Concepts:
Content Standards and Benchmarks (3, 7 and 8):Standard 3: 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. Show
Benchmarks:
Standard 7: Markets exist when buyers and sellers interact. This interaction determines market prices and thereby allocates scarce goods and services. Benchmarks:
Standard 8: Investment in factories, machinery, new technology, and the health, education, and training of people can raise future standards of living. Benchmarks:
Lesson Theme:In the absence of markets, the planning ministry of the Soviet Union faced an impossible task in trying to gather, analyze, and disseminate the information necessary to answer the basic economic question of how to allocate resources for the purposes of production and consumption by an entire nation. Key Points:
Conclusion:As the Soviet economy became more complex, costs of information about resource values and people’s desires rose astronomically. The planning problems became increasingly daunting and eventually insurmountable. No matter their size or complexity, the ministries could not hope to replace the information gathering and dissemination functions so efficiently carried out by market prices. The lack of market information on the values of goods, services, and resources in the Soviet Union, and the increasing ability of western market based economies to use and move information rapidly widened the gap in standards of living. Activity: Missing Markets – The Task of the Planning MinistryDemonstration Video Lesson Overview:In this simulation, student “ministers” find that their ability to distribute goods and services to satisfy consumer wants and needs is severely hampered by their inability to access the information that markets provide. Students compare the level of consumer satisfaction that results from a centrally planned allocation of 2 goods to the allocation of the same goods by markets. Economic Concept:Markets provide important information about price and consumer demand that is not available to planners who must make allocation decisions in centrally directed (command) economies. Economics Content Standards:Standard 3: 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. Benchmarks:
Standard 8: Prices send signals and provide incentives to buyers and sellers. When supply or demand changes, market prices adjust, affecting incentives. Benchmarks:
Materials:
Time required:
Assessment:The following story appears in Meltdown (by Paul Craig Roberts and Karen LaFollette, Washington D.C.: The Cato Institute, 1990, p. 19-20): “Although demand for boots had been falling, shoe factories concentrated on premium-maximizing [heavy woolen] boots. During the first year, the Russian Shoe Trade Association (Rosobuvtorg) imposed 10,000 extra pairs on retailers, filling warehouses and stores. The next year the same thing happened, except this time the trade association manager insisted that sellers take 38,300 more pairs of boots, on top of the 13,000 pairs that now languished in storage. So shoe sellers ended up with the boots, knowing full well that they could never sell them. At last count, retailers were buried under 200,000 pairs of boots that filled every imaginable space.” Suppose that, instead of the Russian Trade Association, Nike had made the first 10,000 pairs of women’s woolen boots. Rewrite the above description to include the changes in:
ProceduresPart 1
Debrief:
When the free market does not produce optimal outcomes for the economy there is evidence of?economics. Which of the following may be used to correct market failure?Market failures can be corrected through government intervention, such as new laws or taxes, tariffs, subsidies, and trade restrictions.
What three factors help determine which production possibility combination to produce at?LEARNING OBJECTIVES. Define the three factors of production – labor, capital, and natural resources. Explain the role of technology and entrepreneurs in the utilization of the economy's factors of production.
Which of the following events would allow the production possibilities curve to shift outward?When the economy grows and all other things remain constant, we can produce more, so this will cause a shift in the production possibilities curve outward, or to the right. If the economy were to shrink, then, of course, the curve would shift to the left.
|