Social Studies: Trade and Markets

Question 1

What is CURRENCY

Answer 1

A country’s money

Question 2

What is BARTER

Answer 2

To trade for goods or services with other goods or services, without money

Question 3

What is INFLATION

Answer 3

A rise in the usual price of many goods and services

Question 4

What is PROFIT

Answer 4

The money a business earns after paying all of its expenses

Question 5

What is DEMAND

Answer 5

The amount of a particular goods or services that consumers desire

Question 6

What is SUPPLY

Answer 6

The amount of goods or services available for consumers to buy

Question 7

A lemonade’s business looks like this:

It made $100 from selling lemonade.

It costs $15 to buy lemons.

It costs $5 to buy sugar.

It costs $5 to make flyers to advertise.

It costs $5 for paper cups.

(1) What are total expenses?

(2) How much profit did it make?

Answer 7

(1) $30 in total expenses

(2) $70 in profit ($100 minus $30 in expenses)

Question 8

What is BORROW

Answer 8

To take and use something with the agreement of returning it later

Question 9

What is AVAILABLE

Answer 9

Able to be used

Question 10

A boy has a lemonade stand that made $100 in one month.

In that month, he spent $10 on buying lemons, $5 on sugar, $5 on making flyers to advertise, and $5 on paper cups.

(1) How much did he spend on total expenses?

(2) How much did he make in profit?

(3) If he has the same profit in one year, what is his income?

Answer 10

(1) $30 in total expenses

(2) $70 in profit ($100 minus $30 total expenses)

(3) $840 in income ($70 times 12 months)

Question 11

Why is it better to use money to buy and sell than bartering?

Answer 11

In bartering, the other person may not want what you want to sell (or the other person may not have what you want to buy) - when this happens, you cannot barter.

In contrast, (1) money can be used to buy anything, (2) money can be divided into different quantities, (3) money is easy to carry, and (4) money is uniform, meaning that all money is the same, so any seller will accept money.

Question 12

Is inflation good or bad for consumers?

Answer 12

Usually it’s pretty bad, because when prices go up, that means you can buy fewer things for the same amount of money.

Question 13

How does competition affect price?

Answer 13

If there is competition to sell the same product, then that will probably decrease the price for the product because consumers will always pay a lower price if there is a choice, so the sellers might compete to offer the best price.

Question 14

What are some risks for an entrepreneur that might cause their business to fail?

Answer 14

(1) Competition

(2) No demand for their goods or services

(3) They run out of money before the business earns a profit

(4) Natural disaster destroys their business

Question 15

It takes spending money to make money. So how might an entrepreneur get enough money to start a business?

Answer 15

(1) Use their own money that they saved.

(2) Borrow money (from a bank or even from friends or family)

(3) Find investors or partners who will help to pay for expenses (in return for sharing profits)

Question 16

Why is high demand good for business?

And low demand bad for business?

Answer 16

It means lots of people want the goods or services offered by the business, and it means they could raise their price to increase their profit?

Low demand is the opposite. It means not many consumers will choose their goods or services, which means they might need to lower their price and decrease their profit, or go out of business entirely.

Question 17

What happens to supply when there is high deman?

Answer 17

Supply will usually decrease, since many people have purchased those products.

Question 18

What happens to price when there is (1) high demand and low supply, or (2) low demand and high supply?

Answer 18

(1) Price will increase

(2) Price will decrease

Question 19

Many people like expensive luxury goods such as a Gucci purse.

That in turn has led to sellers who produce fake Gucci purses that sell for much lower prices.

(1) How can the fake Gucci seller make money when their prices are so low?

(2) Does Gucci need to lower their price to compete with fake goods? Why or why not?

Answer 19

(1) Fake goods are often much cheaper to make - for example they use poor quality materials, and they don’t need to spend money to advertise. This means they can charge a lower price and still make a profit.

(2) Not necessarily, because: (a) there might not be enough demand for fake Gucci purses because Gucci consumers prefer the real thing, or (b) there might not be enough supply because fake Gucci purses might only be available in a small number of places while real Gucci purses are available globally with sufficient supply.

Question 20

Seller A sells chocolates. He is the only seller in Taipei. He has a supply of 100 chocolates per month, and sells them for $2.00 each.

(1) He sells out all 100 chocolates each month. What does this tell you about the demand for his chocolates?

(2) What are 2 things he can do to make more money from selling chocolates?

(3) A new producer, Seller B, decides to compete with Seller A. Seller B sells chocolates $1.50 which is lower than Seller A’s price. Think of a situation where (a) Seller A might want to lower his price to compete with Seller B, and (b) Seller A might not need to lower his price despite competition from Seller B.

Answer 20

(1) There is very high demand. People really love his chocolates.

(2) Some options are:

(a) Increase his supply of chocolates because demand is higher than his current supply. So maybe Seller A can invest to increase the number of chocolates he can produce every month.

(b) Increase the price, because there is higher demand for his chocolates than what he can supply, so that means people might be willing to pay more for scarce goods. So even if Seller A cannot increase his supply of chocolates, he might still be able to make more money by raising prices.

(c) Another option is to find ways to decrease his expenses (for example, Seller A can try to find cheaper chocolate wrapping or boxes, or reduce his advertising cost because people already love his product so there is less need to advertise). So even without increasing supply or price, Seller A will have more profit by raising prices.

(3) With a new competitor in Seller B:

(a) Seller A might need to be worried if Seller B is selling the same kind of chocolates, because if both products are the same, most people will want to choose the ones that cost less. This kind of competition over the same product is called “perfect competition”.

(b) But if Seller A sells special chocolates from France and they are better quality than Seller B’s chocolates from Taichung, then maybe Seller A doesn’t need to worry because Seller B is not really competing for the same product. In other words, demand might not change for Seller A’s product because some consumers prefer French chocolates and are willing to pay more. (So maybe Seller A can change his advertisement to make sure consumers know that his chocolates are from France and are the best tasting in Taipei.)

Question 21

Do the exercise in the text book at the end of Chapter 4, Lesson 2 (placing events in the right sequence)