Economics Vocabulary
Goods – tangible items that people want
Student definition – a good is something people want
that they can touch and hold.
Example: Any item you can buy at a store is a good.
Services – activities that satisfy people’s wants
Student definition – a service is something that one
person does for someone else.
Example : Washing a car, fixing a lawn mower, cutting
hair, or teaching students are examples of services.
Consumers – people who satisfy their wants by using
goods and services
Student definition – people who buy goods and
services
Example: When Sarah purchased a dress, she was a
consumer.
Producers – combine productive resources to make
goods and provide services
Student definition – people who make goods and
provide services
Example: A mechanic is a producer of car repair
services.
Productive Resources – all natural, human, and capital
resources used in the production of goods and services
Student definition – the natural, human, and capital
resources we need to produce goods and services
Example: Steel, plastic, different types of workers, and
many kinds of tools and equipment are some of the
productive resources necessary to produce a car.
Natural Resources – “gifts of nature” necessary for
production, present without human intervention
Student definition – things found in nature that we use
in production
Example: Oil, water, air minerals, wild animals, and land
are examples of natural resources.
Human Resources – “labor”, represents the quantity
and quality of human effort used in production
Student definition – the people who work in jobs to
produce goods and services
Example: Line workers, secretaries, managers, and
engineers are examples of the human resources used to
produce an automobile.
Capital Resources – goods that are produces and used
to make other goods and services
Student definition – special goods such as tools,
equipment, machines, and buildings which are used to
produce other goods and services
Example: The school building and all the equipment in it
are capital resources needed to produce education.
Entrepreneur – people who organize other productive
resources to make goods and services. He/she assumes
the risk of economic lose and gain profits if they are
successful
Student definition – people who take risks to start a
business. They have to organize all of the productive
resources to produce goods and services.
Example: Henry Ford was an entrepreneur who used his
personal savings to design a factory which produced
automobiles on an assembly line.
Scarcity – not being able to have all of the goods and
services that one wants, it exists because there are not
enough productive resources to produce all that people
want. Because of scarcity, people must make choices
Student definition – not being able to have everything
that we want. Scarcity forces us to make choices
Example: When you go shopping, your limited income
forces you to make choices. You can’t buy everything
you want.
Opportunity Cost – a choice is the value of the best
alternative given up
Student definition – when you make a decision, the
most valuable alternative that you don’t choose is your
opportunity cost
Example: Shanika wants to be a nurse and teacher, but
she can’t be both. She decides to be a nurse, so being a
teacher is her opportunity cost.
Trade-Offs – means getting a little more of one option
in exchange for a little less of something else. Few
choices are all-or-nothing decisions; most involve tradeoffs
Student definition – getting a little less of one thing in
order to get a little more of another
Example: Jethro loved to buy baseball cards. So when
he used part of his birthday money to buy some candy
instead, he was trading off cards for candy.
Money – anything used to exchange goods and services,
to be effective money must be scarce, durable,
portable, and divisible
Student definition – money is what people use to buy
goods and services
Example: Many different items have been used as
money throughout history including gold, silver, shells,
tobacco, and paper.
Profit – the difference between the sales revenues and
all the costs of producing a good or service
Student definition – produce or sell a good or service,
your profit is the difference between the money you
make when you sell it and all your costs of production
Example: Beatrice received $200 from selling
lemonade. She figured all her costs were $125. Her
profit was $75.
Price – what people pay when they buy a good or
service and what they receive when they sell a good or
service; in a free marker, price is determined by supply
and demand
Student definition – amount of money that people pay
when they buy a good or service. It is determined by the
buying and selling decisions of consumers and
producers
Example: Tabitha paid a price of $1.50 for the pack of
gum.
Role of Government – main role of government in a
market economy is to : provide a legal framework;
ensure competition; provide public goods, such as road
and national defense; and control “market failures”
such as pollution and animal extinction
Student definition – important roles of government in
an economy are:
1) Provide laws to help the economy run smoothly
2) Make sure there is enough competition among
businesses
3) Provide public goods, such as roads and
national defense
4) Control bad effects of production (such as
pollution and protect endangered resources)
The government gets money by collecting taxes.
Example: Enforcing business contracts through the legal
system is an important role that government plays in
the United States economy.
Specialization – when people produce a narrower range
of goods and services than they consume; specialization
increases productivity and results in greater
interdependence
Student definition – people specialize when they work
in jobs where they produce a few special goods and
services. When people specialize, they produce more
but they also depend more on one another
Example: Jason is a mechanic. He gets his hair cut at
Joe’s Barber Shop. Joe goes to Jason to get his car fixed.
Jason and Joe earn more by specializing, but they must
depend on one another.
Interdependence – when people and nations depend
on one another to provide for each other’s wants
Student definition – occurs when people and nations
depend on one another to provide the goods and
services they want; more people specialize and trade –
the more interdependent they become
Example: Canada and the United States are very
interdependent because they trade so much with one
another.
Productivity – ratio of output (goods and services)
produced per unit of input (productive resources) over
some period of time
Student definition – measures how many goods and
services are produced over a period of time; usually
measured as output per hour
Example: When Maurice purchased a snowblower he
greatly increased his productivity – he was able to clean
many more sidewalks each day.
International Trade – exchange of goods and services
among people and institutions in different nations
Exports are domestic goods and services that are sold to
buyers in other nations.
Imports are goods and services that are bought from
sellers in other nations.
Quotas (limits on imports) and tariffs (taxes on imports)
are common barriers to trade.
Example: The United States imports coffee and exports
wheat.
Additional terms:
Vocabulary Words
3rd grade - Unit 4
Goods
Services
Consumers
Producers
Productive
Resources
Natural
Resources
Human
Resources
Capital
Resources
Entrepreneur
Scarcity
Trade-Offs
Money
Price
Specialization
Interdependence
Productivity
Profit
Role of
Government
International
Trade
Trouble is Brewing in Boston –

“Daily Life in the Colonies”: An interesting
interactive PBS activity.
www.pbs.org/ktca/liberty/perspectives_daily.html

Harcourt Brace: This site contains excellent
interactives that the students would enjoy.
www.harcourtschool.com/

Life in New England: Learn about productive
resources in Colonial New England.
www.harcourtschool.com/ss1/adventure_activities/
interactives/gr5_unit3.html

"What Is It": This site invites students to participate
in a guessing game.
www.harcourtschool.com/activity/what_is_it/index
.html

Economic Glossary: As an economic resource this
site defines goods and services.
Economic Glossary

Goods or Services: This activity gives the students a
chance to demonstrate an understanding of goods
and services, and specialization.
Good and Services

Colonial Voices Jobs: This activity tests the student's
knowledge of the jobs that were popular in Colonial
Boston.
Colonial Voices Jobs

Making a Choice: This visual activity helps the
students gain a better understanding of opportunity
costs.
Colonial Voices Opportunity Costs Visual

Opportunity Costs Cards: To explain different
merchants in Colonial Boston and opportunity costs
students will complete these activities.
Colonial Voices Opportunity Costs Cards
Colonial Voices Opportunity Cost Student Question
Sheet
Colonial Voices: Hear Them Speak
It’s December 16, 1773 and many of the citizens of
Boston are furious with King George’s new tax on tea.
Young Ethan, a printer’s errand boy, has been given the
task of conveying information concerning an upcoming
protest meeting. As he makes his rounds through the
city the reader is introduced to the goods and services
provided by colonial merchants.
A great reference for this lesson is the book, Colonial
Voices: Hear Them Speak by Kay Winters. However it is
not necessary for the students to have read the book to
successfully complete the activities.
Key Concepts: choice, goods, incentive, opportunity
cost, producers, scarcity, services, specialization, wants
Introduction
The printer’s errand boy, Ethan, knows that Boston’s
18th Century merchants work hard to provide the
growing city with its many goods and services. He also
knows that they have many problems and must make
choices. If the merchants make the choice to throw the
highly-taxed tea into the harbor, will this cause an
unsolvable scarcity situation? Will it be possible to meet
the wants of the Boston citizen? The solutions to these
problems have many possible outcomes as each
merchant has his own incentives for dealing with this
unique and history making situation. Each time a choice
is made an opportunity cost is incurred. Opportunity
cost is the next best alternative that is given up when a
choice is made.
Resources

A copy of “Colonial Voices: Hear Them Speak” by
Kay Winters, Dutton Juvenile (May 15, 2008) ISBN
978-0525478720. If you do not own a copy of this
book, you may find it in your school or local library.
It is available for purchase online as well.
www.amazon.com/Colonial-Voices-Hear-ThemSpeak/dp/0525478728
PROCESS
Introduce the lesson, if possible, by reading the book
“Colonial Voices: Hear Them Speak” by Kay Winters.
[NOTE: Reading the book takes about 12 minutes. It is
not necessary to read the book to successfully complete
these activities.]
alternative given up. In other words this is the beverage
he would choose to purchase if the he could purchase
his first choice.
4. Explain to the students that they will now assume the
role of three different merchants in Colonial Boston as
they complete and opportunity cost activity. “Colonial
Voices Opportunity Cost Cards”
http://www.econedlink.org/lessons/docs_lessons/91
1_Colonial%20Voices%20Opportunity%20Cost%2
0Cards2.pdf
and “Colonial Voices Opportunity Cost Student Question
Sheet.”
http://www.econedlink.org/lessons/docs_lessons/91
1_Colonial%20Voices%20Opportunity%20Cost%2
0Student%20Question%20Sheet2.pdf
5. Instruct students to complete the interactive activity.
2. Inform the students that the merchants in Colonial
Boston had to make some very important choices. For
example, if they chose to help the Sons of Liberty dump
the highly taxed tea in the harbor they would give up
the possibility of drinking a favorite beverage.
6. Check for understanding, stressing the economic
concept of opportunity cost and acknowledging
answers will vary.
3. Display the visual "Colonial Voices Opportunity Cost
Visual" .
(http://www.econedlink.org/lessons/docs_lessons/911
_Colonial%20Voices%20Opportunity%20Cost%20Visual.
pdf)
Upon completion of these activities students should
be confident in their understanding of the featured
economic concepts of opportunity cost, goods and
services, producers, specialization, and scarcity.
After this lesson, students should also have a better
understanding of decision making, incentives, and
wants/needs. This interdisciplinary lesson has the
potential to combine the content areas of literature,
history, and economics.
Read the introduction on the
visual to the students. Then ask
them to vote, using show of
hands, as to what they think the
errand boy will choose to drink
with his hot apple pie. Tally the
results and record them. Ask the
students how they came up with
the vote they did. What was
their decision-making process?
Review incentives as any reward
or benefit, such as money,
advantage, or good feeling,
which motivates people to do
something. Ask if they had any incentives to vote the
way they did. If so, what were they? Stress to the
students that the most voted on option is the errand
boy’s choice and that the option that came in second is
his opportunity cost. Define opportunity cost as what is
given up when a choice is made. When deciding how to
spend a resource it is one’s second best alternative; the
CONCLUSION
ASSESSMENT ACTIVITY
1. Economic Concepts Anagrams and Definitions
Source: econedlink
Read the directions to the students concerning the
printable activity assessment.
http://www.econedlink.org/lessons/docs_lessons/911_
Colonial%20Voices%20Edited%20Assessment%20.pdf
http://www.econedlink.org/lessons/index.php?lid=91
1&type=educator
Allow enough time for students to complete the 10
questions.
Check for understanding.
[Part I 1. B, 2. C, 3. D, 4. E, 5. A
Part II 1. Specialization, 2. Good, 3. Scarcity, 4.
Opportunity Cost, 5. Service]
2. Extension 1. The students will demonstrate an
understanding of goods and services and specialization
as they complete the “Goods & Services Activity.” You
may wish to quickly review the definitions for the
concepts as:
Goods- Tangible things such as
food, shoes, books, and toys
Services- Actions such as medical
care, music lessons, and
haircuts
Specialization - Being an expert in one job, product, or
service
[1. service, 2. service, 3. good, 4. good, 5. good, 6.
service. 7. service, 8. goods, 9. good, 10. service.]
EXTENSION ACTIVITY
Ask students to check out Life in New England to learn
about productive resources in Colonial New England.
This is an enrichment activity for students who
complete the lessons ahead of others in the class. Here
“Colonial Voices Jobs” the students test their
knowledge of the types of jobs that were popular in
Colonial Boston but may not be well known today.
[1. E, 2. D, 3. F, 4. g, 5. B, 6. H, 7. A, 8. C.]
Economic Spotter:
Trade in Colonial History
Students take a trip back in time and spot economic
concepts in a historical fiction tale. This time frame
features Boston Harbor around 1680.
RESOURCES

Time Machine-U.S. Mint Activity: This website
discusses the history of coins and contains
various information regarding current and past
coins while including activities about coins. (This
link requires the use of Internet Explorer, if you
are not using Internet Explorer use the
colonization activity).
www.usmint.gov/kids/timeMachine/

Colonization Activity: For more information
about trade and trade specialization students
can participate in this interactive activity.
Colonization activity

Boston Online: History: This site provides links
to webpages that will provide history on the
Boston and Boston Harbor.
www.boston-online.com/History/
Key Concepts: exchange, specialization
PROCESS
INTRODUCTION
Would you like to go back in
history in a time machine? Would you be able to
spot economic concepts? We know that economics
helped shape our history, but can you recognize
those concepts when you read about history? You
are going to take a time machine back to Boston
Harbor in 1680. Your job is to be an economic
spotter and see if you can recognize trade as it
happened in 1680. You are going to keep a list of
different kinds of trade that you find in the story.
Then you are going to explain in paragraph form
what trade is and how trade and specialization
might have helped people in the colonies.
1. Tell the students that they are going to be given a
chance to go back in history on a time machine. This
journey is going to take them back to Boston Harbor in
1680, but their job is to be an economic spotter. Can
they spot and explain economic concepts within a
historical time frame?
2. Discuss trade. When two people exchange goods and
services or money, it is called trade.
And trading goods and services
with people for other goods and services or money is
called exchange.


Have you ever traded something with another
person?
Were you and the other person happy after you
traded?
3. Explain that when people trade voluntarily -- because
they want to -- both parties usually think that they are
better off after the trade. You should never trade
something when you are going to be unhappy after the
trade. You should be better off after the exchange, or
you shouldn't have traded.



Did you ever use money as an exchange for
candy or gum?
Were you happy that you exchanged money for
those goods?
Was the store happy with the money that you
exchanged for the candy or gum?
4. Time Machine-U.S. Mint Activity. (This link requires
the use of Internet Explorer, if you are not using
Internet Explorer) use this Colonization activity) and
keep a list of all the ways trade is used in the story.
(http://www.econedlink.org/lessons/index.php?lid=301
&type=educator)
ASSESSMENT ACTIVITY
Go back to the Time Machine activity and review what
you have learned.
(http://www.usmint.gov/kids/timeMachine/)
Write a paragraph in which you tell what exchange is
and what sort of exchanges took place in Boston, 1680.
Tell how specialization helped people in the colonies
trade with England.
This is ELA Common Core informational/explanatory
writing. Examine a topic and convey ideas and
information clearly.
o
o
o
CONCLUSION
Discuss the following questions with the students:
o
Introduce a topic and group related information
together; include illustrations when useful to
aiding comprehension.
Develop the topic with facts, definitions and
details.
Use linking words and phrases (e.g., also,
another, and, more, but) to connect ideas
within categories of information.
Provide a concluding statement or section.
[NOTE: Click here to learn more about Boston's history.]
(http://www.boston-online.com/History/)
1. Why was Boston Harbor important to the
colonies? [It was a good harbor city and many
goods were exchanged there.]
2. What were the ships coming into Boston
carrying? [Goods from other countries and
ports, such as tea, and maybe furniture, cloth,
dishes, rum, etc.]
3. What were the ships leaving Boston carrying?
[They were carrying furs, animal hides, and
crops.]
4. Where did the furs come from? [Fur traders
traded wampum for animal pelts and then the
father bought them from the fur traders. The
father then sold the pelts to merchants.]
5. Why could the Massachusetts Bay Colony
specialize in beaver pelts? [There were a lot of
animals in the colonies and the Indians would
trap them to trade for wampum.]
6. What is a shilling and what did it get exchanged
for? [A shilling is a coin and it was used to buy a
packet of tea.]
Source: econoedlink
http://www.econedlink.org/lessons/index.php?lid=301
&type=educator
Economic Spotter: In Revolutionary Times
Students take a trip back in time and spot economic
concepts in a historical fiction tale. This time frame
features Valley Forge in 1778. Take a look at the money
used by the patriots and find out why some money
couldn't buy a dime!
Key Concepts: Functions of Money
INTRODUCTION
What does money look like? What is
it worth? Can we take our money to other countries and
spend it? What did our money look like a long time ago?
To explore these questions, you are going to travel in a
time machine back to Valley Forge in 1778. Your job is
to be an economic spotter and see if you can discover
why some money could not be spent back then. If you
couldn't spend it, is it money? That's an economic
mystery!
RESOURCES

U.S. Mint Time Machine Activity: This website
contains information about current and past coins
and includes coin related activities.(This link
requires the use of Internet Explorer, if you are not
using Internet Explorer use this activity)
www.usmint.gov/kids/timeMachine/

History of Money: The Federal Reserve Bank of
Minneapolis provides a more detailed history of
money.
www.minneapolisfed.org/community_education/te
acher/history.cfm

50 State Quarters Program: This page on the U.S.
Mint website provides information on the 50 state
quarters program as well as images of each states
quarter.
www.usmint.gov/kids/coinNews/50sq/

Colonial and Continental Currencies: Images of
Colonial and Continental Currencies
www.sf.frb.org/currency/independence/initial/inde
x.html
PROCESS
People have used many different items for money
including seashells, beads, tea, fish hooks, fur, cattle. As
long as both parties accepted these items in trade,
everything was fine--although paying someone in cattle
is pretty messy if you need change! Practical difficulties
of this sort prompted people to devise better forms of
money.
People in different countries tried
different things. Coins were made
and traded. That worked pretty well
because the coins were made with
valuable metals and were worth the
amount of gold and silver they were
made with.
Paper money was a different story. It
was made with paper, obviously, and
paper was not very valuable. It was called
REPRESENTATIVE money and it REPRESENTED a certain
valuable item, like gold or silver. REPRESENTATIVE
money was a lot easier to carry than what it
represented!
At one time paper money represented tobacco leaves in
United States. It was a lot easier to carry around than
those big tobacco leaves! Do you think the "tobacco
note" would have been accepted in Europe? [Probably
not, because there would not have been a way to trade
it in for the valuable tobacco. However, if Europeans
could have found another party that would accept
tobacco notes, then they could have used such notes in
transactions.]
After people started to accept paper money,
governments started to issue the currency and declared
it to be legal. "Fiat money" is money declared by a
government to be valid.
Countries create their own
money. Even though Canada
uses dollars, and the United
States uses dollars, those
dollars look different. The
dollar of Canada is issued in Canada and it is accepted
everywhere in Canada. The United States dollar is
issued in the United States and is accepted everywhere
in the United States. When you leave the United States
and enter Canada, you need to exchange your United
States dollars for Canadian dollars if you want to shop,
buy gas, or eat in a restaurant. Then when you return to
the United States, you need to exchange your Canadian
money for American money so that you can buy goods
and services here.
At one time in America, people used money of all kinds,
from different countries, and the money issued in
America was not accepted! If it was not accepted, was it
money? Let's look at the purposes, or functions, of
money.
Money serves these three purposes (functions):



Money is a "Medium of Exchange." That means
people accept money in trade for goods and
services. You cannot take play money and buy your
school lunch, because the cafeteria won't accept it.
You can't put play money in a vending machine and
get a snack because the machine won't take your
play coins. Money is money only when both parties
will accept it as a trade.
Money provides a "Standard of Value." That means
that you can use money to measure the value of an
item. A video game that costs $40 takes twice as
much money to buy as a $20 video tape. That only
makes sense! But what if our money didn't provide
a standard of value? We would not be able to
compare prices and find the best buy!
Money also provides a "Store of Value." This means
that you can save your money and use it in the
future--its value will still be there. Wouldn't it be
horrible if one day someone told you that no stores
or banks would accept
your pennies? What about
all that money in your
piggy bank?
Now that you know all about the functions of
money, let's see what purposes money served at
Valley Forge during the Revolutionary War.
Go to the time machine website
(http://www.usmint.gov/kids/timeMachine/)
and think about the money you hear about in the
story. (This link requires the use of Internet
Explorer, if you are not using Internet Explorer use
this activity)
[NOTE: Click on the following link for a longer
explanation of the history of money .]
(http://www.minneapolisfed.org/community_educat
ion/teacher/history.cfm?)
CONCLUSION
At Valley Forge, the Continental wasn't a medium of
exchange. This lesson teaches us that, for any item, if
people accept it as money, if it has a standard of value,
and if it can be saved and used in the future, then it is
performing the functions that money should perform
and it can be counted as money.
Extension
Check out the following link for images of Colonial
and Continental Currencies .
(http://www.frbsf.org/currency/independence/initial
/index.html)
Source: econedlink
http://www.econedlink.org/lessons/index.php?lid=3
15&type=educator
Week One – Video Clips
Video Clip – Trade, Exchange, and
Interdependence
Econedlink
http://www.econedlink.org/interactives/index.php?iid=
196&type=educator
Video Clip – Productive Resources
Econedlink
http://www.econedlink.org/interactives/index.php?iid=
191&type=educator
Video Clip – Demand
Econedlink
http://www.econedlink.org/interactives/index.php?iid=
210&type=educator
Money Phrases:
Words That Mean Money
Words or Phrases that Adults Use
When Talking About Money
small change
dough
funny money
rainy day fund
big money
bread
one G
payoff
nifty fifty
wad
a buck
score
loose change
pile
pin money
loot
spare change
lump sum
a clam
haul
purse strings
found money
investment
tightwad
money market account
allowance
penny-pincher
money doesn’t grow on trees
cash
taxes
ask your father
check
credit card
ask your mother
cheap
bank account
rich
nest egg
Words That Mean No Money
broke
zip
on the dole
penniless
savings account
Additional Glossary
Securities – general term referring to stocks and bonds
Bank seal – seal on bill that shows the federal district
where the bill comes from
Serial number – Series of one prefix letter, eight
numbers, and one suffix letter on each bill; newer bills
have two prefix letters
Bonds – a loan you make to a company in return for
interest
Share – the unit of a company that you uy as an
investment
Bureau of Engraving and Printing – part of the Treasury
Department that makes bills
Simple interest – interest paid on capital only
Capital – money you invest
Stockbroker – an expert in buying and selling securities
Compound interest – interest paid on capital and
interest calculated daily
Stockholders – people who own shares in a company
Counterfeit – imitation or fake
Credit history – record of how you spend your money
and pay your debts
Diversification – method of spreading portfolio risk
Dividend – sum of money paid to investors out of
company profits
Federal Reserve System – national banking system in
charge of money supply in the US
Great Seal – seal on bills that symbolizes different parts
of the US government
Interest – money paid when you loan your money for
use by a bank or company
Mint – part of the Treasury Department that
manufactures coins
Mint mark – letter on some coins that shows at which
mint they were made
Mutual Funds – pools of money used to buy stocks,
bonds, and other securities for a group of investors
Profit – money that’s left after a person or company has
paid its bills and expenses
Risk – the possibility that you’ll lose money when
investing
Secretary of the Treasury – head of the Treasury
Department
Stocks – shares of a company that you may buy
Treasurer of the US – Assistant to the Secretary of the
Treasury
Treasury Department – Federal government
department in charge of money in the US
Money - Additional Activities
When were the State Quarters released? What is
unique about each quarter? Research and share your
findings.
There are five phrases stamped on every American coin.
See if you can find out all five and share your findings.
Why do you think these five are on every coin?
Economics and Financial Literacy
Web Sites
Productive Resources (video)
COLONIAL DAY MARKETPLACE
http://www.econedlink.org/interactives/index.php?iid=
191&type=educator
http://www.ga.k12.pa.us/academics/ls/3/C
olonial/ColonialDay/market/index01.htm
Opportunity Cost (video)
http://www.econedlink.org/interactives/index.php?iid=
190&type=educator
Money (video)
http://www.econedlink.org/interactives/index.php
?iid=189&type=educator
Costs and Benefits of Saving (video)
http://www.econedlink.org/interactives/index.php?iid=
250&type=educator
Incentives (video)
http://www.econedlink.org/interactives/index.php
?iid=188&type=educator
Never Too Young: Personal Finance for Young
Learners (video)
Trade, Exchange and Interdependence (video)
http://www.econedlink.org/interactives/index.php?iid=
196&type=educator
Entrepreneurs (video)
http://www.econedlink.org/interactives/index.php?iid=
212&type=educator
Demand (video)
http://www.econedlink.org/interactives/index.php?iid=
210&type=educator
http://www.econedlink.org/interactives/index.php?iid=
265&type=educator
Arthur’s Pet Business by Marc Brown
To prove he is responsible enough to own a pet and to
repay a debt of money to his sister, Arthur decides to
start a pet business – providing pet care service to
community members. He advertises by putting up signs
around the neighborhood. Business is very good.
Arthur
not only earns a profit (from which he pays his debt) but
also
gains a pet when one if his “clients” has puppies under
his bed.
Key Economic Concepts: Goods, Income, Choices,
Profit, Services, Wages, Entrepreneur
Describe the differences and similarities between goods
and services. Have students brainstorm and share
aloud. Post this on an anchor chart.
As students read the story, have them identify goods
and services shown in the illustrations or mentioned in
the story.
Define entrepreneur. Discuss how Arthur fits this
definition.
Give each student a copy of the attachment – Income
Interview. Students should interview a minimum of five
people at home and/or in the community. They should
ask what work the people do to earn an income and
then complete the interview form.
As a class, analyze and discuss the data collected in the
interviews. Create a bar graph using the data.
Determine which people provide a good and which
provide a service. Were any of the people interviewed
entrepreneurs? Be sure to specify this information in
your graph and label it correctly.
Questions to Ask Students about the book:
1) What were Arthur’s job choices?
2) Why did Arthur start a business?
3) What is the difference between a good and a
service?
4) Was Arthur providing a good or a service?
5) Is Arthur considered an entrepreneur? Why?
6) Do you think it more difficult being an entrepreneur
or working for someone else? Why? Why do people
want to be entrepreneurs?
Key:
1) (work in a bank or a junkyard)
2) (to earn income so he could repay a debt and prove
he was responsible enough to own a pet)
3) (a good is a tangible item; a service is something
someone does for another person)
4) (service)
5) (yes; he made the choice to organize and manage a
business)
6) (probably more difficult being an entrepreneur;
must organize all the productive resources. Must be
willing to take a risk. Always requires long hours and
much dedication. People like being their own boss.
Possibility for much profit)
Extension Activities
Invite an entrepreneur from your community to your
school/classroom. Ask he/she how they decided to
become an entrepreneur and what gave he/she the
idea to create the business.
Charades: On slips of paper, put examples of goods and
services. Have a student draw a slip and act out how to
produce the good or service. The class guesses what job
it is and whether it provides a good or a service.
Start a Classroom Business: Try one that provides a
good and then one that provides a service. Compare
and contrast. For example: 1) make packets of note
cards with matching envelopes. 2) Be “envelope
stuffers” for the principal, school secretary, lunch
supervisor, or other teachers. What was the end result?
How would this activity affect the outcome of choosing
a job? Have students write about it.
Arthur’s Pet Business – Income Interview
Reporter’s Name __________________________________
Person
Interviewed
(family or
community)
What GOOD or
SERVICE do you
produce to earn an
income?
Do you work by yourself?
Group? Advantages of
working in a group?
Disadvantages?
Date _________________________
What CAPITAL
RESOURCES
do you use?
What special
training or skills
(HUMAN CAPITAL)
do you need to do
your job well?
How did you decide
to do this kind of
work? Would you
recommend this kind
of work to others?
Why or Why not?
Spotlighting Entrepreneurs: The Sweet Success of
Milton Hershey
Looking for a lesson that ties Common Core Standards
in Reading Informational Text with Economics? This
lesson spotlights the life of Milton S. Hershey and allows
students to learn about the risks and rewards of
entrepreneurship through a biographical sketch of one
who experienced many bitter disappointments and
sweet successes.
Key Concepts: benefit, business, capital,
entrepreneur, entrepreneurship, profit, risk
Tell students that the goal of this "Spotlighting
Entrepreneurs" lesson is to help them learn the
economics of being an entrepreneur by introducing
them to a famous American.
costs,
INTRODUCTION
Can you remember to the last time you ate a Hershey's
Kiss, a Reese's Peanut Butter Cup, or a Hershey's Milk
Chocolate Bar? While enjoying it, did you stop to think
about the successes and failures of the clever
entrepreneur who made it possible to buy those yummy
treats? This lesson will introduce you to the economics
of entrepreneurship through the story of Milton S.
Hershey.
RESOURCES

Discover
Hershey:
Milton
S.Hershey
www.thehersheycompany.com/about-hershey/ourstory/milton.aspx
(Optional: The story will be provided in the "Process"
section
of
the
lesson.)

A&E Biography of Hershey: Runtime 45 min
www.biography.com/people/milton-hershey-9337133

PROCESS
NOTE: This website may be difficult for students to
understand. Please use it as a resource. Post on
Entrepreneurship from the Library of Economics and
Liberty.
www.econlib.org/library/Enc/Entrepreneurship.html
Ask students to describe an entrepreneur. (Allow time
for students to share thoughts.) Explain an
entrepreneur is a person who accepts the risk of
business failure and success. This person discovers new
ways to combine resources to provide goods and
services that others value in profitable ways.
Ask students if they have ever thought of starting their
own business like a lemonade stand. (Allow students an
opportunity to share.) Continue the discussion by asking
why someone would want to start his or her own
business. (Encourage students to share. Responses may
include they: see opportunities to help others, like
being their own boss, want to earn profits, like being
creative, want to introduce new goods in the
marketplace, and want to find ways to reduce
costs.) Ask students if they think it is easy or hard to
start a business and explain why. (Allow students to
share but many will probably feel it is hard or
challenging. Entrepreneurs do not know if (1) they will
be successful or fail, (2) they do not know if consumers
will value their product, (3) they do not know if others
will help them finance their business to
produce/provide goods
and
services,
pay
expenses, etc.)
Tell students that today they will learn the economics of
entrepreneurship by researching the background of a
gentleman who overcame many obstacles and
persevered, "kept on keeping on," becoming a
successful entrepreneur.
The Sweet Success of Milton Hershey
Milton Hershey was born September 13, 1857, in
Lancaster, Pennsylvania. As a child, his family moved a
lot as his father started several businesses across the
United States. In eight years, he attended seven
different schools.
In the 1800's, young boys were often trained to develop
skills for a particular job or trade. The training was
called an apprenticeship. An apprenticeship allowed
boys to learn by watching and practicing a
craft. Eventually they would grow into a job they would
have throughout their lifetime.
In 1871, Hershey was apprenticed to a local printer who
published a German-English newspaper. The printing
business was not a good match for Hershey's given his
likes, skills, and passions.
Hershey's
mother helped
him
find
another
apprenticeship. It was with a local confectioner or candy
maker, named Joseph Royer. Hershey was 14 years old
at the time. Soon, it became obvious that he had
a natural talent for candy making and he liked what he
was learning. Over the next four years, Milton learned
the art and science of creating tasty treats.
When Milton Hershey turned 18, he took a risk and
started his first candy business in Philadelphia. As an
entrepreneur, there are many costs and risks involved
in starting a business. Entrepreneurs work long hours to
cover payroll, keep abreast of consumers' changing
preferences, and need much financial funding from
others. After six years, his first business failed.
Did Milton Hershey give up? No! He had a passion for
candy making! So he moved to Denver, Colorado, and
took a job with a Denver candy maker to learn more
about the candy making business. This time, in addition
to developing his skills and receiving great training, he
developed a new skill making caramels with fresh milk.
After a few months of working in Colorado, he traveled
to New York City.
New York City was the largest candy market in the
world at this time. People from all over the world
traveled to and from New York. Hershey decided to
start another business given this large market. Even
though he tried hard and invested many hours, his
business failed.
In 1886, he returned to Lancaster, Pennsylvania. He was
28 years old, penniless, but still the entrepreneurial
spirit lingered.
Milton Hershey took another risk and started a
company to manufacture caramels using the methods
he had learned in Denver. He needed more tools and
equipment. Economists call this capital things used to
produce something else. He looked for financing. It
was difficult given his past failures.
Hershey began to look for backers who valued his
business enough to cover his costs, including the value
of his labor and skills. He found one. A British importer
of US Candy offered to market Milton's candy outside
the United States. Milton received a large order to
export. With this order, a local bank found Hershey
credit worthy and he had the financing he needed to
expand his operation. The risks Hershey and his lending
institution
had
taken
finally
paid
off.
In four years, Milton Hershey and the Lancaster Caramel
Company became one of the leading manufacturers of
caramels in the United States. The company employed
over 1,400 workers. Finally, Milton was able to see a
profit in his business. Profit is determined after taking
total sales and subtracting all expenses. So, for Milton,
that meant he calculated the sales of caramels (prices
times quantity) and subtracted all the expenses
necessary to run a business (ingredients, tools,
equipment, wages for workers, salary for Hershey and
other supervisors, rental for the factory, taxes, etc.).
The money remaining after expenses was the profit.
Milton Hershey and his cousin, Frank Snavely, attended
the World's Columbian Exposition of 1893 in Chicago,
an event that changed Milton Hershey's life. A German
company was showing how chocolate was produced,
and Milton was convinced that this was the future of
candy making. Hershey took another risk as he
purchased an entire assembly line of chocolate making
equipment that was on display, had it crated up and
shipped back to Lancaster. Milton, as an entrepreneur,
was a change agent in the candy business. When he
returned home, he installed the machinery in part of his
caramel factory and began making chocolate at a lower
cost, making it affordable to more people.
Milton named his company Hershey Chocolate
Company. At first, he produced sweet chocolate and
cocoa for the flavoring and coating on his caramels.
Then, Milton began mass producing his candy products
and selling them to other candy makers for them to
profit.
Milton's company was experiencing great success;
however he didn't stop and rest. He considered his
production alternatives and determined that his
resources could best be used in producing chocolates.
So, he sold his caramel company for $1,000,000 and
shifted his production focus from caramel to chocolate.
Hershey continued working long hours to develop the
best formula for producing milk chocolate. It was a
challenge that would take years of trial and error to
perfect. For Milton, money was not his only incentive.
He wanted the satisfaction of creating the best quality
product for the marketplace at the most affordable
price to his customers.
In 1900, Milton Hershey became the first American to
discover a formula for manufacturing milk chocolate,
introducing the molded milk chocolate bar. It was
affordable to the masses, tasted good, and remained
fresh for a long time. In the past, chocolate had been a
luxury, something only very wealthy people could
afford.
Hershey knew that many other industries had utilized
mass production to increase the production process,
and he decided to apply it to the chocolate business. In
1907, the company added Hershey's Kisses to its
product line and followed up a year later with Hershey’s
milk chocolate bar with almonds. Hershey packaged his
candy to sell in grocery stores, newsstands and vending
machines.
In the meantime, Hershey had searched for a suitable
location to expand his chocolate company. He decided
on Derry Township, Pennsylvania as the perfect location
since it was convenient to the port cities that could
provide cocoa beans and sugar and was surrounded by
dairy farms and a hardworking labor force. Later, the
town would be named Hershey in honor of the town's
founder.
Hoping to provide for the quality workers he wished to
employ and their well being, Milton built the Cocoa
House, in the town center which included a store, bank,
post office, boarding rooms and a lunchroom. He also
provided for a laundry, a blacksmith shop, a printing
plant, a café, a department store and a barber shop.
Companies were started to supply water, electric
power, sewage and telephone service. In 1909, Hershey
even launched a weekly newspaper, the Hershey Press.
Now, let's review what
entrepreneurs
from
we can
Milton
learn about
Hershey:
Earlier we learned that an entrepreneur is "one who
draws upon his or her skills and initiative to launch a
new business venture with the aim of making a profit.
Often a risk-taker, this person is inclined to see
opportunity when others do not."
Assessment:
1) What special skills and initiative did Milton Hershey
have?
2) What risks did
entrepreneur?
Hershey
encounter
as
an
3) Entrepreneurs aim at making a profit. Earlier in the
lesson, we learned that profit is the money
remaining after expenses have been subtracted
from sales. Did Hershey always earn a profit? How
do you know? (What evidence can you find?)
4) How was Milton Hershey successful?
5) If Milton Hershey had not taken the risks to become
an entrepreneur, how might your life be different?
Assessment Key
CONCLUSION
1) What special skills and initiative did Milton
Hershey have? (He had a special talent and much
experience in candy making and was determined to
create the best products for the market. Candy
making was his passion. He invested many long
hours and persevered through many challenging
times.)
This lesson provided us with an opportunity to look at
the life of an entrepreneur and learn about the risks and
rewards of entrepreneurship. An entrepreneur is a
person willing to take a risk to start a business, hoping
to make a profit. The rewards of creating new products,
recognizing a profit and being successful, tend to
outweigh the costs of long hours, responsibility, stress,
and the potential of financial loss that an entrepreneur
faces when starting a business.
2) What risks did Hershey encounter as an
entrepreneur? (He worked long, hard hours. He
invested his personal money and financial backing
into each business he started. He didn’t know if his
product would be in demand.)
3) Entrepreneurs aim at making a profit. Earlier in the
lesson, we learned that profit is the money
remaining after expenses have been subtracted
from sales. Did Hershey always earn a profit? How
do you know? (What evidence can you find?) (No,
several businesses he started suffered financial
losses which caused him to lose those businesses.
He did earn a profit in the Lancaster Caramel
Company and Hershey Chocolate Company.)
4) How was Milton Hershey successful? (He earned a
profit in his last business. He developed a quality
product that was affordable to many customers. He
shared his success with his employees. He spent his
life doing something he loved.)
5) If Milton Hershey had not taken the risks to
become an entrepreneur, how might your life be
different? (We might not have the chocolate
products we have today. His long hours and vision
made chocolate affordable for us today and
provided consumers with a quality product.)
Milton Hershey is a wonderful example of an
entrepreneur. He was a very creative man who was
driven to succeed. Even though he faced great
challenges, he considered the risks worth the rewards
of entrepreneurship. We, as consumers, are the sweet
recipients of his hard work. Thank you, Mr. Hershey!
Milton Hershey was a man who loved candy making and
was sure he could create a product that the average
consumer could afford. It was worth the risks and the
costs to produce his product for the marketplace.
EXTENSIONS
Interview a local entrepreneur.
Each student will interview an entrepreneur and find
out the risks and rewards associated with starting a
business. Challenge students to find out when and why
the entrepreneur decided to start his or her own
business. (If it is not easy for students to find
entrepreneurs to interview on their own time, invite
one to class.)
If I Were an Entrepreneur
Challenge students to develop a plan for a business they
would like to start. Have them identify the product they
would provide in their business, their target market,
and "how" they would get started in business.
Investigate Hershey Chocolate Company.
Find out more about Hershey's
(http://www.hersheys.com/ads-andvideos.aspx?ICID=HER1266)
Chocolate
Source: Econedlink.org
http://www.econedlink.org/lessons/index.php?lid=106
9&type=educator
.
Entrepreneurs – How to Get Your Ideas
“Out There”
As a class, brainstorm ideas that students could
choose from to create their own business.
Have the students choose one money-making idea
and create a flier that advertises what they are
selling. Emphasize the elements that they will want
to include in their flier.






Pictures, words and other things that catch
people’s attention.
What they are offering.
Their qualifications for doing the job.
Why customers might like or use what they
are selling.
What their good or service costs.
How to contact them -- usually a phone
number if they are providing a service.
This is an ideal project for helping
students to build word processing, publishing and
other computer technology skills.
It is your choice whether the
entire project or selected
elements of it-such as creating
graphics and text-will be
completed on the computer. If
access to computers is limited,
the fliers can also be completed
in a more traditional manner
with colored markers and paper. Students can
draw pictures or cut them out of magazines.
Post students' completed fliers. Have them report
to their classmates their money-making idea and
how they would use the flier they have created.
Discuss appropriate locations for the fliers.
If your students want extra money, becoming an
entrepreneur may be a solution for them. Have
them keep their eyes and ears open -- they will be
surprised how many opportunities for making
money will pop up at home, at school, and in their
neighborhood! Keys to a successful entrepreneurial
experience are finding something they like to do
that is safe and that others are willing to buy; it is
also crucial to set a price that will yield a profit, and
to spread the news on what they are selling.
Entrepreneurs - Video
This video teaches the concept of Entrepreneurs.
Entrepreneurs are willing to risk their own
resources in order to sell them for financial gain or
profits. They are successful when they provide
consumers with goods and services that consumers
highly value.
http://www.econedlink.org/interactives/index.php
?iid=212&type=educator
Key Concepts: entrepreneur, producers, human
capital, profit, risk
How Competition Works
Competition in the marketplace is good for
consumers and good for business. Competition from
many different companies and individuals through free
enterprise and open markets is the basis of the U.S.
economy. When firms compete with each other,
consumers get the best possible prices, quantity, and
quality of goods and services. Antitrust laws encourage
companies to compete so that both consumers and
businesses benefit.
One important benefit of competition is a boost
to innovation. Competition among companies can spur
the invention of new or better products, or more
efficient processes. Firms may race to be the first to
market a new or different technology. Innovation also
benefits consumers with new and better products,
helps drive economic growth and increases standards of
living. Products that are commonplace today once were
technological breakthroughs: cars, planes, phones,
televisions, the personal computer, and modern
medicines all show how innovation can change your life,
and increase prosperity.
Competition can lead companies to invent
lower-cost manufacturing processes, which can increase
their profits and help them compete—and then, pass
those savings on to the consumer. Competition also can
help businesses identify consumers’ needs—and then
develop new products or services to meet them.
For example, your aunt or grandmother
probably grew up listening to music played on a bulky
cassette or CD player. They might even remember vinyl
records or eight-track tapes! Innovation made those
players obsolete. Now people—maybe even your
parents—are downloading music from the Internet onto
small digital audio players. You might have a digital
media player that lets you listen to music AND watch
music videos and movies. Adults today probably never
dreamed of anything like that when they were kids. And
who knows what innovations in technology will be
available 20 years from now!
It’s the Federal Trade Commission’s (FTC’s) job to make
sure that businesses are competing fairly—and within
the law. The FTC is a law enforcement agency that
promotes competition and challenges business
practices that could harm competition. It’s their job to
make sure consumers have access to quality products
and services, and that businesses compete on the
merits. The FTC challenges business practices that
could result in higher prices, lower quality, fewer
products or services for consumers, or those that create
unfair advantages in the marketplace. The FTC has
lawyers and economists who monitor business
practices, review potential mergers, and challenge
conduct that might prevent consumers from getting
choice and quality at a fair price. They make sure the
marketplace works according to consumer preferences,
not illegal or anti-competitive practices.
When the competitive system is operating well,
there’s no need for government intervention.
The law knows that some arrangements between
firms—like competitors cooperating to perform joint
research and development projects—may be good for
consumers. In these cases, the agreement may even
lead to greater competition.
The law doesn’t try to stop all agreements
between companies. It disapproves of agreements that
hurt competition—for example, that could raise prices
for consumers or keep them from getting new and
better products. When the FTC sees practices or merger
proposals that could harm the consumer or competition
itself, the staff acts quickly to protect the interests of
American consumers.
Things to Talk About and Do
 What are some products that have changed in your
lifetime? What role did competition play in those
innovations?
 Think of a product that you use that your parents
didn’t have when they were kids. How has it made
your life different or better?
 Find a story in the news about a competition issue
in the marketplace. What does the industry say
about it? What does the government say about it?
What do you think?
What to Find Out More?
Federal Trade Commission—Guide to the
Antitrust Laws
www.ftc.gov/bc/antitrust
U.S. Department of Justice—Antitrust Division
www.usdoj.gov/atr
Kids.gov—Links to sites on money, selling,
and marketing
www.kids.gov/6_8/6_8_money_selling.shtml
American Antitrust Institute—Fair Fight in the
Marketplace (Video and resources)
www.fairfightfilm.org/index.html
National Council on Economic Education—
Online lessons
www.ncee.net/resources/lessons.php
Why Competition Matters
Competition in the marketplace is good for
consumers—and good for business, too. It benefits
consumers by keeping prices low and the quality and
choice of products and services high. It benefits
businesses by promoting innovation—improvements to
make products different—and often, to make them
better in ways that consumers want.
More choices, better prices, and higher quality
are good for you. But did you know that you have a lot
to do with what companies decide to produce and sell?
Companies are in business to make money. To do that,
they need to make products you want to buy, and sell
them at a price you’re willing to pay.
A lot of companies make the same kind of
products. How many companies can you think of that
make computers, cell phones, cameras, bikes, jeans, or
sneakers? And how many stores sell those brands? They
all want your business. They compete for your money—
and your loyalty—on many levels: price, selection,
service, and quality, to name a few. These are probably
things you think about, even if you don’t always know
you do. Say you want to buy a new cell phone. How
would competition help you—and how might
companies compete for your business?
•
•
•
•
Price: how much does it cost? If the company
offered a cheaper phone, might you buy it?
Selection: does one company offer more kinds
of phones that you like? Would you choose the
company with the best selection, even if they
cost more?
Service: does one cell phone company have
better coverage where you live? Or might they
have a store near you, or an easy-to-use online
site? Would you choose a phone based on
having better coverage and service?
Quality: is it a great-looking phone but won’t
hold a charge? Or maybe you’ve heard it has a
reputation for breaking. Would you pay extra
for a high-quality phone?
Competition doesn’t mean that everybody wins,
though. Take a look at what’s going on at the mall. It
may have several “anchor” stores—usually department
stores—that sell everything from clothes to cosmetics,
toys to televisions, and boots to bedding. The mall also
may have clothing and shoe stores for
men, women, and kids; specialty stores with furniture,
sports equipment, jewelry, make-up, games... you name
it. And there’s usually a food court, with pizza, burgers,
salads, tacos, egg rolls, ice cream, and blah, blah, blah.
So many choices. How do all these places stay in
business?
The answer is (drum roll, please): Not all of
them do.
• Some don’t offer what consumers want to buy.
• Some consistently charge higher prices for
merchandise you can get for less elsewhere.
• Some are just too much like other stores.
• Some don’t have a good selection of merchandise, or
appeal only to very specialized tastes.
• Some may have low prices, but bad customer service.
So while competition doesn’t mean that every
single business wins, it means that every single
business tries to put their best foot forward to win your
business—and stay in business. That means it’s good for
businesses as a whole—and good for consumers like
you!
Things to Talk About and Do
• Think about a product you buy. Among price,
selection, service, and quality, what’s most
important to you in deciding exactly which one
to buy? Does it change depending on the
product? Why or why not?
• Imagine you’re selling a product. What would
you do to make sure your product can compete
and you succeed in your business?
• Think about the last thing you bought, and
where you bought it. Why did you choose to
buy it there? Is there anything that other stores
or online sellers could do to win your business?
Why or why not?
Want to Find Out More?
Federal Trade Commission—Guide to the
Antitrust Laws
www.ftc.gov/bc/antitrust/
U.S. Department of Justice—Antitrust Division
www.usdoj.gov/atr
Kids.gov—Links to sites on money, selling,
and marketing
www.kids.gov/6_8/6_8_money_selling.shtml
American Antitrust Institute—Fair Fight in the
Marketplace (Video and resources)
www.fairfightfilm.org/index.html
National Council on Economic Education—
Online lessons
www.ncee.net/resources/lessons.php
50
Competing for Customers
At the mall, you probably have some favorite
stores. Maybe they sell clothes or games; maybe they
have a great selection, great prices, or really low prices
every once in a while.
How else might stores get your business? Think
about what you see when you’re in the mall. Some
stores might have special promotions, like “Buy One,
Get One Free.” Or frequent shopper programs that let
you earn points for discounts on future purchases.
Other stores might guarantee they have the lowest
price, or offer a free gift with a minimum purchase. Still
others may have generous return policies.
For many people, price is the biggest factor in
deciding where to shop. Prices are based on many
things, such as the cost of materials, but prices are also
affected by supply and demand. Prices usually are
higher for products that are in high demand or low
supply. Think about the holiday shopping season. Isn’t
there always a “hot” toy or “gotta have” game or
gadget that everyone wants? Sometimes, companies
can’t manufacture enough of whatever’s hot to satisfy
the demand—or they underestimate
the demand. With supply low and demand high, sellers
can charge full price for the items, rather than putting
them on sale to move them out the door.
Sometimes, a product is so popular that
consumers will put themselves on a waiting list for it.
You may have seen news stories about people standing
in line and paying top dollar for certain kinds of gaming
systems.
Prices also can be related to product quality —
and the materials used in production. For example, your
rich uncle’s shoes that are handmade from genuine
leather are going to cost more than a pair of canvas
shoes, mass-produced on an assembly line. Other
factors that can affect prices are weather and the
availability of supplies used in manufacturing.
Say your dad asks you to buy a loaf of whole
wheat bread at one of the bakeries in the mall.
He says he paid about $2.50 a loaf a couple of weeks
ago. You check out the two bakeries and now, both are
charging $3.79 a loaf. That’s more than your dad paid
and might show that the two bakeries are not
competing based on price.
Could the two bakeries have agreed to charge
the same price? Sometimes businesses (illegally) make
agreements about price— called “price fixing.” These
are some of the most serious business practices the FTC
looks at.
But not all price similarities, or price changes
that happen at the same time, are the result of price
fixing. They often result from normal market conditions.
For example, if you want to buy wheat from a farmer,
the price probably will be the same, no matter what
farmer you buy from. The prices farmers charge rise and
fall without them agreeing on what to charge. That’s
because they’re all selling the same product that is
affected by the same kinds of conditions. If there’s a
drought, the supply of wheat falls, and the price of the
available wheat goes up. Bakeries have to pay more for
their flour, and that means the price they charge you
also will go up.
Things to Talk About and Do
 Think about places that you often shop. Why do
you go to those places and not others?
 Can you think of a product that people actually
waited in line to buy? Why was it so hot? Did
the idea of supply and demand have anything to
do with its popularity? Or its price? Why or why
not?
Want to Find Out More?
Federal Trade Commission—Guide to the
Antitrust Laws
www.ftc.gov/bc/antitrust
U.S. Department of Justice—Antitrust Division
www.usdoj.gov/atr
Kids.gov—Links to sites on money, selling,
and marketing
www.kids.gov/6_8/6_8_money_selling.shtml
American Antitrust Institute—Fair Fight in the
Marketplace (Video and resources)
www.fairfightfilm.org/index.html
National Council on Economic Education—
Online lessons
www.ncee.net/resources/lessons.php
Playing by the Rules
Most businesses compete fair and square.
They’re tough competitors, but they don’t try to cheat
the system – or the consumer. Once in a while, though,
business might decide to try to beat the system in ways
that break the law: for example, they might try unfairly
to keep other competitors out of the market, or work
together with a competitor to make more money or
corner the market. Illegal practices harm consumers:
prices go up and there are fewer choices. The FTC keeps
its ear to the ground and investigates when it suspects
one of these practices, taking action in court to stop
illegal business practices when necessary.
Every contest needs rules, and the antitrust
laws are the rules of the competitive marketplace. The
FTC enforces the antitrust laws to promote competitive
markets and protect consumers from harmful business
practices. Here are some examples of business practices
that may break the law:
A monopoly is when one company has control
over an entire market – like the trusts did over steel and
oil. It’s not illegal to have a monopoly; it is illegal to sue
unreasonable methods to get a monopoly. For example,
if your competitor goes out of business because you sell
better stuff at better prices with better service – that’s
fair enough. But you can’t sabotage your competitor’s
store to put them out of business. That would count as
an unreasonable method, and you’d be breaking the
law.
Price fixing occurs when competing sellers
agree on what to charge. Take the example of three
companies that made shoes: they got together to agree
on a price for the shoes they’d supply to shoe stores –
and prices went up! But these shoe-makers got caught
and ended up paying some hefty fines. Companies can
get in serious trouble for price fixing…fines, probation,
even jail. It’s no joke.
Supply restrictions happen when competitors
agree with each other to sell fewer products. That
creates a shortage and drives up prices.
Customer-allocation agreements are when
competitors agree to divide up customers, maybe by
geographic area. For example, they might say, “You take
all the customers east of the Mississippi River, I’ll take
all of those west of the Mississippi.” This reduces – and
may even eliminate – competition….and that’s illegal.
Business owners who make these kinds of agreements
can face heavy fines or possible jail time.
Things to Talk About and Do
Imagine you own the only shoe store in town – and that
you got there by taking over all the other shoe stores,
one by one. Now you have no local competition. Is this
good for your business?
Think about the reasons why no competition might not
be good for your business: do you have pressure to
keep prices down? To keep high-quality shoes, and a
variety of styles? To give good customer service? After
all, you’re the only game in town, right?
If your store now has higher prices, less selection, poor
quality, and not-great service, what other options do
consumers have?
Among all of these illegal practices, which do you think
would be most likely to make your company the most
money in the short-term? What about in the long-term?
Why?
Want To Find Out More?
Federal Trade Commission – Guide to the Antitrust Laws
www.ftc.gov/bc/antitrust
American Antitrust Institute – Fair Fight in the
Marketplace (Video and resources)
www.fairfightfilm.org/index.html
US Department of Justice – Antitrust Division
www.usdoj.gov/atr
Antitrust Laws: A Brief History
Once upon a time, way back in the 1800s, there were
several giant businesses known as “trusts.” They
controlled whole sections of the economy, like
railroads, oil, steel, and sugar. Two of the most famous
trusts were U.S. Steel and Standard Oil; they were
monopolies that controlled the supply of their
product—as well as the price. With one company
controlling an entire industry, there was no
competition, and smaller businesses and people had no
choices about from whom to buy. Prices went through
the roof, and quality didn’t have to be a priority. This
caused hardship and threatened the new American
prosperity.
While the rich, trust-owning businessmen got richer
and richer, the public got angry and demanded the
government take action. President Theodore Roosevelt
“busted” (or broke up) many trusts by enforcing what
came to be known as “antitrust” laws. The goal of these
laws was to protect consumers by promoting
competition in the marketplace. The U.S. Congress
passed several laws to help promote competition by
outlawing unfair methods of competition:
• The Sherman Act is the nation’s oldest antitrust law.
Passed in 1890, it makes it illegal for competitors to
make agreements with each other that would limit
competition. So, for example, they can’t agree to set a
price for a product—that’d be price fixing. The Act also
makes it illegal for a business to be a monopoly if that
company is cheating or not competing fairly. Corporate
executives who conduct their business that way could
wind up paying huge fines—and even go to jail!
• The Clayton Act was passed in 1914. With the
Sherman Act in place, and trusts being broken up,
business practices in America were changing. But some
companies discovered merging as a way to control
prices and production (instead of forming trusts,
competitors united into a single company. The Clayton
Act helps protect American consumers by stopping
mergers or acquisitions that are likely to stifle
competition.
• With the Federal Trade Commission (FTC) Act (1914),
Congress created a new federal agency to watch out for
unfair business practices—and gave the Federal Trade
Commission the authority to investigate and stop unfair
methods of competition and deceptive practices.
Today, the Federal Trade Commission’s (FTC’s)
Bureau of Competition and the Department of Justice’s
Antitrust Division enforce these three core federal
antitrust laws. The agencies talk to each other before
opening any investigation to decide who will investigate
the facts and work on any case that might be brought.
But each agency has developed expertise in certain
industries. Every state has antitrust laws, too; they are
enforced by each state’s attorney general. There’s an
office in your state capitol that helps consumers or
businesses who might be hurt when businesses don’t
compete fairly. Antitrust laws were not put in place to
protect competing businesses from aggressive
competition. Competition is tough, and sometimes
businesses fail. That’s the way it is in competitive
markets, and consumers benefit from the rough and
tumble competition among sellers.
Things to Talk About and Do
• What if these laws had never been passed and
trusts were allowed to exist? How would things
be different today?
 How would a monopoly affect you personally?
Imagine that all the companies that make jeans
were bought up by one company. Now there’s
only one place that supplies jeans. What might
happen to the selection and quality of what you
can buy? What about the price?
Want to Find Out More?
Federal Trade Commission—Guide to the Antitrust Laws
www.ftc.gov/bc/antitrust
U.S. Department of Justice—Antitrust Division
www.usdoj.gov/atr
Kids.gov—Links to sites on money, selling, and
marketing
www.kids.gov/6_8/6_8_money_selling.shtml
American Antitrust Institute—Fair Fight in the
Marketplace (Video and resources)
www.fairfightfilm.org/index.html
National Council on Economic Education—Online
lessons
www.ncee.net/resources/lessons.php
Literature Connections to
Entrepreneurship
The following books have economic and/or
entrepreneurial themes. The list is not inclusive,
however, it will help you find books that reinforce
classroom business activities.
Fiction
Nonfiction
Benny’s Pennies by Pat Brisson (1995)
Out and About at the United States Mint by Nancy
Garhan Attebury (2004)
Agatha’s Feather Bed by Carmen Agra Deedy (1991)
Little Nino’s Pizzeria by Karen Barbour (1990)
A Day’s Work by Eve Bunting (1997)
Brainstorm! The Stories of Twenty American Kid
Inventors by Tom Tucker (1995)
Market Day by Eve Bunting (1996)
What Color Is Your Piggy Bank?: Entrepreneurial Ideas
for Self-Starting Kids by Adelia Cellini Lunecker (2004)
How the Second Grade Got $8,205.50 to Visit the
Statue of Liberty by Nathan Zimelman
The New Totally Awesome Money Book for Kids by
Arthur & Rose Bochner (2007)
Mel’s Diner by Marissa Moss (1999)
The Paperboy by Dav Pilkey (1999)
A Basket of Bangles by Ginger Howard (2002)
Double Fudge by Judy Blume (2002)
Freckly Juice by Judy Blume (1984)
Lunch Money by Andrew Clements (2005)
Stock Market Pie: Grandma Helps Emily Make a
Million by J.M. Seymour (2003)
101 Ways to Bug Your Parents by Lee Wardlaw (1996)
Lawn Boy by Gary Paulsen (2007)