Help broaden your students’ understanding of the underlying economic principals behind current events, as well as other more basic economic concepts.
FOR THE WEEK OF Nov. 29, 2009
Article Link: "High demand leaves toymaker scurrying" Nov. 27, 2009, The Denver Post, 1A
- scarce: the fundamental economic problem of having unlimited human needs and wants, in a world of limited resources.
- supply and demand: demand is the desire to own something and the ability to buy it. Supply is the amount of a good or service that a business is willing and able to provide to buyers at a given price.
- Consumer product: an item for sale and that is used for personal, family, or household for non-business purposes.
- Retailer: a business that sells individual items from a fixed location directly to consumers.
- Production: use of machines, tools and labor to make things for use or sale. The term is applied to industrial production, in which raw materials are transformed into finished goods on a large scale.
- shortage: is a term describing a difference between the quantity demanded for a product or service and the amount supplied by producers. Specifically, a shortage occurs when there is excess demand; therefore, it is the opposite of a surplus.
- Marketing: promoting the sale of goods or services. It is considered a "social and process by which individuals and groups obtain what they need and want through creating and exchanging products and values with others. In this article the company (Cepia) marketed the Zhu Zhu Pets using cable TV advertising to create demand for the toy.
- Outsourcing: outsourcing means a company asks another company to make a part or all of a product. This decision is often based upon achieving a lower production cost, making better use of available resources, or just making more efficient use of labor, capital, technology or natural resources. Cepia, the company that designed Zhu Zhu Pets has outsourced the production of the toy to another company in China.
Discussion: The article describes the shortage of a popular holiday gift toy—Zhu Zhu Pets. This toy is inexpensive and has accessories—children love them and parents can afford them. They are made in St. Louis and China. However, the company is very small and was not able to make enough of the toys for Christmas. Parents around the country are desperately trying to find them at major retailers.
Questions for discussion: What do you like about Zhu Zhu Pets? Why is this toy so difficult to find in the stores? Are there other toys that you can think of that are scarce? Do you like to buy things that you see on TV? Why or why not?
Article Link: "Tariffs, demand increase tire prices" Nov. 27, 2009, The Denver Post, 9B
- tariff: a duty imposed, by a government, on goods when they are moved across a political boundary. This article discusses an example of a protective tariff, which is intended to artificially inflate prices of imports and protect domestic industries from foreign competition.
- Demand: The desire to buy a good or service and the willingness and ability to pay for it. As demand increases producers are able to raise prices. This is called a demand “shift.” This means that another factor influenced demand—not just a change in price. In this article the shift occurred because of the tariff and increased cost of raw materials.
- Raw materials: something that is used by producers for use as a component to create some product.
- Union: is an organization of workers who have banded together to achieve common goals in key areas, such as working conditions.
- Import: any good or service brought in from one country to another country in a legitimate fashion, typically for use in trade.
- Price: the monetary value of a good or service that a buyer is willing to pay and a producer is willing give up the item. When money is exchanged for a good or service we say that that amount of money is the price of that item.
- protectionism: the economic policy of restraining trade between countries, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to discourage imports, and prevent foreign impacts on local workers and companies. This is an anti-globalization or anti-free trade policy.
- Unintended consequences: outcomes that are not the results originally intended by a particular action.The unintended results may be foreseen or unforeseen, but they are the logical or likely results of an action. In this article one of the unintended consequences is the larger than expected increase in tire prices due to demand and the increased cost of raw materials.
Discussion: This article is an excellent example of how tariffs can affect prices. Tire manufacturers in China can make tires for 25%-50% less than the same tires made in U.S. factories. U.S. unions representing tire workers asked President Obama to impose a 35% tariff on all tires imported from China. The union said that Chinese imports have resulted in the loss of 5,000 jobs in the U.S. The article also discusses the fact that other factors are causing an increase in tire prices: increased cost of raw materials and increased demand from consumers and businesses that have to buy replacement tires for their vehicles.
Questions for discussion: What are the pros and cons of imposing a tariff? Do you think the tariff will allow the U.S. tire workers to go back to work? Why or why not? Why did demand for tires increase suddenly? (Ans.: winter driving and delayed purchase of replacement tires.) If you are interested in buying tires what do you think would be a good purchase strategy?
Handy Dandy Guide
6 core economic Principals
Colorado Model Content Standards for Economics
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 firstname.lastname@example.org.