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 May 8, 2011
Article Link "Smaller cars lift sales for Detroit," Wednesday, May 4, 2011, The Denver Post, 7B
- Sales: money that a business (or industry) receives for selling its goods or services.
- Buyers: consumers (individuals and households), governments and businesses who purchase goods and services.
- Fuel-efficient: is a measure of energy use of a particular car or truck. It is expressed as a ratio of distance travelled per unit of fuel used. Fuel efficiency is written in miles per gallon (MPG).
- Supply shortages: describes a difference between the amount of a product demanded by buyers and the amount available for purchase. A shortage can occur if there is excess demand and a reduced supply.
- Substitute good: when the demand for one product increases when the price of another product increases. In this article the demand for fuel-efficient cars has increased because the price of gasoline has increased dramatically.
Discussion This article describes the increase in sales of fuel-efficient cars in Colorado. The reporter writes that this increase is a result of increased gasoline prices. Small, fuel-efficient cars get better mileage and so car buyers are buying more of them. In Colorado the sales increase for January and February of 2011 is almost 3,000 vehicles greater than 2010. This increase in sales has particularly helped General Motors and some Korean brands. Toyota is still not able to supply enough cars to satisfy demand. This is because of the earthquake and tsunami disaster in March that disrupted parts supplies.
Questions for discussion Why are Americans buying smaller cars? What has happened to the price of gasoline in the past several months? What happened to the supply of Japanese cars in the last few months? Why is it a good sign for the economy when car sales increase? When people buy cars are they confident in the future of the economy? Why or why not?
Article Link "Molycorp: Rare-earth stockpile will worsen supply," Friday, May 6, 2011, The Denver Post, 11B
- Stockpile: a temporary storage place for raw materials used to avoid future shortages.
- Supply: amount of some product producers are willing and able to sell to consumers at a given price.
- Producer: an individual or organization that creates goods or services for sale.
- Inventory: goods or materials held by a business to help guarantee a steady supply for producing a final product.
- Export quota: is a type of government-imposed trade restriction that sets a physical limit on the quantity of a good that can be exported from a country.
- Rare earths: a set of seventeen chemical elements that are used in specialized products. Rare earth metals are not “rare” but are difficult to mine and purify economically.
- New York Stock Exchange: located on Wall Street in New York City it is the world’s largest stock exchange.
- Shares: a company may issue shares of ownership to raise money for operations. People who own shares in a company are entitled to a portion of the profits and have voting rights. Shares of a company may increase or decrease in value according to the success of the company and the demand for the shares.
- Subsidies: a form of financial assistance paid to a business, usually by a government for the purpose of affecting the market for a product or service. In this article a bill is being proposed in Congress that would give loans to producers of rare earths.
- Supply/demand: supply is the willingness of producers to offer a good or service whereas demand is the desire of buyers to purchase a good or service. The balance between supply and demand is a price that is called the “equilibrium” price. This price is considered in economics to be “just right.” This article suggests that the proposed bill would upset the “just right” price through government intervention. The government could use the proposed stockpile to affect prices of rare earths.
Discussion The article reports on the scarcity of rare earths in the United States. Rare earths are essential for the production of sophisticated machines. China has decided to restrict the export of rare earths by 72 %. This has resulted in a rapid rise in prices for rare earths in the U.S. Molycorp is a Colorado company that mines rare earths but does not want the government to create a stockpile of rare earths. Molycorp stock has increased 37% this year because of the shortage of rare earths.
Questions for discussion Why do you think Representative Coffman wants the U.S. government to create a stockpile of rare earths? Why do you think China placed an export quota on rare earths? What has been the effect of the Chinese quota on the supply and price of rare earths? What has happened to the share price of companies that mine rare earths? In general is it a good idea for government to interfere in markets? Explain your answer.
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.