SECONDARY LESSON PLANS
LESSON 4
Why Do I Want All This Stuff?
1. FOCUS
Student Objectives
Identify two factors that determine consumer demand. Identify substitutes and complements for
selected goods and services. Distinguish between fact and opinion in advertisements. Use
economic reasoning to better understand the factors that influence consumer demand and
spending decisions.
Background
Successful companies know who buys their products, why, and what kind of advertising
influences consumers. Advertisers spent over $150 billion dollars in 1992 to influence the
spending decisions of consumers. A quick look at any television program or periodical will
reveal the many ways that advertisements are used to influence demand and spending decisions.
Children are big spenders. By examining advertisements, students will find information,
distinguish between fact and opinion, and better understand their own responses to advertising.
Using economic reasoning to evaluate these claims and to compare facts will enhance decision
making.
Since income is always limited relative to wants, people must make choices. Consumers must
choose from among alternatives to achieve the greatest level of satisfaction with their limited
income. Understanding the factors that influence their demand, such as taste and preference,
availability of substitutes, and the costs of complementary goods, will contribute to better
decision making. Practicing better decision making in the classroom better prepares students to
make choices as consumers.
Concepts
Demand, determinants of demand, tastes and preferences, substitutes, complements, advertising
Preview
Producers and advertisers use a variety of methods to by to influence consumer tastes and
preferences, and through that, demand.
Tastes and preferences and the price of substitute and complementary products influence
demand for goods and services.
Distinguishing fact from opinion in advertising enhances consume? decision making.
People respond to advertising in various ways.
Consumers make better choices when they understand and consider the factors that influence
their demand for goods and services.
2. PREPARE
Activity Sheet 9: Familiar Symbols
Samples of advertisements for products typically purchased by children
Markers (two colors for every student)
Optional: videotape of television commercials Art supplies, hangers, yarn, heavy paper or index
cards, hole punch
1. Ask students to bring magazines or newspapers from home that contain advertising. An
option is to videotape commercials from children's television programs.
2. Assemble a display of print advertisements for familiar products or edit a selection of
television commercials illustrating a variety of advertising appeals.
Examples: brand name familiarity or slogans "Just Do It."
celebrity endorsement
"if you buy - you will be like me."
authority endorsement
"99% of doctors recommend
bandwagon/status appeal
"All the 'cool' people wear_"
quality claims or comparisons
"We are better than "
informative
Now available at your local store.
3. Make an overhead transparency of Activity Sheet 9.
3. TEACH
Introduction
1. Display a transparency of Activity 9 and discuss:
a. What products do you associate with each symbol? (Converse shoes, Chevrolet automobiles,
McDonalds Restaurants, Nike Shoes and Products, Domino's Pizza, Levi Strauss Clothing, Walt
Disney/Mickey Mouse, Apple Computers)
b. Why do these symbols remind you of specific products or companies? (see them on television
or in newspapers and magazines, see them in stores)
c. What do you remember about the product or company? (Answers will vary.)
2. Explain that companies use ads to provide information for consumers to influence consumer
behavior. They want consumers to remember, and hopefully prefer, their product. Logos are a
common advertising tool. Discuss:
a. What other logos, symbols, or slogans do you remember? (Answers will vary.)
b. Why do you remember them? (Answers will vary.)
c. How do these advertisements or logos influence people's choices? (Being familiar with a
brand name might encourage people to buy that brand.)
Activities
1. Explain that advertisers are interested in increasing the demand for their products. Two factors
that influence the demand for a good or service are consumer tastes and preferences and the
prices of substitute and complementary products.
2. Explain that consumer tastes and preferences involve things other than price, such as quality,
color, design, flavor, size, and individual values. An advertiser tries to change consumer tastes
and preferences in favor of his or her product to maintain or increase the demand for the product.
Discuss:
a. Name a product that is advertised by a celebrity. (Nike shoes, Converse shoes, Gatorade, milk,
soft drinks)
b. Why do companies use celebrities in ads? (They think that celebrity ads will influence
consumer tastes and preferences for the product, and, therefore, increase consumer demand for
the product.)
c. Name a product that is endorsed by an authority, such as a doctor, the American Dental
Association, a teacher, a police officer, and soon. (soap, toothpaste, pain relievers, teaching aids
such as Hooked on Phonics or Sylvan Learning Centers, car and home alarm systems)
d. Why do companies use authorities in ads? (They think that an endorsement by an authority
will influence consumer tastes and preferences for the product, and, therefore, increase
consumer demand for the product.)
e. Name a product advertisement that focuses on a claim that everyone else consumes the
product. (Levi jeans, Guess, video game systems, various toys)
f. Why do companies advertise in this way? (They think that the ad will influence consumer
tastes and preferences consumers will want what everyone else has, and the demand for the
product will increase.)
g. Name a product advertisement that compares the quality of similar products. (cars, pain
relievers, other over-the-counter medications, macaroni and cheese)
h. Why do companies advertise in this way? (If consumers think the quality of one product is
higher than another, they will substitute one product for another, and the demand for the
high-quality product will increase.)
3. Explain that complements are products that are used or consumed in combination with one
another, such as hamburgers and hamburger buns, peanut buffer and jelly, and loose leaf paper
and 3-ring binders. Substitutes are products that can replace one another, such as apple juice and
orange juice, butter and margarine, and pencils and mechanical pencils.
4. Divide the class into pairs. Explain that they are going to play Complement and Substitute
Jeopardy. You will read pairs of items. Each pair of students must decide whether the items are
complements or substitutes. Then, they must respond with the question what are complements?
or What are substitutes?
5. Read the following:
a. shampoo and conditioner (What are complements?) b. ice cream and ice-cream cones (What
are complements?) c. ice cream and frozen yogurt (What are substitutes?) d. crayons and
markers (What are substitutes?) a. milk and chocolate syrup (What are complements?) f. baked
potato and sour cream (What are complements?)
g. a bar soap and liquid soap (What are substitutes?) h. pudding cups and Jell-O cups (What are
substitutes?) I. lunch box and a paper bag (What are substitutes?) j. lunch at school and a packed
lunch (What are substitutes?) k. roller blades and hockey sticks (What are complements?)
6. Remind students that companies try to influence consumer demand for a product through
advertising. The advertisements may attempt to change consumer tastes and preferences,
promote the sale of complementary goods, or promote the sale of a substitute good. Knowing
that advertisements are created to influence consumer behavior may help consumers analyze
advertisements so they can make more careful decisions.
7. Explain that some of the information in advertisements is fact and some is opinion.
8. Define a fact as a statement that can be proven true or false. For example:
a. The price of the toy is $27.00.
b. The bike is 21 inches.
c. The basketball is red, white and blue.
d. The binder can be used to hold paper.
e. The candy contains sugar, caramel, chocolate, and peanuts.
9. Define an opinion as a statement based on a belief or value. For example:
a. Our cereal is better than the other brand.
b. This game is more fun than the other one.
c. This computer is easier to use than the other brand.
10. Divide the students into small groups. Distribute copies of print ads and markers to each
group.
11. Explain that the students should read the ads and determine which phrases in the ads are
facts about the product and which are opinions. They should circle facts with one color and
opinions with another.
12. Ask each group to report the facts and opinions they found to the class. When all groups
have reported, discuss the following questions:
a. Which occurred more frequently facts or opinions? (probably opinions)
b. Which are most useful to consumers? (facts)
c. Provide an example of a time that you were misled by an advertisement. (Answers will vary.)
Why do you think this happened? (Didn’t t pay enough attention to the facts.)
13. Using the same advertisements, ask each group to answer the following questions:
a. Who is being encouraged to use this good or service? (Answers will vary.)
b. How do the ads appeal to the consumer's tastes and preferences? (describes the product;
shows a celebrity using, eating, or wearing the product; provides an authority's opinion about the
product)
c. In which type of publication did this ad appear? (newspaper, children's magazine, sports
magazine, news magazine, working women's magazine, fashion magazine)
d. Is there a relationship between the potential consumer, the type of advertisement, and the type
of publication? (Yes. Companies place advertisements in publications that will most likely be
read by consumers the company is trying to reach.)
e. Does the ad provide consumers with enough information to decide whether to buy this good
or service? (Answers will vary.)
14. Explain that each group will create a substitute mobile for its product.
15. Distribute art supplies, a hanger, yarn, hole punch, and heavy paper or index cards to each
group.
16. Instruct each group to create a mobile by illustrating the product and the available substitutes
for the product on the paper or index cards. For example, if the product is Coca-Cola, substitutes
would include Pepsi, Dr. Pepper, Kool-Aid, mineral water, fruit tea, flavored water and juices.
17. Explain that when the drawings are complete, students should punch a hole in the top of each
drawing and tie a piece of string through the hole. Then, they should connect each drawing to
the coat hanger and hang it from the ceiling.
18. When the mobiles are completed and hung, discuss the following questions:
a. Give an example of a product for which there are few if any good substitutes. (electricity, salt,
water, some medicines)
b. Do companies advertise these products? (No.) Why? (If there are few substitutes, no
advertisement is needed to encourage people to buy the product.)
19. Review the following:
a. Why do companies advertise products? (to provide information in an effort to influence
consumer tastes and preferences and, as a result, consumer demand for the product.)
b. What types of information do ads provide? (facts and opinions)
c. Which information is most valuable to consumers in making decisions to buy? (fact)
d. Give an example of a fact that might be included in an ad. (size or color of the product, price
of the product, use for the product, ingredients in the product)
e. Why are facts valuable for the consumer? (Facts allow consumers to accurately compare a
product to similar products.)
f. Give an example of two products that are substitutes for one another. (Answers will vary.)
g. Give an example of two products that are complements for one another. (Answers will vary.)
20. Closure. Review the preview statements for the lesson, emphasizing that these are the big
ideas students should have learned from the activities.
a. Producers and advertisers use a variety of methods to try to influence consumer tastes and
preferences, and through that, demand.
b. Tastes and preferences and the price of substitute and complementary products influence
demand for goods and services.
c. Distinguishing fact from opinion in advertising enhances consumer decision making.
d. People respond to advertising in various ways.
e. Consumers make better choices when they understand and consider the factors that
influence their demand for goods and services.
21. (Optional) For homework, instruct students to view two television advertisements or
read magazines that have ads that are designed to have high appeal for children their
age and answer the following questions:
a. What information is presented in the ad that may influence children to buy the product?
b. Was a celebrity used in the ad?
c. What facts were provided about the product?
d. Were there enough facts for you to make a decision about buying the product?
e. Was there any part of the ad that might not seem true? (toy moved in a way it wouldn
really move, product appeared larger than it really is)
f. Would this ad influence your buying behavior?
4. CONNECT
Family Connection. Ask families to discuss with their children at what age they began to
recognize common product logos. Discuss the brands of products found in the home. Why were
those brands purchased? Did advertising influence their choices? Families can use the following
resources to help children learn more about consumer decision making: Berry, Joy Wilt. Every
Kid's Guide to Making & Managing Money. Chicago: Children's Press, 1986. Helps children
understand about producers and consumers, including the use of advertising. Fair, Jan and
Melvin, Mary. Kids Are Consumers Tool Menlo Park, California: Addison-Wesley, 1968.
Real-world mathematics for the classroom. A collection of activities using mathematics and
consumer decision-making. Money for Kids. Time Inc., New York, New York. An annual
magazine for children on a variety of topics, including consumer and career decisions. Available
from Time Consumer Service, Inc., P.O. Box 30626, Tampa, FL 33630-0626. $1.50 for postage
and handling.
Language Arts Connection. Locate advertisements for the same product in two or more
publications. Compare the ads. Students can write about how their spending decisions are
influenced by ads, illustrating their understanding of how facts and opinions affect preferences
and demand.
Children's Literature:
Asch, Frank. Good Lemonade. New York: Franklin Watts, 1976. A boy decides to open a
lemonade stand. He uses every advertising appeal to gain customers.
Herman, Charlotte. Max Malone Makes a Million New York: Holt, 1991. Max decides to make
his fortune after reading about how another young boy did it.
Page, David. The Lemonade War St. Petersburg, FL: Willowwisp Press, 1993. Pam and Julie
want to earn enough money to buy a video game. They decide to open a lemonade stand. They
argue over advertising the lemonade as the war begins.
Video Resources:
Buy Me That Too: A Kid's Survival Guide to Advertising. HBO, 1991. Grades K-6. This video
explores advertising aimed at children. Children develop their critical thinking skills as they
watch sample commercials and examine advertising techniques.
Buy Me That 3l A Kid's Guide to Food Advertising HBO, 1993. Grades K-6. A look at
advertising of food products aimed at children.
ACTIVITY SHEET 9
Familiar Symbols
What product or "brand" do you associate with each of these symbols?
1. Product/Brand?
2. Product/Brand?
3. Product/Brand?
4. Product/Brand?
5. Product/Brand?
6. Product/Brand?
7. Product/Brand?
8. Product/Brand?
What is a stock?
LESSON THREE
LESSON 3 WHAT IS A STOCK? OR, WHO OWNS McDONALDS?
INTRODUCTION
Private ownership is fundamental to the operation of a market economy. This lesson introduces
the idea that individuals can become owners of a business by purchasing stock.
ECONOMICS BACKGROUND
People who buy stock in corporations are owners of that corporation. They risk their money
(personal wealth) on the success of the business. My business is risky because the future is
uncertain. The owners of the business bear that risk. If the business succeeds, the owners benefit.
LANGUAGE OF ECONOMICS
Economize: To base decisions on an assessment of costs and benefits, choosing the best
combination of costs and benefits from among the alternatives. Ownership: The tight to use
something and enjoy its benefits. Profit: The difference between
OBJECTIVES
1.
2.
3.
4.
Students explain that a stock is a share of ownership in a business.
Students explain that a company's risk is assumed by those who own it.
Students explain that owners of stock are entitled to a share of a company's profits.
Students describe the risk that a company's owners assume when the business introduces
a new product.
5. Students make decisions regarding stock ownership, weighing expected benefits against
expected costs.
MATERIALS
Activities 1, 2, and 3*
TIME REQUIRED
One class period
PROCEDURE
A. Explain to students that today they will learn what a stock is and how stock ownership
provides limited risks and potential rewards to investors.
B. Ask the students if they know anyone who owns something. (Everyone owns something:
clothes, books, cars, businesses.) Have students provide examples of ownership they are
familiar with. Find out whether any students know people who own businesses.
C. Why do people like to own things? (Private ownership is a producing or selling a good or
service; it is a return for risk taking.
Risk: The chance of losing money. Risk is the opposite of safety.
Stock: A share of ownership in a company. Owners of stock receive part of the company's
profits-or bear some of its losses-up to the amount of money they put into the stock.
CROSS CURRICULUM SKILLS Students develop skills in reading, listening, group
participation, and writing. people to enjoy the benefits of what they own)
D. Ask: Can people legally do anything they want with items they own? To prompt discussion,
provide a few problematic examples-e.g.,
1. Can you drive on the left side of the road with your car?
2. Can you use your clothes to tie up a student and lock him or her in a locker?
3. Can you use your books to start a fire in someone's living room?
Activity 3 is adapted from The Stock Market Game Guide, published in 1990 the Securities
Industry Foundation for Economic Education, Inc., and used here with permission.
LESSON THREE
4. Can you use your makeup to color over the computer monitor screen in school? (The answer
is no to each question. Each of these activities is illegal.)
E. Ask: What does ownership mean? (It establishes who gets the benefits associated with the
items and who bears the responsibility for what happens with them. You get to drive your car no one else may without your permission - but you are responsible for driving legally and
answering for any harm you cause when you use the car. Ownership means that privileges and
responsibilities are clearly defined.)
F. Distribute Activity 1, Stock Ownership: A Delicious Topic, to the class. Ask students to read
it individually. Their purpose is to identify the costs and benefits of stock ownership.
Ask:
1. How many people own McDonald's? (226,656)
2. Why would people wish to buy McDonald's stock? (They hope to share in the profits and
increase their wealth.)
3. How do you become an owner of McDonald's? (Buy McDonald's stock)
G. Divide the class into groups of three. Distribute Activity 2, Happy Birthday, Cookie.
Ask students to use the information in Activity 1 as they answer the questions in Activity 2.
Discuss the answers in class.
1. When Nabisco introduced its new cookies in 1912, Nabisco stockholders assumed a risk that
was similar to Toad's risk in wanting to sell chocolate insects. What was that risk? (They risked
losing money when the company introduced the new cookies. Neither Toad nor Nabisco knew
that customers would buy enough of their products.)
2. Why were stockholders willing to assume this risk? (They thought they could earn a profit)
3. Did the risk-taking turn out to be worthwhile for Nabisco's stockholders? Why or why not?
(Yes and No. Stockholders have earned profits from the Oreo cookie, but they lost money on the
other two cookies.)
4. Did the risk-taking by Nabisco's stockholders benefit the company's customers and
employees?
4. What are the benefits of stock ownership? (Owners may share in the profits in the company.)
5. What are the risks of stock ownership? (Owners may lose some or all the money used to buy
stock)
6. Will McDonald's accept Toad's suggested menu? (McDonald's is not ready for ants,
mosquitoes, or earthworm parts-even U they are dipped in chocolate.)
7. How do profits help McDonald's? (Profits help by increasing dividends paid to stockholders
and expanding the number of restaurants.)
(Customers have benefited by obtaining products they enjoy and the company's employees have
benefited by having a place to work and earn income.)
5. If you owned stock in the company, would you be entitled to take a package of Oreos from
the supermarket whenever you wanted? Why or why not? (No. I would own only a tiny fraction
of each cookie, building or machine belonging to the company.)
H. Distribute copies of Activity
3. Thank-You
Note. Remind the students that every economic choice involves weighing expected costs against
expected benefits. For home-work, ask students to read the directions and write Aunt Elizabeth a
thank-you note that demonstrates that they understand the answers to the questions in Activity 2.
Lesson 3--Activity One
LESSON THREE
ACTIVITY I
STOCK OWNERSHIP: A DELICIOUS TOPIC
Toad is Maria's best friend, but sometimes his impractical schemes are a bit much, even
for Maria. Yesterday was a good example. He embarrassed her at McDonald's just
because he was ignorant about stock ownership and insects.
Stock ownership and insects? Yes. It all started when Toad stopped by Maria's house and
asked her to go to lunch at McDonald's. "Nothing like fries and a burger and something
special for lunch," he said, as they walked over to the local Golden Arches.
"Something special?' she asked. But he just ignored her as he hopped along, carrying a
carefully folded brown bag.
At the restaurant, Toad offered to buy lunch. He asked Maria to find a table and to guard
his brown bag. "Don't look inside, it's a surprise," he said. That should have been enough
warning, Toad buying lunch and asking her to guard a brown bag; but she just went along
with everything because he brain was temporarily locked in the numb position.
Shortly he joined her at the table with the food and a sour mood. "What is the matter?"
she asked. "Didn't they give you good service?'
"Oh, yes," Toad grumped, "but apart from the service she was so uncooperative! I said I
wanted to see the owner about this great idea of mine, but she said she was the local
franchise owner. I said, 'so you own all the McDonald's in the world? And she said, "No,
it is impossible to talk to those owners.' Then she started waiting on the next customers.
She's so rude!" Toad moaned.
"Actually," Maria replied, "she is right. There are 226,656 owners of McDonald's. Maybe
you should become an owner."
"That's a great idea," Toad replied. "Then I could have the restaurants serve my favorite
foods and I could eat free. If I own the business, then I get to run it my way, right?'
"Not exactly," Maria replied. "I learned a lot about ownership and business by surfing the
Internet. If you want to become a part owner of McDonald's, all you have to do is buy
stock in that company. You become a part owner of the company, but many other people
will also have bought stock in the company. So you are only one of many people who
share its ownership. That's why stocks are called shared."
"But I could only eat a tiny share of all the food McDonald's cooks each day," said
Toad. "As a part owner, couldn't l eat part of their food?"
Lesson 3--Activity One
"No, you couldn't. McDonald's has close to 694 million shares of stock. That means that the
ownership of every hamburger McDonald's produces is really divided into 694 million parts. If
you buy one share of stock then you would own one of 694 million parts of each hamburger."
"That's hard to imagine," said Toad. "That little bit wouldn't fill me up."
"And the same would be true for the company's buildings, stoves, and furniture. You would own
only one 1/694 millionth of each thing."
"Well, maybe I could decide what food to put on the menu if I were an owner of McDonald's
stock," Toad said. "They are really missing a sure bet by not offering a more varied menu."
"Actually, you can't do that either," Maria replied. "For each share of stock, you get one vote for
the company's top managers, or directors. With so many owners or stockholders, you by yourself
would not have a big influence on what the company offers as its menu. Actually, managers run
the company for you and the other stockholders."
"So what would I get for buying a share of stock in the company?" asked Toad. "It doesn't sound
like much of a deal to me."
"Each share of ownership entitles you to some of the profits the company earns," she explained.
"But profit is not a sure thing. If people don't like the food, the company wouldn't earn enough
money to cover the costs and earn a profit. Any business is risky because the future is uncertain.
A company could spend lots of money for buildings, equipment, or developing a new product.
But if customers don't like the product or if prices are too high or products of other restaurants
are more attractive, business income will be too low. Success is never a sure thing, so there is
always a chance of loosing your money. Any business is risky and someone has to bear that risk.
That's what stockholders do as owners of a business."
"Sounds exciting," said Toad. "So why buy a stock and risk losing money?'
"Because you can make a gain also. You think the business will earn a profit on the product, so
you take the risk. The possibility of earning a profit gives the owners and managers of a business
an incentive to produce something consumers want to buy at a price they are willing to pay. If
the business succeeds, its owners will earn a profit. That is the reward stockholders get for
risking their money. Customers also benefit because they get something they like. Employees of
the business benefit because they have a place to work and earn income. It's like they're all on
one big team with the same goal. But owners are the only ones who risk their own money on
whether the goal is accomplished."
"So by buying a stock," Toad said, "I become a business owner who takes part of the risk that
the company might fail. But if the company succeeds, I may get some of the company's profit.
I'd like to do this, because I know McDonald's could make a profit from my new menu idea. It's
tasty, inexpensive to produce, and everyone in my family likes it."
Lesson 3--Activity One
Then Maria asked the fatal question. "Toad," she said what is the food you think McDonald's
should have on its menu?'
"Look at this great stuff!" Toad shouted as he opened the bag and dumped the contents onto
their food plates." Over at Windy Willows Community Center where all my relatives live, this is
our favorite food. Try some. It's got chocolate on it. I know you will like it."
The food was very small-bite sized--and very tasty. The chocolate taste dominated, but Maria
noticed an unusual aftertaste that was not unpleasant. Other people sifting nearby were
interested, so Toad also shared it with them. Even the franchise owner came over to see what the
fuss was about and tried some. Everything was going great until someone asked, "What is this
food?"
On the way home Maria was mad enough to spit. "How could you embarrass me that way? You
know most people do not like to eat ants, flies, mosquitoes, and earthworm parts. Now we can
never go back to that McDonald's Restaurant! I know for sure McDonald's will never hire you to
decide on their food menu. Can you imagine what would happen to their sales if they served
your food?"
"I'm sorry," Toad replied. "I just thought that the chocolate flavor would take care of the
problem."
Questions for Discussion
1. How many people own McDonald's?
1. Why would people wish to buy McDonald's stock?
1. How do you become an owner of McDonald's?
1. What are the benefits of stock ownership?
1. What are the risks of stock ownership?
1. Will McDonald's accept Toad's suggested menu?
1. How do profits help McDonald's?
From Geography: Focus on Economics, National Council on Economic Education, New York,
NY
Lesson 3--Activity Three
LESSON THREE
ACTIVITY 3
THANK-YOU NOTE
After talking with Toad, Maria thought some more about stocks, profits, and risk. She
thought about the $500.00 her Aunt Elizabeth had given her as a gift for making the
school honor roll. She talked to her parents about what to do with the money and then she
decided to invest it in stock.
Pretend that you are Maria. Write a letter to your Aunt Elizabeth in the space below and
thank her for her gift. Explain that you have decided to use the money to help buy shares
of stock in a business. Aunt Elizabeth might be made uneasy by the news of your
decision to buy stock. She keeps all her extra money in a savings account. Anticipate
Aunt Elizabeth's concerns. Explain why you think you are making good use of the
money, even though stock ownership involves risks.
Dear Aunt Liz,
_______________________________________________________
What's a Dollar Worth? CPI Calculation Machine
Woodrow Federal Reserve Bank of Minneapolis
What is a dollar worth?
The Consumer Price Index (CPI) is the ratio of the value of a basket of goods in the current year
to the value of that same basket of goods in an earlier year. It measures the average level of
prices of the goods and services typically consumed by an urban American family. Parkin. 1990
Consumer Price index and Inflation Rates 1913
Consumer Price index and Inflation Rates (Estimate), 1800
Bureau of Labor Statistics -- regional and commodity/service group indexes
How the CPI is used to make these calculations
Directions: Enter years as 4 digits (i.e. 1913) through 2000. An estimate is used for 2000 based
on the change from 4th quarter 1998 to 4th quarter 1999. Enter dollar amount without commas
or $ sign in box on first line. Click Calculate button to compute dollar amount shown on second
line.
If in I - (year) I bought goods or services for $1.00
in I - - - (year) the same goods or services would cost $ --Cacu1ate
Notes:
• Estimate for 2000 is based on the change from 4th quarter 1998 to 4th quarter 1999.
• Limited to years from 1913 to 2000.
• Data from consumer price indexes for all major expenditure class items.
• Base year is chained; 1982-1984 = 100
• The calculator does not work well in Windows 3.x or earlier Windows releases.
• JavaScript-enabled browsers only; Netscape version 2.0 or higher provides the best
results.
How the CPI is used to make these calculations.
• What would an item or service purchased in 2000 be worth in 19?? dollars?
Example: The CPI is used to calculate how prices have changed over the years. Let's say you
have $7 in your pocket to purchase some goods and services today. How much money would
you have needed in 1950 to buy the same amount of goods and services?
The CPI for 1950 = 24.1 The CPI for 2000 = 171.0* Use the following formula to compute the
calculation: 1950 Price =2000Pricex (1950 CPI/2000 CPI*)
*Estimate for 2000 is based on the change from 4th quarter 1998 to 4th quarter 1999.
. What would an item or service purchased in 19?? be worth in 2000 dollars?
Example: Let's say your parents told you that in 1950 a movie cost 25 cents. How could you tell
if movies have increased in price faster or slower than most goods and services? To convert that
price into today's dollars, use the CPI.
The CPI for 1950 = 24.1 The CPI for 2000 = 171.0* A movie in 1950 = $0.25 Use the following
formula to compute the calculation: 2000 Price = 1950 Price x (2000 CPI* / 1950 CPI) $0.25 x
171.0* / 24.1 = $1.77
A fill price movie at a Minneapolis theater costs between $5.00 and $7.00. Looks like movies
have increased in price faster than most other goods and services.
*Estimate for 2000 is based on the change from 4th quarter 1998 to 4th quarter 1999.
1999-2000 Student Essay Contest
WOODROW FEOLPAL RESERVE BANK
OF MINNEAPOLIS
1999-2000 Student Essay Contest
The Workshop and Awards Program has been
rescheduled from Friday, April 21, to Monday, May 1.
The Federal Reserve Bank of Minneapolis announces
its Twelfth Annual Student Essay Contest. It is open to all high school juniors and
seniors in the Ninth Federal Reserve District and U.S students in foreign countries.
What does this picture imply about how markets work? Bow can the lessons
portrayed in the picture guide policymakers today?
This year the Essay Contest examines a photo of an economic event during 1973.
Participants are asked to answer the above questions based on clues offered by the
picture. As you gaze at this photo, ask yourself questions such as: What economic
concepts are depicted in this image? What happened in the U.S. and international
economies that left Don Roberts without any gas to sell? Could a similar situation
develop again in petroleum or another industry?
Students should take time to reflect on what they have learned in their economics
classes and/or economics books and magazines. They will explore how the picture
relates to their knowledge of economics. Most important, students have the
opportunity to creatively interpret the picture and find diverse resources to support
their ideas.
The bibliography provides sources about economic thinking as a starting place for
different viewpoints to look at the picture. Resources include the Beige Book
Archive. which describes economic conditions across the United States from 1970
to the present. Students are also encouraged to brainstorm with their classmates
about the economic significance of this photo. Then write a creative essay that
combines economic events with concepts suggested in the picture.
Rules and Writing Guide
o Registration Form
o Rules and Forms -- including required Student Entry form
o Students guide: how to write a winning essay
o Citation Guides for Electronic Documents, via University
1999-2000 Student Essay Contest
• Bibliography --Updated Feb. 1, 2000
Essay Contest Participants and Archive
(including this year's winning Essay)
Contest Timetable
Background materials available September 27, 1999
Student essays due
March 17, 2000
Winners announced
April 7, 2000
Student Workshop and Awards
Program, Minneapolis, MN
May 1, 2000