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May 2, 2010: Buffett animated about kids show; Battered firms find a foothold

Everyday EconomicsHelp broaden your students’ understanding of the underlying economic principals behind current events, as well as other more basic economic concepts.

FOR THE WEEK OF May 2, 2010

Elementary

Article Link: "Buffett animated about kids show," Thursday, Apr. 29, 2010, The Denver Post, 6B

Economic terms:

  • (personal) finance:  how to make good decisions with your money.  Personal financial literacy uses lessons and ideas from economics and applies them to money management.
  • Millionaire:  a person or household who has a one million dollars in cash and property.  This is a measure of wealth:  what is owned minus what is owed = wealth (net worth).  There are approximately 10 million households with a net worth of $1,000,000 or more in the United States.  This calculation excludes the worth of the family home.
  • Warren Buffett and Berkshire Hathaway:  the founder and Chairman of a large corporation based in Omaha, Nebraska.  Warren Buffett is the second-richest man in the U.S. (after Bill Gates of Microsoft Corporation). 
  • Debt:  money that has been borrowed and must be repaid with interest.
  • Supply and demand:  demand is the desire to buy a good or service.  Supply is the willingness of a producer to sell a good or service.

Economic Concepts:


Discussion:This article describes a new web site that will help children (with the help of teachers and parents) to learn how to manage their money well.  The link to the web site is:  http://www.thesecretmillionairesclub.org/.  Warren Buffett is supporting this educational effort because he wants kids to have the power of knowledge about sound financial management.  The announcement was made at the annual meeting this week in Omaha of the Berkshire Hathaway Company.

Questions for discussion:Why is it important to manage your money wisely?  What is an example of a good financial decision?  Give an example of a bad financial choice.  After looking at the web site for The Secret Millionaire’s Club discuss one idea in your class and then with your parents or guardian.


Secondary

Article Link: "Battered firms find a foothold," Thursday, Apr. 29, 2010, The Denver Post, 8B

Economic terms:
  • Firm: a business organization.  This article refers to publicly traded companies that must report their financial results.
  • Profit:  In finance or accounting, profit is the increase in wealth that investors realize from making an investment.  Profit = revenue (income) minus expenses (costs).
  • Personal spending:  the final purchase of goods and services by individuals and households.
  • Economy:  describes the total production, exchange and consumption of a country’s goods and services. 
  • Retail sales:  this number is a measure of consumer spending.  Retail firms provide data on dollar value of their sales and inventories.
  • Standard & Poor’s 500 index:  a stock index published since 1957 of the prices of 500 largest common stocks actively traded in the on either of the two largest American stock market exchanges-- the New York Stock Exchange and the NASDAQ.

Economic Concepts:

  • Economic trend:  prolonged period of time when prices in a financial market are rising or falling faster than their historical average, also known as "bull" and "bear" markets.  The data in the graph help explain why the stock markets have grown so rapidly in the past several months.

Discussion: Corporations are reporting their financial results for the first 3 months of 2010.  The profits (earnings) have increased dramatically leading investors and economists to conclude that the recession is over.  However, unemployment is still high and will likely not decline until 2011.  The profits are a result of increased consumer spending as reflected in much higher retail sales.

Questions for discussion: What products do the 6 companies at the bottom of the graph make?  What industries are these companies in?  Do you think the stock price of these companies has increased as a result of improved earnings?  Why or why not?  What effect does increased consumer spending have on Gross Domestic Product (GDP)?

Handy Dandy Guide
6 core economic Principals
Colorado Model Content Standards for Economics
Everyday Economics is written by Dennis Grogran, Program Director, Colorado Council for Economic Education. For information about CCEE's other programs, call 303-752-2323 or e-mail dgrogan@ccee.net.
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