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Economics Standards and Benchmarks
Economics Standard 1:
Understands that scarcity of productive resources requires choices that generate opportunity costs
Level III (Grade 6-8)
- Understands that scarcity of resources necessitates choice at both the personal and the societal levels
- Knows that all decisions involve opportunity costs and that effective economic decision making involves weighing the costs and benefits associated with alternative choices
- Understands that the evaluation of choices and opportunity costs is subjective and differs across individuals and societies
Level IV (Grade 9-12)
- Understands that increases in productivity are affected by incentives that reward successful innovation and investments (e.g., in research and development, and in physical and human capital)
- Understands that investing in new physical or human capital involves a trade-off of lower current consumption in anticipation of greater future production and consumption
- Understands that technological change and investments in capital goods and human capital may increase labor productivity but have significant opportunity costs and economic risks
Economics Standard 2:
Understands characteristics of different economic systems, economic institutions, and economic incentives
Level III (Grade 6-8)
- Knows that in a command economic system a central authority, usually the government, makes the major decisions about production and distribution
- Knows that in a market economic system individual households and business firms make the major decisions about production and distribution in a decentralized manner following their own self-interests
- Understands that national economies vary in the extent to which they rely on government directives (central planning) and signals from private markets
- Understands the types of specialized economic institutions found in market economies (e.g., corporations, partnerships, cooperatives, labor unions, banks, nonprofit organizations)
- Understands that economic incentives such as wanting to acquire money or goods and services and wanting to avoid loss are powerful forces affecting the way people behave
- Understands that entrepreneurs respond to incentives such as profits, the opportunity to be their own boss, the chance to achieve recognition, the satisfaction of creating new products, and disincentives such as losses and the responsibility, long hours, and stress of running a business
- Understands that in a market economy the pursuit of economic self-interest directs people and businesses in most of their economic decisions (e.g., to work, to save, to invest)
- Understands that many non-economic factors (e.g., cultural traditions and customs, values, interests, abilities) influence patterns of economic behavior and decision making
Level IV (Grade 9-12)
- Understands that the effectiveness of allocation methods can be evaluated by comparing costs and benefits
- Understands that economic institutions (e.g., small and large firms, labor unions, not-for-profit organizations) have different goals, rules, and constraints, and thus respond differently to changing economic conditions and incentives
- Knows that property rights, contract enforcement, standards for weights and measures, and liability rules affect incentives for people to produce and exchange goods and services
- Understands that in every economic system consumers, producers, workers, savers, and investors respond to incentives in order to allocate their scarce resources to obtain the highest possible return, subject to the institutional constraints of their society
Economics Standard 3:
Understands the concept of prices and the interaction of supply and demand in a market economy
Level III (Grade 6-8)
- Understands that the price of any one product is influenced by and also influences the prices of many other products
- Understands that scarce goods and services are allocated in a market economy through the influence of prices on production and consumption decisions
- Understands the "law of demand" (i.e., an increase in the price of a good or service encourages people to look for substitutes, causing the quantity demanded to decrease, and vice versa)
- Understands that an increase in the price of a good or service enables producers to cover higher costs and earn profits, causing the quantity supplied to increase (and vice versa), but that this relationship is true only as long as other factors influencing costs of product and supply do not change
Level IV (Grade 9-12)
- Understands that the demand for a product will normally change (i.e., the demand curve will shift) if there is a change in consumers' incomes, tastes, and preferences, or a change in the prices of related (i.e., complementary or substitute) products
- Understands that the supply of a product will normally change (i.e., the supply curve will shift) if there is a change in technology, in prices of inputs, or in the prices of other products that could be made and sold by producers
- Understands that changes in supply or demand cause relative prices to change; in turn, buyers and sellers adjust their purchase and sales decisions
- Understands that a shortage occurs when buyers want to purchase more than producers want to sell at the prevailing price, and a surplus occurs when producers want to sell more than buyers want to purchase at the prevailing price
- Understands that shortages or surpluses usually result in price changes for products in a market economy
- Understands that when price controls are enforced, shortages and surpluses occur and create long-run allocation problems in the economy
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Selected Standards and Benchmarks
used by permission:
Copyright
2003 McRel
Mid-continent Research for
Education and Learning
2550 S. Parker Road, Suite 500
Aurora, CO 80014
Telephone: (303) 337-0990
www.mcrel.org/standards-benchmarks
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