SOCIAL STUDIES 7: ECONOMIC SECURITYCHAPTER 3

NEEDS AND WANTS

Many of our needs and wants can be met with money like food, clothing, and belongings.

Others cannot be met with money, like feeling like you belong, and being safe. (This is why not every person aims for the highest paying career choice!)

Capitalism Goods and services are distributed through

buying and selling. Individuals are free to become as wealthy as

they can.  Most goods and services are produced by

private companies. The main goal of businesses is to make a profit for the owners. 

Capital The money and other things that have to be

invested or “put into” a business venture to start it up and keep it operating. This where the word “capitalism” comes from. 

PROFIT

The money the business owner makes after repaying for the investment and paying other expenses.

Example:  Ms. Reardon and Ms. Byrne’s Lemonade Factory made

$5000 in sales this week,  but they don’t know what their profit is until they take into account their expenses!

First, they must calculate how much they need to pay their employees, Nick, Sebastion, Brianna, and Hailie. Each employee gets $300 for the week, thats $1200. 

Second, they must pay their bills! Heat/Light is $200 this week, rent is $500, lemons from Ms. Coopers lemon store will cost them $800, sugar is $100, and finally the cost of lemonade cartons is $50. That’s $1750 that must go toward bills! 

expenses: $1200 + $1750 =$2950 

So, how much profit did Ms.Byrne and Ms.Reardon make?? $5000 - $2950 = $2,050 is how much they profited. 

KINDS OF BUSINESSES A person may work on their own and have their own

business. A person who does this is called an entrepreneur. Ex. a local carpenter may put out an ad in the paper to get customers to pay for his services.  

Family businesses- a small or medium sized business. For example, a family farm, convenience store, restaurant, etc. These businesses are normally started by people who see a need for certain goods and services in a community. 

Larger business - often owned by big companies that are based somewhere else in the country or in other countries. Ex. Walmart.

HOW DOES A BUSINESS CREATE WEALTH IN A COMMUNITY?  When a new business starts up, it helps

creates wealth because people get hired, the employees make money, they spend the money on goods and services in the community, which helps other businesses, which also helps those businesses pay their employees who make money and spend their money in the community, which helps businesses…. It’s a cycle that keeps going and benefits the community. 

STANDARD OF LIVING

The measure of how much “buying power” a family has. It includes just about everything that can be bought with money: a home, food, entertainment, transportation, etc. 

POVERTY

Living with a lower standard of living. Your income is less than the cost of living.

(income < cost of living)

Another way to define poverty is to calculate whether or not you can survive on the money you make. A family is living in poverty when the cost of meeting its basic needs is higher than its income. 

ECONOMIC SECURITY

• This is when your income is more than the cost of your basic needs. After paying for your basic needs, there is money left over. You can choose to spend your extra income on things you want or use it to build toward the future.

• (income > cost of living)

POVERTY CYCLE

If a person has trouble getting a job, then they might get caught in the poverty cycle. Once you have reached the point where you don’t have enough wealth to take care of your needs, its hard to get what you need to improve your life. For example, someone who is living in poverty may not have enough money to buy healthy food, this could lead to poor health, and they may become too sick to work. So, they can’t work because they’re sick, but they’re sick because they can’t work. 

PERSONAL CAPITAL

Is anything that you have to help you improve your economic situation. These are things like: savings, property, skills (education / experience), and determination. Each of these can help you break out of the poverty cycle! Our government also has programs to help people, like scholarships for people who work hard and get good grades in high school (yes, Newfoundland has this, too!)

OWNING A HOME

Owning a house is usually a family’s biggest capital investment, and is very rarely paid for all at once. To start, a family pays a portion of the cost of the home, called a down payment.

The rest of the cost of the house is borrowed from the bank and he family pays the bank back a bit each month until they own the whole house. This is called a mortgage, and can take many years to pay back. The house is capital because it can be sold!