Understanding
Economics by Looking at
our Colonial Heritage
A Study Guide
5th Grade
Unit 2
Let’s talk about what
economics is all about…
• Economics is simply the study of
the choices people make.
• We usually think of money when we
think of economics, but economics
is more than money.
• Why?
• Because we make choices every
day!
Here are some examples
of choices we make.
• Should I sleep in or go to school?
• Should I save my money or buy a new
video game?
• Should I read this book or that
book?
ALL people must make choices because
we can’t have everything we want.
But why CAN’T we have it
all?
We can’t have it all
because…
• Resources are limited.
• Economists call this
SCARCITY
• Scarcity means that there aren’t
enough resources to give everyone
everything they want.
Factors of Production
• Economists usually call resources the
Factors of Production.
• Let’s review the types of
resources…OOPS…factors of
production. (We might as well talk
like economists since we’re studying
economics!)
There are 4 Factors of
Production
•
•
•
•
Natural resources
Human Resource
Capital Resource
Entrepreneurship
Let’s look at what they are!
NATURAL RESOURCES
• Natural resources are all things
found in nature that can be used to
produce a good or create a service.
• Can you think of some examples?
Let’s try this…
The Colonists and
Natural Resources
• What natural resources might the
colonists have needed?
•Trees for wood to build shelter and furniture
•Water to keep their crops healthy
•Fish for food
•Horses for transportation
•Gold for trading
Can you think of others?
HUMAN RESOURCE
• Human resource is the work and thought
that people provide to produce a good or
create a service.
– A Teacher is a human resource.
– People who work on assembly lines are human
resources.
• Can you think of others?
Let’s try this…
What human resources
might you have found in
the colonies?
•
•
•
•
•
People to plant and harvest crops
Ministers at church services
Blacksmiths
Fishermen
People to make cloth and sew clothing
Can you think of others?
CAPITAL RESOURCES
• Capital resources are the tools and
machinery used to produce a good or
provide a service.
– Sewing machines are capital resources.
– Assembly lines are capital resources.
– Computers are capital resources.
Can you think of others?
Let’s try this…
What capital resources
might the colonists have
used?
• Plows for farming
• Fishing poles for fishing
• Boats, ships, canoes and wagons for
transporting goods.
Can you think of others?
Entrepreneurship
• This long word really stands for a
simple idea you probably already
know. Let’s see…
• Entrepreneurs are people who bring
the other three factors of
production together to produce a
good or create a service.
• Entrepreneurs take a risk when they
do this. Why do they take the risk?
THEY HOPE TO MAKE A
PROFIT!
Do YOU know an
entrepreneur?
• Do you know someone who owns a business?
• Do you have a doctor who has his or her
own office?
• Have you ever heard of Walt Disney,
Henry Ford or Oprah Winfrey?
If you answered ‘YES’ to any of these
questions, then you know or have heard
of an entrepreneur!
Entrepreneurs in Colonial
America
• Store owners and the people who started
trading posts were entrepreneurs.
• People who owned and ran farms were
entrepreneurs.
• Plantation owners were entrepreneurs.
• Fur trading companies were run by
entrepreneurs.
Can you think of others?
INVESTORS
• Sometimes people don’t want to take
the risks that entrepreneurs take,
but they want to make a profit, too!
• These people loan money to
entrepreneurs so they can build their
businesses.
• We call these people investors.
• Have you ever loaned money to
someone for a profit? Did you ever
collect interest?
• If you have a savings account, you
have loaned money to a bank and you
are an INVESTOR!
SHAREHOLDERS
• Shareholders are special types of
investors.
• Shareholders pay money to buy a small
piece of a business.
• These businesses are called
corporations. Sometimes shareholders
buy many pieces of a corporation.
• The shares of the corporation they
buy are called ‘stocks’. Do you know
anyone who owns stocks?
• If you do, you know a shareholder!
Economics is not new!
As you have seen, during colonial times,
the same factors of production were
used. The colonists created businesses
and made choices.
What choices?
How about these:
• Do I use that tree for my house or
should I build a canoe?
• Do I use my land to plant corn or
should I grow cotton?
• Do I start a blacksmith shop or open
up a general store?
Economists also have special
names for the people who make
certain choices…
• Here are some examples:
–
–
–
–
–
–
Producers
Consumers
Investors
Importers
Exporters
Distributors
Let’s see who these people are!
PRODUCERS
• Producers are the people and businesses
who choose to produce goods.
– Pizza Hut is a producer of pizza.
– Artists are producers of paintings and
sculptures.
– TriStar Pictures is a producer of movies.
– General Motors is a producer of automobiles
and trucks.
– If you make necklaces or bracelets, you
produce jewelry.
Can you think of other
producers?
Producers in Colonial
America
• Mills produced grain.
• Textile mills produced cloth.
• Many fishing companies produced
fuel from whale oil.
• Carpenters produced furniture.
CONSUMERS
• Consumers are the people and
businesses who choose to use goods
and services.
– When you buy a new pair of jeans you
are a consumer.
– When Ford Motor Company buys steel
for its cars, it is a consumer.
– When Hungry Howie’s buys pepperoni, it
is a consumer.
Can you think of other
consumers?
Consumers in Colonial
America
• When textile mills bought cotton to
make cloth, they were consumers.
• When carpenters bought lumber to
make furniture, they were
consumers.
• When colonists ate the crops that
were grown, they were consumers.
Think about this…
• Can you be both a producer AND
a consumer?
• Can a business be both a
producer AND a consumer?
YES!
Let’s look at some examples
from the colonies…
What am I?
• I just bought a new plow in town. I am a
__________________.
• I grew 100 acres of corn this year. I am a
__________________.
• I used 10 yards of cloth to make curtains for the
town hall. When I bought the cloth I was a
_____________. When I made the curtains I was
a __________________.
• I bought lumber from the mill to build wagons.
When I bought the lumber I was a
_______________. When I sold the wagons I was
a ___________________.
I think you’ve got
it!
IMPORTERS, EXPORTERS
AND DISTRIBUTORS
• Once goods are produced, they have
to get to the market where they will
be sold.
• Sometimes, the market is in another
country.
• Sometimes goods arrive at one place
and have to be sent to another.
• These are the times we talk about
importers, exporters and distributors.
• Let’s see what these people and
companies do!
IMPORTERS
• Importers buy goods that were produced
in another country.
– The United States imports most of its
bananas from countries where it is warmer.
So, for some products, the United States is
an importer.
– Countries in Europe import many American
cars. When they do, Europe is an importer.
What did the colonists
import?
The Colonists as
Importers
• Colonists imported tea.
• Colonists imported many
manufactured goods.
EXPORTERS
• When a country or company sells
goods to markets in other countries,
they are exporters.
– The United States exports automobiles
to many other countries.
– Farmers in the Midwest export many
tons of wheat to other countries.
What did the colonists
export?
The Colonists as
Exporters
• The colonists exported cotton to
Europe.
• Fur trading companies exported furs
to Europe.
• The colonies exported MANY natural
resources to Europe.
Were the colonists
importers or
exporters?
BOTH!
DO YOU REMEMBER
WHY?
• The colonists exported natural resources.
• The colonists imported manufactured
goods.
So what are
distributors?
• Distributors are the people and businesses that
buy goods and then send them to other places.
– When the United States imports foreign
cars, the distributors send them around the
country so they can be sold.
– When a farmer sells his wheat to a large
company, the company is a distributor when
it sends the wheat to other markets or
companies.
Your Turn
• Give an example of each of the
following:
–
–
–
–
Natural resource
Human resource
Capital resource
Entrepreneur
There’s more…
Give an example of each
of the following:
• Producer
• Consumer
• Investor
• Shareholder
• Importer
• Exporter
• Distributor
CONGRATULATIONS!
You can now talk like an economist!
Let’s give it a try.
~Write a story about colonial America that
correctly uses all of the words we have studied.
~Your story should have a beginning, a middle, and
an ending.
Use details to show you really CAN talk like an
economist!
Here are the words…
Words for Your Story
•
•
•
•
•
•
•
•
•
•
•
•
•
Economics
Factors of production
Natural resources
Human resources
Capital resources
Entrepreneurship
Producer
Consumer
Investor
Shareholder
Importer
Exporter
Distributor
HAVE FUN!