Download The Foundations of Wealth

The Foundations of Wealth
from In the Classroom Media (zzit.org)
1. Describe a subsistence economy.
People produce barely enough for their basic daily needs. If they have any
surplus, it is saved for themselves for the next day. Most of the time, there is not
enough. They work day in and day out just to stay alive.
To get out of a subsistence economy, people must produce more than they need.
That is the “secret” which enables a society to start improving its way of life.
2. Describe the division of labor by product.
People specialize by doing on job instead of trying to do all the work themselves.
The shepherds took care of the sheep. The cowards took care of the cattle. The
farmers grew the crops. The tailors made the clothes. The fishers caught the fish.
3. Why do the farmers, shepherds, and fishers produce more than before?
People did one job over and over. The practice helped the do the work faster
and better than before. By becoming more skilled as they specialized, they were able
to create a surplus. A surplus is the first step to a better way of life. Another
benefit to surplus is that goods become cheaper.
4. Describe division of labor by process. (This was illustrated in the video by making
20 shawls.)
Taking a job that requires a lot of steps (or processes) and breaking it down so
that people specialize in one part of the job. Each person becomes very good at one
part of the job and can do their work faster and better.
5. What is a trader?
Someone who exchanges the surpluses of one for the surpluses of another.
Trading is another step along the road to prosperity.
6. What causes production to increase?
The division of labor by process creates surplus because people do the same job
over and over. This helps them get better with practice. They also can work faster.
7. What do we do with our surplus production in the modern world?
Frequently we have mass production on huge farms or in huge factories. We
trade and sell our surplus products with people all over the world to get things we want
and could not make ourselves.
8. Define mechanization.
Finding a way to use machines to cut down the effort required to do a job. By
saving energy and time, it saves muscle power.
9. In addition to water and animal power, what sources of energy are shown in the
video?
wind, coal, oil, and uranium - The power of fire transformed the world. It boiled
water for steam engines, later gasoline was burned in combustion engines.
10. What must people do if they specialize in only one type of good or job? They must
trade or swap with others to get what they need, but don’t make.
11. Putting everything that a community in a common storehouse can be good or bad.
Give an example. If people cheat and take more than their fair share, other
people don’t get what they need.
One way to fix it is to let the biggest and strongest person take everyone’s
things and issue everyone their own share.
One way would be for people to eat only what they made and wear only what they
made.
One way would be to swap. If you don’t produce enough, you won’t have anything
to exchange. It is a way to make everyone work and not put the “bully” in charge.
Swapping (or bartering at the market) allowed people to get what they wanted. It also
allowed people to find out what was going on in the community and what people needed.
12. What information does a market provide producers?
It tells people what others want and what they don’t want. A market also
provides variety and choice.
13. How did money help at the market?
Money can be saved for another day.
Money is something everyone wants, doesn’t have enough of.
Money can be divided.
Money helps people to compare prices of a variety of things.
Money makes it easy to exchange for things.
14. What happens to price if supply increases?
If there is a lot of one thing, the price tends to go down. Conversely, if there
are few of one item and people want it, the price tends to go up.
15. How does raising or lowering the price of a good or product effect demand?
If you raise the price, ___________________
If you lower the price, ___________________
16. High prices encourage producers to increase production and low prices discourage
the production of goods. Price is always acting to encourage producers to produce the
right balance between what customers want and what they are willing to pay.
17. Competition between producers helps to keep the prices down for consumers.
18. Define scarcity.
19. Scarcity causes prices to go up. When prices are high, people are encouraged to
produce a lot. When more people begin to produce the product at the high price,
competition between the producers brings the price down.
Conversely, the lower the price, the fewer products a producer will want to
make.
20. What is meant by “equilibrium price?”