Introduction
October 29, 1996
The inclusion of economics as a core subject in the Goals 2000 Educate
America Act recognizes the value of economic understanding in helping
people comprehend the modern world, make decisions that shape the future,
and strengthen major institutions. The principles of economics bear directly
on the ordinary business of life, affecting people in their roles as consumers
and producers. Economics also plays an important role in local, state,
national, and international public policy. Economic issues frequently
influence voters in national, state, and local elections. A better understanding
of economics enables people to understand the forces that affect them
every day, and helps them identify and evaluate the consequences of private
decisions and public policies. Many institutions of a democratic market
economy function more effectively when its citizens are articulate and
well informed about economics.
Learning how to reason about economic issues is important also because
the analytic approach of economics differs in key respects from approaches
appropriate for other related subjects such as history and civics. Yet
valid economic analysis helps us to master such subjects as well, providing
effective ways to examine many of the "why" questions in history,
politics, business, and international relations.
Skills, as well as content, play an important part in economic reasoning.
The key skills students must develop in economics include an ability to
(a) identify economic problems, alternatives, benefits, and costs; (b)
analyze the incentives at work in an economic situation; (c) examine the
consequences of changes in economic conditions and public policies; (d)
collect and organize economic evidence; and (e) compare benefits with
costs.
Students should have gained several kinds of economic knowledge by the
time they have finished the twelfth grade. First, they should understand
basic economic concepts and be able to reason logically about key economic
issues that affect their lives as workers, consumers, and citizens, so
they can avoid errors that are common among persons who do not understand
economics. Second, they should know some pertinent facts about the American
economy, including its size and the current rates of unemployment, inflation,
and interest. Third, they should understand that there are differing views
on some economic issues. This is especially true for topics such as the
appropriate size of government in a market economy, how and when the federal
government should try to fight unemployment and inflation, and how and
when the federal government should try to promote economic growth. Nevertheless,
on many issues and in their basic methods of analysis, there is widespread
agreement among economists.
The essential principles of economics are identified in the 20 content
standards that follow. Each standard is followed by a rationale for its
inclusion. Then benchmarks for the teaching of each of the content standards
are provided, indicating recommended levels of attainment for students
in grades 4, 8, and 12. Finally, samples of what students can do to enhance
or demonstrate their understanding of the benchmarks are provided.
Content Standard 1
| Students will understand that: |
Students will be able to use this knowledge to: |
| Productive resources are limited. Therefore, people cannot have
all the goods and services they want; as a result, they must choose
some things and give up others. |
Identify what they gain and what they give up when they make choices. |
Students face many choices every day. Is watching TV the best use of
their time? Is working at a fast-food restaurant better than the best
alternative job or some other use of their time? Identifying and systematically
comparing alternatives enables people to make informed decisions and to
avoid unforeseen consequences of choices they or others make.
Some students believe that they can have all the goods and services
they want from their families or from the government because goods provided
by families or governments are free. But this view is mistaken. Resources
have alternative uses, even if parents or governments own them. For example,
if a city uses land to build a football stadium, the best alternative
use of that land must be given up. If additional funds are budgeted for
police patrols, less money is available to hire more teachers. Explicitly
comparing the value of alternative opportunities that are sacrificed in
any choice enables citizens and their political representatives to weigh
the alternatives in order to make better economic decisions. This analysis
also makes people aware of the consequences of their actions for themselves
and others, and leads to a heightened sense of responsibility and accountability.
Benchmarks
| At the completion of Grade 4,students will know that |
Students will use this knowledge to: |
| 1. People make choices because they cannot have everything they
want. |
1. Identify some choices they have made and explain why they had to
make a choice. |
| 2. Economic wants are desires that can be satisified by consuming a
good, service, or leisure activity. |
2. Match a list of wants with the correct example of a good, service,
or leisure activity that satisfies each want. |
| 3. Goods are objects that can satisfy people's wants. |
3. Create a collage representing goods that they or their families
consume. |
| 4. Services are actions that can satisfy people's wants. |
4. Create a collage representing services that they or their families
consume. |
| 5. People's choices about what goods and services to buy and consume
determine how resources will be used. |
5. Explain why a choice must be made, given some land and a list of
alternative uses for the land. |
| 6. Whenever a choice is made, something is given up. |
6. Choose a toy from a list of four toys and state what was given up. |
| 7. The opportunity cost of a choice is the value of the best alternative
given up. |
7. Describe a situation that requires a choice, make a decision, and
identify the opportunity cost. |
| 8. People whose wants are satisfied by using goods and services are
called consumers. |
8. Examine pictorial examples of people using goods and services and
identify the goods and services being consumed. |
| 9. Productive resources are the natural resources, human resources,
and capital goods available to make goods and services. |
9. Identify examples of natural resources, human resources, and capital
goods used in the production of a given product. |
| 10. Natural resources, such as land, are "gifts of nature";
they are present without human intervention. |
10. Use a resource map of their state to locate examples of natural
resources. |
| 11. Human resources are the quantity and quality of human effort directed
toward producing goods and services. |
11. Draw pictures representing themselves as workers. Also, identify
examples of human resources used in the production of education at
their school. |
| 12. Capital goods are goods produced and used to make other goods and
services. |
12. Draw a picture representing a capital good used at school. Also,
identify examples of capital goods used to produce goods or services
in their community. |
| 13. Human capital refers to the quality of labor resources, which can
be improved through investments in education, training, and health. |
13. Give examples of how to improve their human capital. Explain how
an athlete invests in his or her human capital. |
| 14. Entrepreneurs are people who organize other productive resources
to make goods and services. |
14. Select an entrepreneur and identify the productive resources the
entrepreneur uses to produce a good or service. |
| 15. People who make goods and provide services are called producers. |
15. Identify producers of five different types of goods and five different
types of services. |
| At the completion of Grade 8, students will know the Grade 4 benchmarks
for this standard and also that: |
At the completion of Grade 8, students will use this knowledge to: |
| 1. Scarcity is the condition of not being able to have all of the
goods and services that one wants. It exists because human wants for
goods and services exceed the quantity of goods and services that
can be produced using all available resources. |
1. Work in groups each representing a scout troop that has volunteered
to assist a local nursing home on Saturday morning. The nursing home
has a list of 30 possible projects, all of which it would like completed.
Explain why all 30 projects cannot be completed on a Saturday morning. |
| 2.Like individuals, governments and societies experience scarcity
because human wants exceed what can be made from all available resources. |
2. Role play a city council meeting called to allocate a budget of
$100,000. The council would like to buy four new police cars at $25,000
each, repair two senior-citizen centers at $50,000 each, and build
two new tennis courts at $50,000 each. Explain why a choice must be
made, decide how the city council should spend its money, describe
the trade-offs made, and identify the opportunity cost of the decision. |
| 3.Choices involve trading off the expected value of one opportunity
against the expected value of its best alternative. |
3. Determine criteria for selecting a stereo and identify the trade-offs
made when selecting one stereo over another. |
| 4. The choices people make have both present and future consequences. |
4. Analyze the consequences of choosing not to study for a final exam
and tell when those consequences occur. |
| 5. The evaluation of choices and opportunity costs is subjective; such
evaluations differ across individuals and societies. |
5. Individually develop a solution to a problem that affects everybody
in the class and identify the opportunity cost. Compare the solutions
and explain why solutions and opportunity costs differ among students. |
| At the completion of Grade 12, students will know the Grade 4 and
Grade 8 benchmarks for this standard and also that: |
At the completion of Grade 12, students will use this knowledge to: |
| Choices made by individuals, firms, or government officials often have
long-run unintended consequences that can partially or entirely offset
the initial effects of their decisions. |
Explain how a high school senior's decision to work 20 hours per week
during the school year could reduce her lifetime income. Also, explain
how an increase in the legal minimum wage aimed at improving the financial
condition of some low income families could reduce the income of some
minimum wage earners. |
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Content Standard 2
| Students will understand that: |
Students will be able to use this knowledge to: |
| Effective decision making requires comparing the additional costs of
alternatives with the additional benefits. Most choices involve doing
a little more or a little less of something; few choices are all-or-nothing
decisions. |
Make effective decisions as consumers, producers, savers, investors,
and citizens. |
To make decisions that provide the greatest possible return from the
resources available, people and organizations must weigh the benefits
and costs of using their resources to do a little more of some things
and a little less of others. For example, to use their time effectively,
students must weigh the additional benefits and costs of spending another
hour studying economics rather than listening to music or talking with
friends. School officials must decide whether to use some school funds
to buy more books for the library, more helmets for the football team,
or more equipment for teachers to use in their classrooms. Company managers
and directors must choose which products to make and whether to increase
or decrease the amount they produce. The President, Congress, and other
government officials must decide which public spending programs to increase
and which ones to decrease.
Focusing on changes in benefits and comparing them to changes in costs
is a way of thinking that distinguishes economics from most social sciences.
In applying this approach, students should realize that it is impossible
to alter how resources were used in the past. Instead, past decisions
only establish the starting points for current decisions about whether
to increase, decrease, or leave unchanged resource levels devoted to different
activities.
Benchmarks
| At the completion of Grade 4, students will know that: |
At the completion of Grade 4, students will use this knowledge to: |
| 1. Few choices are all-or-nothing decisions; they usually involve getting
a little more of one thing by giving up a little of something else. |
1. Analyze how to divide their time on a Saturday afternoon when the
possibilities are raking leaves to earn money, going roller skating
with friends, and shopping at the mall with their aunt. Students will
identify the possible uses of their time and explain how devoting
more time to one activity leaves less time for another. |
| 2. A cost is what you give up when you decide to do something. |
2. List the costs of buying and caring for a pet. |
| 3. A benefit is something that satisfies your wants. |
3. List the benefits of buying and caring for a pet. |
| At the completion of Grade 8, students will know the Grade 4 benchmarks
for this standard and also that: |
At the completion of Grade 8, students will use this knowledge to: |
| To determine the best level of consumption of a product, people
must compare the additional benefits with the additional costs of
consuming a little more or a little less. |
Solve the following problem: Your grandmother gave you $30 for your
birthday and you are trying to decide how to spend it. You are considering
buying compact discs ($12 each), going to the movies ($5 per ticket),
or taking some friends out for pizza ($7.50 per person). You do not
have to spend all your money on one thing. You can use some money
for one thing and some for another. How would you spend your money
to get the greatest satisfaction? |
| At the completion of Grade 12, students will know the Grade 4 and
Grade 8 benchmarks for this standard and also that: |
At the completion of Grade 12, students will use this knowledge to: |
| 1. Marginal benefit is the change in total benefit resulting from an
action. Marginal cost is the change in total cost resulting from an
action. |
1. Explain why beyond some point they are unwilling to buy and consume
an additional slice of pizza. |
| 2. As long as the marginal benefit of an activity exceeds the marginal
cost, people are better off doing more of it; when the marginal cost
exceeds the marginal benefit, they are better off doing less of it. |
2. Apply the concepts of marginal benefit and marginal cost to an environmental
policy to find the optimal amount of pollution for two firms that
have substantially different costs of reducing pollution. |
| 3. To produce the profit-maximizing level of output and hire the optimal
number of workers and other resources, producers must compare the
marginal benefits and marginal costs of producing a little more with
the marginal benefits and marginal costs of producing a little less. |
3. Decide how many workers to hire for a profit-maximizing car wash
by comparing the cost of hiring each additional worker to the additional
revenues derived from hiring each additional worker. |
| 4. To determine the optimal level of a public policy program, voters
and government officials must compare the marginal benefits and marginal
costs of providing a little more or a little less of the program's
services. |
4. Use the concepts of marginal cost and marginal benefit to evaluate
proposals for a pollution-control ordinance aimed at maximizing economic
efficiency; then select the best proposal and explain why it seems
best. |
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Content Standard 3
| Students will understand that: |
Students will be able to use this knowledge to: |
| Different methods can be used to allocate goods and services. People,
acting individually or collectively through government, must choose
which methods to use to allocate different kinds of goods and services. |
Evaluate different methods of allocating goods and services by comparing
the benefits and costs of each method. |
Individuals and organizations routinely use different decision-making
systems to determine what should be produced, how it should be produced,
and who will consume it. Most high school students already understand
the major advantages and disadvantages of selling concert tickets using
a first-come-first-served system, rather than a lottery, to select from
among those who applied for tickets. Unfortunately, many students have
experienced the use of force to allocate resources on the school playground.
Students also know that families typically use authoritarian systems to
decide how resources are used--that is, Mom and/or Dad decide.
The American economy uses a market system to make many allocation decisions,
and it is important for students to understand why the market system is
used so extensively. Students also should be able to compare the characteristics
of a market system with alternatives used more extensively in some other
countries. With this understanding, students can assess the benefits and
costs of alternative allocation systems when discussing difficult questions
such as how incomes should be divided among people or who should receive
a kidney transplant and who should not.
Benchmarks
| At the completion of Grade 4, students will know that: |
At the completion of Grade 4, students will use this knowledge to: |
| 1. No method of distributing goods and services can satisfy all
wants. |
1. Generate different methods for allocating student time on classroom
computers, tell who gains and who loses with each distribution method,
and conclude that no distribution method satisfies all wants. |
| 2. There are different ways to distribute goods and services (by prices,
command, majority rule, contests, force, first-come-first-served,
sharing equally, lottery, personal characteristics, and others), and
there are advantages and disadvantages to each. |
2. Compare the advantages and disadvantages of different methods of
allocating various goods and services, such as cookies, houses, student
time on playground equipment at recess, elective class offices, military
service in times of war or peace, and athletic championships. |
| At the completion of Grade 8, students will know the Grade 4 benchmarks
for this standard and also that: |
At the completion of Grade 8, students will use this knowledge to: |
| 1. Scarcity requires the use of some distribution method, whether the
method is selected explicitly or not. |
1. Describe the distribution methods used to allocate a variety of
goods and services, such as parking spaces, prison paroles, access
to a new drug treatment for cancer, seats on a bus, milk, and tickets
to a popular art exhibit. Then explain why a distribution method is
necessary. |
| 2. There are essential differences between a market economy, in which
allocations result from individuals making decisions as buyers and
sellers, and a command economy, in which resources are allocated according
to central authority. |
2. Compare the methods used to allocate work responsibilities in homes
with those used to allocate work responsibilities in businesses. Also,
compare the advantages and disadvantages of economic systems used
in different countries and at different times, using as criteria broad
social goals such as freedom, efficiency, fairness, and growth. |
| 3. People in all economies must answer three basic questions: What
goods and services will be produced? How will these goods and services
be produced? Who will consume them? |
3. Answer the three economic questions while producing a simple classroom
product, such as yarn bracelets, greeting cards, or decorations for
a school dance. |
| 4. National economies vary in the extent to which they rely on government
directives (central planning) and signals from private markets to
allocate scarce goods, services, and productive resources. |
4. Compare the relative size and responsibilities of government in
several countries. |
| 5. As consumers, people use resources in different ways to satisfy
different wants. Productive resources can be used in different ways
to produce different goods and services. |
5. List the resources used to produce some item and identify other
items that could have been made from these resources |
| At the completion of Grade 12, students will know the Grade 4 and
Grade 8 benchmarks for this standard and also that: |
At the completion of Grade 12, students will use this knowledge to: |
| 1. Comparing the benefits and costs of different allocation methods
in order to choose the method that is most appropriate for some specific
problem can result in more effective allocations and a more effective
overall allocation system. |
1. Examine economic systems used in different countries, select the
one that provides the most effective method for allocating resources,
and explain why this method is effective. Also, assess the effectiveness
of various systems for allocating organ transplants, hunting and fishing
licenses, elective offices, time with a parent, and access to hospital
maternity facilities. |
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Content Standard 4
| Students will understand that: |
Students will be able to use this knowledge to: |
| People respond predictably to positive and negative incentives. |
Identify incentives that affect people's behavior and explain how incentives
affect their own behavior. |
Economic incentives are the additional rewards or penalties people receive
from engaging in more or less of a particular activity. Understanding
rewards and penalties helps people to make the choices they need to make
in order to achieve their goals. Prices, wages, profits, subsidies, and
taxes are common economic incentives. Subsidizing an activity usually
leads to more of it being provided; taxing or penalizing an activity usually
leads to less of it being provided.
People frequently have good reasons to influence the behavior of others.
For example, businesses try to encourage people to buy more of their products,
workers try to persuade employers to hire them and to pay them higher
wages, and governments try to induce the production and consumption of
some products and discourage the production and consumption of others.
To understand or predict the behavior of people or organizations, students
must understand the economic incentives these people or organizations
face.
Benchmarks
| At the completion of Grade 4, students will know that: |
At the completion of Grade 4, students will use this knowledge to: |
| 1. Rewards are positive incentives that make people better off. |
1. List examples of rewards that are incentives for positive classroom
behavior. |
| 2. Penalties are negative incentives that make people worse off. |
2. List examples of penalties or negative incentives that discourage
inappropriate behavior at home. |
| 3. Both positive and negative incentives affect people's choices and
behavior. |
3. Identify examples of incentives and categorize them as positive
or negative incentives. |
| 4. People's views of rewards and penalties differ because people have
different values. Therefore, an incentive can influence different
individuals in different ways. |
4. Identify the incentives that would encourage them to read a book,
to return their library books on time, to repay money they borrow
from the school cafeteria for lunch, and to complete their homework
assignments on time; explain why various students respond differently
to incentives to do these things. Also, explain why some students
will do extra-credit work and some will not. |
| At the completion of Grade 8, students will know the Grade 4 benchmarks
for this standard and also that: |
At the completion of Grade 8, students will use this knowledge to: |
| 1. Responses to incentives are predictable because people usually pursue
their self-interest. |
1. Explain why they would be willing to shovel snow when temperatures
are below freezing, mow lawns when their friends are going to a movie,
or baby-sit on a weekend evening instead of going with friends to
a dance. |
| 2. Changes in incentives cause people to change their behavior in predictable
ways. |
2. Predict how students' study habits will change if the grading system
changes from letter grades to pass/fail to no grades. |
| 3. Incentives can be monetary or non-monetary. |
3. Identify the monetary and non-monetary incentives related to taking
a driver's education class. |
| At the completion of Grade 12, students will know the Grade 4 and
Grade 8 benchmarks for this standard and also that: |
At the completion of Grade 12, students will use this knowledge to: |
| 1. Acting as consumers, producers, workers, savers, investors, and
citizens, people respond to incentives in order to allocate their
scarce resources in ways that provide the highest possible returns
to them. |
1. Analyze the impact (on consumers, producers, workers, savers, and
investors) of an increase in the minimum wage, a new tax policy, or
a change in interest rates. |
| 2. Small and large firms, labor unions, and educational and other not-for-profit
organizations have different goals and face different rules and constraints.
These goals, rules, and constraints influence the benefits and costs
of those who work with or for those organizations and, therefore,
their behavior. |
2. Compare and contrast the incentives an individual might face in
serving as an elected official, the owner of a small business, the
president of a large company, and the director of a local United Way
office. |
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Content Standard 5
| Students will understand that: |
Students will be able to use this knowledge to: |
| Voluntary exchange occurs only when all participating parties expect
to gain. This is true for trade among individuals or organizations within
a nation, and among individuals or organizations in different nations. |
Negotiate exchanges and identify the gains to themselves and others.
Compare the benefits and costs of policies that alter trade barriers
between nations, such as tariffs and quotas. |
As a result of their competitive experiences in sports and games, students
usually have learned to expect that, in most contests, when one person
or team wins, another person or team must lose. Voluntary exchanges, on
the other hand, are cooperative activities in which both sides expect
to gain, and both usually do. Because all the parties to a voluntary exchange
expect to gain from trade, institutions that make trading easier usually
improve social welfare.
Understanding the win-win nature of voluntary exchange helps students
learn that people and organizations trade with one another only when each
party offers something that the other party values more than whatever
he or she has to trade. For example, an employer will hire a student at
a wage rate of $6 per hour only if the employer expects to receive labor
services from the student that are worth at least that much. And the student
will voluntarily work for $6 per hour only if the student values the $6
more than the best alternative use of his or her time. The principle that
voluntary trade can improve each participant's situation applies to all
voluntary exchanges, including trade between people or organizations in
different parts of the same country or among people or organizations in
different countries.
Benchmarks
| At the completion of Grade 4, students will know that: |
At the completion of Grade 4, students will use this knowledge to: |
| 1. Exchange is trading goods and services with people for other goods
and services or for money. |
1. Identify exchanges they have made and tell whether they were monetary
or barter exchanges. |
| 2. The oldest form of exchange is barter—the direct trading of
goods and services between people. |
2. Identify current and historical examples of barter exchanges. |
| 3. People voluntarily exchange goods and services because they expect
to be better off after the exchange. |
3. Describe a trade they have made, such as one with baseball cards,
stickers, or lunch desserts, and explain why they agreed to trade. |
| At the completion of Grade 8, students will know the Grade 4 benchmarks
for this standard and also that: |
At the completion of Grade 8, students will use this knowledge to: |
| 1. When people buy something, they value it more than it costs them;
when people sell something, they value it less than the payment they
receive. |
1. Describe recent monetary transactions they have made; as buyers
or sellers, explain why they were willing to trade. |
| 2. Free trade increases worldwide material standards of living. |
2. Identify the benefits when a trade barrier such as sugar or automobile
import quotas is eliminated. |
| 3. Despite the mutual benefits from trade among people in different
countries, many nations employ trade barriers to restrict free trade
for national defense reasons or because some companies and workers
are hurt by free trade. |
3. Look at historical examples of periods when the United States has
imposed trade barriers and explain why U. S. citizens would impose
trade barriers, given the mutual benefits of free trade. |
| 4. Imports are foreign goods and services purchased from sellers in
other nations. |
4. Examine labels of products in their homes to compile a list of imported
products and the countries from which they are imported. |
| 5. Exports are domestic goods and services sold to buyers in other
nations. |
5. Determine what major products are produced in their community for
export and the countries to which they are exported. |
| 6. Voluntary exchange among people or organizations in different countries
gives people a broader range of choices in buying goods and services. |
6. Describe how their daily lives would be different if people in the
United States did not trade with people in other countries. |
| At the completion of Grade 12, students will know the Grade 4 and
Grade 8 benchmarks for this standard and also that: |
At the completion of Grade 12, students will use this knowledge to: |
| 1. A nation pays for its imports with its exports. |
1. Participate in a trading simulation where students represent different
countries with specific goods to sell and specific goods they wish
to buy; conclude that a nation pays for its imports with its exports,
or by borrowing. |
| 2. When imports are restricted by public policies, consumers pay higher
prices and job opportunities and profits in exporting firms decrease. |
2. Analyze the political and economic implications of a proposed ban
on imported television sets. |
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