Social studies · Grades 2–12

Economics basics · Quick reference

Reference sheet for Grades 2 to 12: 5 key ideas, including needs and wants, goods and services and government budgets: surplus or deficit. Ask: could a person live safely without it? If not, it is a need.

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Rule and key idea

Needs and wants

Ask: could a person live safely without it? If not, it is a need.

Which one is a need: a bigger TV or a safe place to live? → a safe place to live

Goods and services

A good is an object; a service is an action someone does for you.

Which one is a service: a haircut or a backpack? → a haircut

Government budgets: surplus or deficit

Compare money coming in (revenue) with money going out (spending). A deficit must be covered by borrowing or savings.

revenue − spending > 0 → surplus · < 0 → deficit

A town expects revenue of $78 million and plans to spend $73 million this year. What is the result? → a surplus of $5 million

Supply, demand and prices

First decide whether the event changes how much is available (supply) or how much people want to buy (demand). Then predict the price, holding everything else constant.

supply ↓ or demand ↑ → price ↑ · supply ↑ or demand ↓ → price ↓

A toy goes out of fashion, and far fewer people want it. Which change does this describe? → Demand decreased.

Opportunity cost

Every choice uses scarce time or money. The opportunity cost is only the next-best option you give up, not every option.

opportunity cost = the next-best choice given up

Priya has one free Saturday afternoon and ranks the options: 1) visiting a grandparent, 2) going to a movie, 3) going to a museum. Priya chooses visiting a grandparent. What is the opportunity cost of this choice? → going to a movie

Check yourself

Four practice questions on this topic. Try each one before you open the answer.

A popular video makes many people want to try a new snack. Assuming nothing else changes, what will most likely happen to the price?
- It will most likely rise.
- It will stay exactly the same.
- It will most likely fall.
Show the answer
It will most likely rise. Lower supply or higher demand tends to push prices up; higher supply or lower demand tends to push prices down, other things being equal.
After the holidays, far fewer people want to buy wrapping paper. Assuming nothing else changes, what will most likely happen to the price?
- It will most likely rise.
- It will most likely fall.
- It will stay exactly the same.
Show the answer
It will most likely fall. Lower supply or higher demand tends to push prices up; higher supply or lower demand tends to push prices down, other things being equal.
A city’s population grows quickly, and many more people want apartments. Assuming nothing else changes, what will most likely happen to the price?
- It will most likely rise.
- It will most likely fall.
- It will stay exactly the same.
Show the answer
It will most likely rise. Lower supply or higher demand tends to push prices up; higher supply or lower demand tends to push prices down, other things being equal.
Which one is a need: a movie ticket or a safe place to live?
- a movie ticket
- a safe place to live
Show the answer
a safe place to live A need is something people must have to live and stay safe. A want is nice to have but not necessary.