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Smart Money Decisions
Stanley Yukon
Introduction
This teaching unit is a focused overview of basic consumer economics and decision
making geared to eighth grade "C" level Special Education students in New
Mexico. The unit will examine money, budgets, consumer decision making, saving,
spending, and other key areas that impact the present and future lives of students.
The unit will present clear specifics to students regarding economic realities in a
beneficial and stimulating format. The specifics discussed within this curriculum unit can
be used to develop lessons that could be utilized as a nine-week component of a middle
school math or social studies curriculum. ‘C’- level Special Education students
tend to read two grade levels below their current grade placement and have comparable math
deficits. Study and organizational skills among ‘C’- level Special Education
students tend to be unfocused and inconsistent.
The goals of the unit are
-Foster clear understanding of basic consumer economics.
-Clarify and develop how individuals, businesses, and governments decide to spend income.
The objectives of the unit are
-Develop an understanding of the meaning and role of money in the lives of individuals,
businesses, and governments.
-Integrate related academic fields such as math and social studies into the study of
economics.
-Build understanding of personal, business, and government budgets in the lives of
students.
-Enlighten students as to the role of human emotions in consumer decision making regarding
such purchases as clothes, food, transportation, entertainment, and housing.
-Motivate potentially at-risk students by integrating relevant and accessible material and
resources that connect to their daily lives.
Background
Subject background necessary for teacher understanding of covered content materials
includes such essential economic concepts as demand and supply in the marketplace, competition
and market structure, the labor force in the United States, minimum wage,
substitute goods, the gains from trade, and money.
Keys to Understanding Demand
The law of demand states that there is an inverse relationship between the price of a
good or service and the quantity that a consumer will purchase. The quantity-demanded
schedule and the demand curve are two different ways of showing the concept of demand.
Prices charged for products affect a person’s purchasing power. When prices
increase, people can not afford to purchase as many units as before, consequently the
quantity demanded decreases. Retail and wholesale businesses lower their prices when their
goal is to increase sales volume. For example, Nature’s Herbs might lower the price
of a bottle of its capsuled herbs to try to gain a higher percentage of the retail market
for capsuled herbs. The retailers, in turn, might lower their price to consumers by 10% in
hopes that a larger sales volume will offset the decreased profit margin per sale.
A demand schedule lists the quantity of goods that consumers are willing and able to
buy at a series of possible prices, while a demand curve shows the same information on a
graph. Students can see that the demand curve is downward sloping. The instructor will
explain the correlation between lower prices and higher amounts demanded thus showing the
inter-relatedness between the two factors of price and quantity.
| Demand Schedule For Silk Ties |
Price |
Quantity |
$30
$50
$75 |
25,000 15,000
9,000 |
Decisions, Decisions, Decisions
From the world of literature and movies, we find classic examples of decision-making
gone right and wrong -- of decisions based on emotion, and of decisions guided by reason.
In Mark Twain’s, The Adventures of Tom Sawyer, which will be read
concurrently with this curriculum unit, Twain captivatingly chronicles the adventures and
misadventures of young Tom Sawyer. Tom lives in a small town on the Mississippi River in
Missouri during the mid-19th century, at a place and time that Frederic Jackson
Turner would consider frontier territory. Brawling riverboat men killed each other in
knife-fights, banks were robbed, and "dentists" yanked teeth with pliers.
Early in Tom Sawyer, Tom makes one light-hearted, yet brilliant decision
when he decides that other boys should paint Aunt Polly’s fence – not
him. By "painting" a positive image of fence painting in the minds of several of
his friends, Tom induces those friends into deciding that they would rather be painting
that fence. Tom’s argument that fence-painting requires skill and provides
pleasure for the painter is so cleverly marketed that several friends eventually paint
most of the fence. There is a connection to economics with Tom and the fence. Tom
emphasized the benefits of fence painting while downplaying the costs of fence painting.
Shortly after the painting scenario, Tom witnesses a graveyard murder. Should Tom
remain silent? Tom’s friend, Huck, makes Tom take a vow of silence about the knife
murder. But Tom’s conscience ultimately weighs on the side of Tom testifying in favor
of the innocent town drunkard despite the clear risk to Tom’s life at the hands
– or knife – of Injun Joe. Loyalty to justice and the strong desire to save an
innocent life induce Tom Sawyer to put his own life at risk -- a weighty decision if ever
there was one.
Casablanca is often regarded as one of the greatest American movies ever
produced and filmed. Certainly, it is laced with memorable lines. The movie has two major
heroes, the American Rick Blaine, and the Czechoslovak Victor Lazlo. In the film’s
famous closing airport scene, Rick is asked by the beautiful Ilsa to think and decide for
both of them. Rick decides to put the woman who loves him on the outgoing plane with her
gallant husband, Victor Lazlo. Rick will stay in Casablanca and take his chances with the
French Police Inspector Renauld. Rick’s rationale is that Ilsa is part of
Victor’s vital work against the Nazis…and that Rick has secret things to do of
which Ilsa cannot be a part.
Most of us seldom have such heroic decisions to make as did Rick in Casablanca.
We do, however, make many more mundane threshold and incremental decisions
everyday.
We will study decision-making and the three types of decisions: heroic, threshold,
incremental, within our curriculum unit on Smart Money Decisions. We will
discuss and analyze students’ decisions along with those of famous fictional and
historical figures. Within student capacity to play/act, we will incorporate role-playing
within the context of our study and analysis of decision-making. Rational decision making
implies that decisions are in the best interests of the decision-maker. In the "best
interest" of a decision-maker suggests that it is consistent with some goal or
objective such as saving $1,000 or buying a new car.
Classroom Activity on Personal Budgets
The primary objective for the class on personal budgets is to develop awareness
of the power and efficacy of personal budgets in helping students assume better control
over their spending concurrent with keener awareness of the value of money. The curriculum
writer takes a "consumer poll" in class from every student on what she purchased
from any retail store this month. The primary purchase favorites – food, cosmetics,
candy, clothing, movie tickets, and CD’s – are written on the blackboard in
class along with the total number of students who "voted" for that purchase
item. We then discuss how often items are purchased and how much money is spent on each
within one month period.
The class will have a brief discussion on the difference between necessity items
such as water, housing, and core clothing, and discretionary items such as baseball
caps and candy. Students are asked whether or not they absolutely need candy or if
they simply want candy.
Some eighth graders have part-time jobs from which they might earn $20 each week.
Others are given allowances from $10 to $20 weekly. In constructing our monthly
personal budget, we start from the amount of disposable income available to
each student given that each student starts with the same, teacher determined,
amount of money on the first of the month. Let’s say that each eighth grader begins
with $100.00 on September 1. How will he/she spend that money? When? How often?
Each student is asked to remember his/her favorite purchase items, to list them
according to how much and how frequently he/she purchases them each month. We often
construct a personal budget as follows:
Beginning Income: $100.00
– Minus Monthly Expenses:
Mc Donald’s + Wendy’s -$20
Cosmetics
-$15
Movies
-$20
Candy
-$10
Soft Drinks
-$15
Music
-$10
Total Purchases $90.
Amount Left Over For Savings $10.00
From this budget exercise, student learn several valuable economic lessons:
- It’s usually wise to spend within one’s budget; we should not
spend more than what we have.
- It’s often wise to save some of your monthly income; why not open a savings account
at a bank.
- Use of a monthly budget helps give students a picture of what they have and what they
spend and puts spending into clearer focus.
- Use of a monthly budget encourages students to think about money.
- The concept of diminishing marginal utility: If a student loves an organic nectarine, he
will probably love eating two nectarines. However, the third and fourth nectarines might
start to fill him up and perhaps start to irritate his stomach. The nectarine-loving
student would probably enjoy the first and second nectarines more than the third and
fourth nectarines. Paul Samuelson defines diminishing marginal utility as the law that
states that as more and more of any one commodity is consumed, its marginal utility
declines.
The curriculum unit should, as part of this personal budget lesson, introduce budget
lines such as demonstrated in Stockman’s Microeconomics. Thus, students
can have a choice between tapes and video games, and can visually see the trade-off
entailed in choosing all of one item or parts of both items. Since visualization is
very important to student’s grasping the concept of choice and trade-off,
the following example could be used:
Budget Line Between Tapes and Video Games
Starting with $5, a student could play 20 video games at $0.25 per game, and no
tapes; or buy 5 tapes at $1.00 per Video Games tape, and play no video
games; or various combinations of both games and tapes.For example, one
could play 12 video games for $3.00 and also buy 2 tapes. Students will visualize
and understand that in our Tapes and Video budget line, a tape "costs" four
video games. A video game costs $.25, while a tape costs one dollar, or four times
the cost of one video game. A student with $5 will have to sacrifice some video games if
he desires to buy several tapes.
Supply in the Marketplace
While producers supply goods and services for many reasons, their primary motive is profit.
The law of supply, as shown by the supply schedule below shows that a direct relationship
exists between an item’s price and the quantity of that item supplied. A tie-maker
will produce more ties when buyers will pay more for his ties. If Smith’s Grocery is
running out of highly popular chocolate bars, it’s unlikely that Smith’s will
put chocolate bars on sale or in their clearance bins.
Key Points:
- Supply is directly related to the price that producers can charge for their products.
Producers supply more products when their products command a higher price on the market.
- A supply Schedule lists each quantity of a product that producers are willing to supply
at various market prices.
- When one producer earns a profit, it indicates to other producers that moving
into the same or similar business might be a profitable economic decision. For example, if
Brian is making tee shirts and is making $5 profit on each tee shirt he sells and is
selling 100 tee shirts every week, there might be incentive for Davon to also move into
the tee shirt business in hopes of cutting into some of Brian’s profit. So, this
"mechanism" indirectly encourages producers to make more of what consumers want
most.
Supply Schedule for Silk Ties |
Price |
Quantity |
$30.00
$50.00
$75.00 |
10,000
16,667
25,000 |
Classroom Activity - showing the
interaction between Supply and Demand.
The instructor will bring into class a somewhat rare set of early 20th
century Lincoln head cents, an old stamp, a silver dollar, a 6-pack of cola, and a bag of
bubble-gum and conduct an auction of these somewhat rare and/or popular items. Through
this auction, the instructor will be able to show the interaction of supply and demand. If
we have but one can of cola remaining, and six students covet the cola, the auctioneer can
perhaps auction the can of cola at more than its normal, retail price. A student
might offer one dollar for the can of cola at that moment when he could buy two
cans of cola for a dollar at his local Smith’s.
Background on Money
Money is an alternative to barter and a measure of relative values. Many forms of money
have been developed throughout history, including commodity, specie, fiat, and near
money. To serve as an acceptable medium of exchange, standard of value, and store of
value, money must have certain characteristics.
Keys to Understanding
- Money serves as a medium of exchange, a standard of value, and a store of value in the
American economy.
- The five characteristics of money – durability, portability, divisibility,
stability in value, and acceptability – makes it the most efficient and viable means
of exchange in our economy. Additionally, one has greater "TIME" flexibility
with money than with trade or barter. One can sell one’s bull for cash today, and buy
goats at some later date.
- Barter involves trading one commodity for another (say, furs for fish), or one service
for another (say, roofing for tutoring). Barter obviates the need for money, but creates
obstacles to efficient exchange of goods and services. Trading one bull for three goats
might be difficult if you lived ten miles from me or if I did not like your goats.
- Money is more than just a medium of exchange. We should also recognize the more
emotional aspects of money. Acquiring money is often viewed as an outward sign of material
success. It can be a signal of status, success, etc. Some students are guilty of
"Conspicuous Consumption" wherein students buy and wear one hundred-dollar
running shoes despite not being able to afford the shoes. Their Conspicuous Consumption
can become unaffordable consumption.
Background on Occupations and the American Labor Force
Instructors should be cognizant of the following salient facts of economic history
- In the 18th century (1700’s), the United States was primarily an
agricultural nation comprised mainly of small, largely self- sufficient farmers.
- In the 19th century, especially in the North/North-east sections of the
United States, the economic base shifted to manufacturing. Large textile mills developed
in New England; steel mills were built in Pittsburgh; and precursors of automobile plants
were built in late 19th century in Detroit.
- The 20th century has witnessed several major shifts in the U.S. labor force:
a. A more dramatic switch to a capital-intensive economy where technological
knowledge of
computers, finances, communication, and information services has increasingly replaced a
labor-intensive economy of farmers, factory workers, miners, and fisherman.
b. American women joined
the work force in substantial numbers during the two 20th century world wars
resulting in a
change of society’s attitudes toward the role of women the labor force. The numbers
of female doctors,
lawyers, business owners, and politicians is far greater in the year 2000 than it was in
1950.
- A direct relationship exists between income and education levels.
- Immigration, consumer tastes, and technological change affect the labor supply.
- Americans are living longer and tend to have longer productive life expectancies.
- The American economy, through our imports and exports, is increasingly connected to the
rest of the world. American made airplanes, computers, and food are sold around the world.
Foreign made clothing and cars are imported by America.
Student Activities re: The Labor Force
A primary focus of the unit section on the labor force is to clearly emphasize the
correlation between lifetime earnings and school/skills training. Students should see the
connections between their staying in school and their attaining higher wages and salaries.
This curriculum unit writer could hand out recent income figures comparing the mean
lifetime earnings of high school dropouts, high school graduates, and college graduates.
Combined with the education-income handout will be a discussion of what class members can
do to stay in school. Such helpful specifics such as improving reading and study skills,
taking summer academic classes, utilizing homework clubs, employing tutors, organizing
student study groups, and visiting local schools such as Albuquerque TVI will be
highlighted.
This curriculum unit will reinforce and review part of what students studied in seventh
grade New Mexico history. We will construct a 20th century New Mexico economic
time-line which will show how the percentage of New Mexico’s labor force has changed
from primarily agricultural, ranching, and mining to a labor force primarily in government
positions; service providers such as medical personnel, lawyers, accountants, and roofers;
and retailers such as Wal-Mart employees.
Additionally, a class lecture and picture display of Long Island’s Gold Coast will
relate the story of J.P. Morgan and his son. One hundred years ago, J.P. Morgan was one of
America’s wealthiest people. Morgan was able to hire dozens of unskilled,
semi-skilled and skilled laborers to garden his estate, build roads on the estate grounds,
and build extensions on to his mansion. Morgan paid, early in the 20th century,
small wages to his laborers because there was an ample –indeed, surplus- supply of
recent European immigrants who were stone masons, carpenters, gardeners, and home
builders. This unit instructor lived adjacent to the island owned by Junius P. Morgan on
Long Island’s North Shore. During The Great Depression, Morgan used immigrant labor
to build a bridge and a stone guardhouse before the entrance to his estate. Morgan paid
many of his laborers two dollars a day for their labor during the 1920’s and
1930’s.
It’s important that students understand several important aspects concerning the
economy of New Mexico:
- It has, and will continue to, undergo change.
- All students are and will become part of the economy of their state.
- Students can affect the outcomes of their economic future by becoming aware of what
opportunities exist for them and of how best to take advantage of present and future
economic opportunities.
- Mental attitude, focus, self-confidence, and determination all factor into a
student’s economic success.
- Individually, students should learn the frequent value of delaying their immediate
gratification for a chance of higher future rewards. A student would/could benefit by
saving part of his current earnings so that he would have money for future college.
The following economic decision-making tools will be studied discussed, and used to
guide student-consumer decisions:
- Brainstorming
- Decision theory and decision trees
- Critical path analysis
- "SWOT" analysis: Strengths, Weaknesses, Opportunities, and Threats
Brainstorming
Brainstorming is a device for crafting innovative and imaginative answers to a problem.
The group or individual that is brainstorming tries to devise various solutions to the
problem or situation. The teacher and the group are receptive to all ideas put forth
during the brainstorming session with one goal of expanding the number of alternatives
considered. Another goal is for students to expand their thinking while breaking down
their inhibitions along the way. Breaking down inhibitions, particularly involving
academic contributions in class, is important for Special Education students. To link
brainstorming to consumer decision making and to government budgets, the class will
have brainstorming sessions right after sessions on consumer decision making.
This instructor’s class will brainstorm "how Albuquerque will earn and then
spend its money." The class will devote the entire two preceding classes before the
speaker from the Albuquerque Mayor’s Budget Office visits our class to discuss the
Albuquerque City Budget. We will examine many of the components of the Albuquerque City
Budget items, such as police and sanitation, which are always parts of city budgets. Some
years, those "fixed" budget items such as police and sanitation are raised by,
say, 5% to reflect salary increases or services expansion (policeofficers hired). Some
budget items, such as 4th of July City celebrations, are more discretionary and
could conceivably be postponed one year or expanded the next contingent upon funds
availability. Ms. Betty Snapka, of the Mayor’s budget Office will bring actual
numbers and dollar amounts for the latest Albuquerque City Budget to enhance the realism
of the classes on government budgets.
During the brainstorming session, the instructor’s adult educational assistant
will keep a record, as notes, of proceedings. The brainstorming session is broken into two
main components. First, a group session is used to cultivate effective and varied ideas.
The group can add depth to an idea of one individual, and can serve as a catalyst for a
thrust in a new, productive direction. Second, the class is broken down into productive,
compatible pairs who will examine one aspect of the budget and recommend whether to
increase or decrease funding ¾ and why.
Decision Trees
A decision tree is a managerial tool that allows a person to see and evaluate
alternative decisions, and to hopefully better grasp the positives and negatives of each
choice on the "decision tree."
A beneficial student use of a decision tree involves the following examination of
whether or not to remain in school:
A decision tree shows students that they have options. The instructor can lead the
class in a discussion of the consequences of various decisions. Should a sixteen year-old
opt to have a child, how would she and the father pay for the child? The class will
highlight the consequences of each choice/on our decision tree.
When we can assign a dollar value to each possible outcome on the decision tree, we can
calculate the decision having the highest value to us. For example, some research shows
that a high school graduate earns over $200,000 more than a high school dropout does over
the course of his working career. A college graduate earns approximately $300,000 more
than a high school during the entire course of his working career. Thus, from a dollar
standpoint, it clearly seems economically advantageous to continue on in school to learn a
marketable skill for which the job market pays reasonably well.
Critical Path Analysis
Many middle school students have problems beginning, developing, and completing a
multi-step task such as a book report or term paper. Prioritizing time and attention on
the key aspects of an academic task allows the student and teacher to schedule and monitor
the student’s progress. Using critical path analysis helps a student budget his time
and energy to enhance his chances of a quality, on-time report, paper, or project.
As part of this instructor’s unit on smart money decisions, students will
read and write a report on Mark Twain’s Tom Sawyer. There exists a
sequential aspect to the student report on Tom Sawyer. First, the students
must have read the book. Second, the student must develop the body of this report.
Finally, the student must summarize and conclude his report. The above steps need to be
completed in sequence. Each step is completed before the next step can begin.
To utilize critical path analysis, we need to list the various components of our
academic plan. We show our starting dates and our due dates for the academic project. For
example, we might set September 7th as our start date for reading Tom
Sawyer. Then, we’d list intermediate dates by which certain chapters should
be read such as September 14th and 21st. The final chapter should be
completed by the 24th of September. By the 26th, an introduction
will be turned in to the teacher. With specific dates as guidelines, students will be able
to complete their book report, say, by October 7th