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 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 Apr. 10, 2011
Elementary
Article Link "Service sector growth continues," Wednesday, Apr. 6, 2011, The Denver Post, 6B
Economic terms
- Service-sector: activities where people use their knowledge and skills to improve economic life. The basic characteristic of this sector is the production of services instead of products. The other sectors of the economy are agriculture and manufacturing.
- Expansion: is an increase in the level of economic activity (as measured by value of the goods and services sold in a given period of time).
- Financial crisis (of 2007-2010): a result of the collapse of house prices. The fall in housing caused a general lack of confidence in financial institutions worldwide. The result was a severe recession (a decline in economic activity). Many people lost their jobs.
Economic Concepts
- Goods vs. services: economic output is divided into physical goods and intangible services. This article explains that most (90%) Americans are employed providing services to consumers, businesses and governments. Some people provide both goods and services: an example would be a dentist—who sells dental repairs and fillings or braces.
- Labor: a relationship between an employee and an employer. The employee sells her/his labor to the employer for a wage or salary. An employee can be part-time, full-time or contract (for a specified period of time or project). Consumers rely on wages and salaries to provide income for consumption of goods and services. There are many types of labor markets: teachers, carpenters, executives, computer programmers are just a few of the thousands of labor markets.
Discussion The article describes the strong growth in job creation in the service-sector. This sector of the job market has grown for the last several months. This indicates optimism on the part of service businesses for the future. Ninety percent of Americans are employed is the service-sector.
Questions for discussion What types of jobs do you think are service jobs? What is the difference between a good and a service? Is a teacher providing a good or a service? What about the school cafeteria worker? Name some service jobs that pay high wages? Low wages?
Secondary
Article Link "Ship more? No can brew," Saturday, Apr. 9, 2011, The Denver Post, 1A
Economic terms
- Demand: is the desire of buyers (consumers, businesses and governments) to purchase something and has the ability to pay.
- Supplies: the amount of a product which is available to consumers.
- Shortage: describes a disparity between the amount demanded for a product or service and the amount supplied in a given market. Specifically, a shortage occurs when there is excess demand; therefore, it is the opposite of a surplus.
- Consumers: individuals and households who purchase goods and services. Consumer spending accounts for about 70% of the U.S. economy.
- Distributors: business organizations that act as go-betweens for manufacturers and producers. Distributors may deliver goods either to retailers or directly to consumers.
- Craft beer: used to describe micro-breweries that produce fewer than 15,000 barrels of beer annually. These are differentiated from the mass-market breweries that produce millions of barrels of beer per year.
- Sales: money (revenues) that a business receives for selling its goods or services.
- Scarce: not enough of a resource. Scarcity is the fundamental economic problem. Societies, businesses, and individuals must satisfy their wants in a world of scarcity.
- Capacity: a business can only supply a limited amount of production (or services). This is based on its capital investment in equipment and labor. Capacity utilization is a measure of how much spare or excess production is available at any given time. Normally companies try to operate at 90% capacity.
- Rationing: the controlled distribution of scarce resources, goods, or services.
- backlog: an accumulation of work waiting to be done or orders to be filled.
- Barrel: In the U.S. breweries measure their production in barrels. One barrel equals 31 U.S. gallons
Economic Concepts
- Allocation: a method of dealing with the problem of scarcity. In this article these Colorado breweries are allocating their beer production to certain states and denying production to other states. They have set up distribution rules based on many factors: local demand, transportation costs, and future growth potential.
Discussion This article describes how various Colorado micro-breweries are restricting distribution of their beer to other states. The problem is both excess demand from certain markets and a lack of production capacity in the breweries. The problem is also one of very rapid growth in demand. These breweries have not been able to expand production fast enough to keep up with consumer demand. Some companies are trying to expand their production capacity but it takes many months to install equipment and hire more employees. The more mature breweries have learned how to match their supply with demand.
Questions for discussion What normally happens to price when demand grows faster than supply? Do you think these breweries can charge more for their beer than the mass-market breweries? Why or why not? What do you think the following quote means? “We make sure we have enough padding in our production just in case demand doubles.” Do you think it is easier to run a small business or a large business? Why? What are some other ways that a business could allocate its production besides rationing?
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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