for crayons is high because many parents are buying them for their children who need them in school. Because the demand is high, your store can ask for a higher price.

Now imagine your store is selling crayons a few months later in November. The demand for your crayons will be lower at this time of year. You still may have a large supply of crayons. Therefore, you may decide to put your crayons on sale and ask for a lower price.

Read "Homer Price" by Robert McCloskey in your social studies textbook. Answer the following questions: What was the problem? How did they get people to buy more doughnuts? Which advertising idea was the most successful? Why?

Profit is the income a business has left over after all its costs are paid. This includes paying the workers, the goods, and for the building, electricity, etc. That is why a person who owns a business has to sell a product for more money than they paid for it. The owner tries to keep the price down by buying the product to sell at the lowest possible cost.

Meet Al. Al wants to buy a new video game. The game costs $20.00.

Using the chart below, how many weeks will Al have to save his allowance in order to buy the video game? WeekIncomeSpendingSaving 1$7.00$2.00$5.00 2$7.00$2.00$5.00 3$7.00$2.00$5.00 4$7.00$2.00$5.00 5$7.00$2.00$5.00 6$7.00$2.00$5.00 7$7.00$2.00$5.00 Total:$49.00$14.00$35.00

You are correct. It will take 4 weeks.