UNIT-1&2 CBSE-i VI Economics What is Economics & Money Students’ Manual W h a t i s E c o n o m i c s & M o n e y CLASS Shiksha Kendra, 2, Community Centre, Preet Vihar, Delhi-110 092 India CLASS UNIT-1&2 VI CBSE-i Economics What is Economics & Money Students’ Manual Shiksha Kendra, 2, Community Centre, Preet Vihar, Delhi-110 092 India The CBSE-International is grateful for permission to reproduce and/or translate copyright material used in this publication. The acknowledgements have been included wherever appropriate and sources from where the material has been taken duly mentioned. In case anything has been missed out, the Board will be pleased to rectify the error at the earliest possible opportunity. All Rights of these documents are reserved. No part of this publication may be reproduced, printed or transmitted in any form without the prior permission of the CBSE-i. This material is meant for the use of schools who are a part of the CBSE-International only. Preface This International Curriculum initiated by Central Board of Secondary Education - (CBSE) is a progressive step in making the educational content and methodology more sensitive and responsive to the global needs. It signifies the emergence of a fresh thought process in imparting a curriculum which would restore the autonomy of the learner to pursue the learning process in harmony with the existing personal, social and cultural ethos. The Central Board of Secondary Education has been providing support to the academic needs of the learners worldwide. It has about 12500 schools affiliated to it and over 158 schools situated in more than 23 countries. The Board has always been conscious of the varying needs of the learners and has been working towards contextualizing certain elements of the learning process to the physical, geographical, social and cultural environment in which they are engaged. The International Curriculum being designed by CBSE-i, has been visualized and developed with these requirements in view. The nucleus of the entire process of constructing the curricular structure is the learner. The objective of the curriculum is to nurture learner autonomy, given the fact that every learner is unique. The learner has to understand, appreciate, protect and build on values, beliefs and traditional wisdom, make the necessary modifications, improvisations and additions wherever and whenever necessary. The recent scientific and technological advances have thrown open the gateways of knowledge at an astonishing pace. The speed and methods of assimilating knowledge have put forth many challenges to educators, forcing them to rethink their approaches for knowledge processing by their learners. In this context, it has become imperative for them to incorporate those skills which will enable young learners to become 'life long learners'. The ability to stay current, to upgrade skills with emerging technologies, to understand the nuances involved in change management and the relevant life skills have to be a part of the learning domains of the global learners. The CBSE-i curriculum has taken cognizance of these requirements. The CBSE-i aims to carry forward the basic strength of the Indian system of education while promoting critical and creative thinking skills, effective communication skills, interpersonal and collaborative skills along with information and media skills. There is an inbuilt flexibility in the curriculum, as it provides a foundation and an extension curriculum, in all subject areas to cater to the different pace of learners. The CBSE introduced classes I and X in the session 2010-11 as a pilot project in schools. It was further extended to classes II, VI and X in the session 2011-12. In the seesion 2012-13, CBSE-i is going to enter in third year with classes III, VII and XI. The focus of CBSE-i is to ensure that the learner is stress-free and committed to active learning. The learner would be evaluated on a continuous and comprehensive basis consequent to the mutual interactions between the teacher and the learner. There are some non-evaluative components in the curriculum which would be commented upon by the teachers and the school. The objective of this part or the core of the curriculum is to scaffold the learning experiences and to relate tacit knowledge with formal knowledge. This would involve trans-disciplinary linkages that would form the core of the learning process. Perspectives, SEWA (Social Empowerment through Work and Action), Life Skills and Research would be the constituents of this 'Core'. The Core skills are the most significant aspects of a learner's holistic growth and learning curve. The International Curriculum has been designed keeping in view the foundations of the National Curricular Framework (NCF 2005) NCERT and the experience gathered by the Board over the last seven decades in imparting effective learning to millions of learners, many of whom are now global citizens. The Board does not interpret this development as an alternative to other curricula existing at the international level, but as an exercise in providing the much needed Indian leadership for global education at the school level. The International Curriculum would evolve building on learning experiences inside the classroom over a period of time. The Board while addressing the issues of empowerment with the help of the schools' administering this system strongly recommends that practicing teachers become skillful learners on their own and also transfer their learning experiences to their peers through the interactive platforms provided by the Board. I profusely thank Shri G. Balasubramanian, former Director (Academics), CBSE, Dr. Sadhana Parashar, Director (Training) CBSE, Dr. Srijata Das, Education Officer CBSE, CBSE along with all the Officers involved in the development and implementation of this material. The CBSE-i website enables all stakeholders to participate in this initiative through the discussion forums provided on the portal. Any further suggestions for modifying any part of this document are welcome. Vineet Joshi Chairman , CBSE Advisory Shri Vineet Joshi, Chairman, CBSE Dr. Sadhana Parashar, Director (Training), CBSE Ideators VI-VIII Ms. Aditi Mishra Ms. Guneet Ohri Ms. Sudha Ravi Ms. Himani Asija Ms. Neerada Suresh Dr. Rajesh Hassija Ms. Preeti Hans Ms. Neelima Sharma Ms. Gayatri Khanna Ms. Urmila Guliani Ms. Anuradha Joshi Mrs. Sonali Sinha Conceptual Framework Shri G. Balasubramanian, Former Director (Acad), CBSE Ms. Abha Adams, Consultant, Step by Step, School, Noida Dr. Sadhana Parashar, Director (Training), CBSE Ms. Charu Maini Dr. Usha Sharma Prof. Chand Kiran Saluja Dr. Meena Dhani Ms. Vijay Laxmi Raman Mrs. Avanita Bir Ms. Malini Sridhar Ms. Leela Raghavan Dr. Rashmi Sethi Ms. Seema Rawat Ms. Suman Nath Bhalla Prof. Om Vikas Material Production Groups: Classes VI-VIII English : Ms. Neha Sharma Ms. Dipinder Kaur Ms. Sarita Ahuja Ms. Gayatri Khanna Ms. Preeti Hans Ms. Rachna Pandit Ms. Renu Anand Ms. Sheena Chhabra Ms. Veena Bhasin Ms. Trishya Mukherjee Ms. Neerada Suresh Ms. Sudha Ravi Ms. Ratna Lal Ms. Ritu Badia Vashisth Ms. Vijay Laxmi Raman Core - Research Ms. Renu Anand Ms. Gayatri Khanna Dr. N K Sehgal Ms. Anita Sharma Ms. Rashmi Kathuria Ms. Neha Sharma Ms. Neeta Rastogi Ms. Manjushtha Bose Mathematics : Dr. Ram Avtar Mr. Mahendra Shankar Chemistry Ms. Poonam Kumar Mendiratta Ms. Deepa Gupta Ms. Gayatri Chowhan Ms. Rashmi Sharma Ms. N Vidya Ms. Kavita Kapoor Ms. Divya Arora Ms. Mamta Goyal Ms. Chhavi Raheja Physics : Ms. Vidhu Narayanan Hindi: Ms. Meenambika Menon Mr. Akshay Kumar Dixit Ms. Patarlekha Sarkar Ms. Veena Sharma Ms. Neelam Malik Ms. Nishi Dhanjal Biology: Ms. Kiran Soni Mr. Saroj Kumar CORE-SEWA Ms. Rashmi Ramsinghaney Ms. Vandna Ms. Prerna Gosain Ms. Nishtha Bharati Ms. Seema Kapoor Mr. Manish Panwar Ms. Seema Bhandari Ms. Vikram Yadav Ms. Seema Chopra Ms. Monika Chopra Ms. Reema Arora Ms. Jaspreet Kaur Ms. Neha Sharma Ms. Preeti Mittal ICT Ms. Shipra Sarcar Ms. Leela Raghavan Mr. Yogesh Kumar Ms. Varsha Manku Dr. K L Chopra Ms. Nancy Sehgal Ms. Purvi Srivastava Ms. Babita Mahajan Ms. Ritu Arora Ms. Swati Panhani Ms. Chanchal Chandna Geography: Ms. Suparna Sharma Ms. Aditi Babbar History : Ms. Leeza Dutta Ms. Kalpana Pant Ms. Ruchi Mahajan Political Science: Ms. Kanu Chopra Ms. Shilpi Anand Economics : Ms. Leela Garewal Ms. Anita Yadav CORE-Perspectives Ms. Madhuchhanda Ms. Varsha Seth Ms. Neha Sharma Chief Co-ordinator : Dr. Srijata Das, EO Coordinators: Ms. Sugandh Sharma, EO Dr Rashmi Sethi, EO Ms. S. Radha Mahalakshmi, E O Ms. Madhuchhanda, RO (Inn) Mr. Navin Maini, RO (Tech) Shri Al Hilal Ahmed, AEO Shri R. P. Singh, AEO Ms. Anjali Chhabra, AEO Ms. Neelima Sharma, Consultant (English) Mr. Sanjay Sachdeva, SO Sh. R. P. Sharma Consultant (Science) Ms. Reema Arora Consultant (Chemistry) Contents 1. What is Economics? 1 Its Meaning and Definition 2. Barter Economy Its meaning, Need, working and Drawbacks 3. Money as a Medium of Exchange Its need and use. 10 UNIT- I AND II WHAT IS ECONOMICS & MONEY ECONOMICS SYLLABUS Topic Concepts Skills/Learning Outcomes Unit -1. What is Economics? What is Economics in daily life Comprehend the basic idea of Economics? economics as a subject of study. Appreciate the use of economics in our daily lives. Unit-2. Money as a medium of To learn about barter economy as Money as a exchange a first step for exchange of goods Medium of Barter Economy Exchange ‘Integrated between people. Role of money in our day Analyse the need of money as a medium of exchange. to day life. project’ Appreciate and value the role of money in our day to day life. NOTE:1) Content no-1 to be taught in SA-I as an introductory chapter under “What is CONOMICS” 2) Content no-2, 3 should be taught in SA-II (Unit-2. Money as a Medium of Exchange) 1 Introduction to Economics: An Overview Often enough we hear the following – „I need a new dress‟ or „I want to purchase a new car‟ or „I want a new watch‟ or „I want to see a film‟ or „I want to eat an ice cream‟. All human beings have needs, wants and desires. They are unlimited in nature because as soon as a need/want is met, another one comes up and this goes on endlessly. As children we all read about Aladdin and his magic lamp. Whenever he wanted anything, he just had to rub the lamp and a genie would appear and fulfill all his wants and desires. But, in reality this is not the case. In real life we have to depend on our resources, i.e., our income to fulfill our needs. Now, the question arises – can we fulfill all our needs? Let us take the example of Jane who is very excited because she has got pocket money for the first time. She has got $50 to spend in a month. But soon she realizes that she is in a dilemma. There are so many things she wants but she will not be able to purchase all of them as she has only $50 with her. We can now answer our question. No, we cannot fulfill all our needs. Why? Do we have unlimited resources? No, we do not! 2 The resources available with us are limited. Hence all our needs/wants cannot be fulfilled. In our example, Jane has only $50/2500 Rs. to meet her needs and so she will not be able to fulfill all her needs at a time. Here we must also remember that not only that our resources limited, but also have alternative uses. The money (income of a person) can be used to purchase all different type of goods or services. Faced with a situation of limited resources, what does Jane do? She has to make a choice and choose to buy those things that she wants the most. 3 Oh dear! What to buy? Now Jane is faced with a problem of choice! Jane will spend her pocket money in such a way that she gets the maximum satisfaction out of it. Do You Know? 1. Adam Smith is known as the father of Economics. 2. James Mill and his son John Stuart Mill both were eminent economists 3. Amartya Sen: Indian Economist won Noble Prize for his contribution to Economics. http://www.ucl.ac.uk/economics/about/economists 4 This problem of choice arose because of scarcity of resources. Had there been no scarcity, i.e., had the money and resources available been unlimited, there would not have been any problem of choice as all her wants would have been satisfied. But, in reality it is not possible. Let us take another example. A farmer raises food crops. At any point of time, the input resources used in agriculture like land, labour, water, seeds, fertilizer etc. are given. All these resources also have alternate uses. The same resources can be used in the production of fiber crops or beverage crops or vegetables. This gives rise to the problem of choice, as the farmer has to decide how to use his resources so that he gets maximum satisfaction out of their use. Looking around us, in our daily lives, we will be able to see many examples of limited resources (Scarcity), unlimited wants and problems of choice. Story of Mohit Mohit is a student of class Sixth (VI) in a Public school. His father is working in a Multi National Company (MNC) and his mother is a business women. Mohit is good in academics and receives a scholarship of Rupees 1000/ $20 every month. He tries to meet all his day-to-day expenses with this money. He goes out for movies with his friends, he buys story books, chocolates, ice creams etc form this money. He does not ask his parents for money for any such need of his. It is now the month of March and Mohit is in a dilemma why? This month he needs to buy a gift and a card for his best friend‟s birthday. He has seen a poster, which he likes, for his room. He also wants to see some movies. His friends are also planning to go out for a picnic and want 5 him to accompany them. Mohit has only Rupees 1000/ $ 20 to meet his needs and knows that he will not be able to get all that he needs with this. He thinks and first buys a card and gift for his friend. He also puts money aside for one film and the picnic. Now he has only Rupees 40/ 1$ left and he decides to postpone the purchase of the poster and seeing the other film. Read the case study above and answer the following:Why cannot Mohit fulfill all his needs? The first thing he buys is the card and gift. Why? Why does he postpone the purchase of the poster? What is the basic problem faced by Master? Do you think if he had saved more previously, he would have been in better position? What is your opinion? This is what economics is all about – making the best use of our limited resources!!! We can agree with the following simple definition of economics: “Economics is a study of how people and society choose to employ scarce resources that have alternate uses, to satisfy their wants so that they can get maximum satisfaction”. Economics can be discussed in three parts: 6 1. Consumption: We want to know how the consumer decides what to buy (at the given prices) for his use, given his income and its alternative uses. 2. Production: We want to know how the producer decides what to produce for the market (when he knows the costs and prices), given his resources. A production unit Garment factory 3. Distribution: We want to know how the income arising out of the production of any good or service is distributed among the people who made the production possible (the factors of production). Money as a medium of exchange 7 Money, today, is a very important part of our lives. The goods and services required to satisfy our needs can be obtained only with the help of money. A person who has money can easily exchange it for any commodity or service that he wants. Jane has got money with her and she wants to buy a chocolate. She goes to the shop, gives the shopkeeper money and gets the chocolate. The chocolate seller needs to buy bread for his family. He uses the money he earned from the sale of chocolates to buy the bread. The baker needs to buy vegetables and uses the money earned by the sale of bread for it, and so on. Money facilitates the process of exchange, i.e., it acts as the medium of exchange. Can we imagine what the situation would be like if there was no money? How would we get the things we need? The only option would be to exchange goods for goods. This was the system which was followed in the ancient times (when there was no money) and was called the Barter system of exchange. A long time ago there were no coins. There was no such thing as money. Before the invention of money people had to get their food, clothing and other needs by trading things. There is a special name for this kind of trading called “Barter”. The word barter comes from a French word, barter, which means "to trade." When you swap baseball cards with a friend or trade your chocolate pudding for a cookie at lunchtime you are bartering because you are exchanging something you have for something you want. EXCHANGE OF GOODS 8 People traded some of the things they didn't need for things they wanted or needed. Even then people had different jobs and skills. Some people were good hunters, some were better farmers than others, some people made beautiful clay pots and some were skilled carpenters, and so on. There were many different ways in which these people bartered, or traded, for things they needed. The good hunter might trade 10 rabbits to the carpenter for the carpenter's promise to fix his roof. The farmer might trade a fat pig to the potter for pots to cook in. A goat might be traded for some tools. Perhaps the shoemaker would trade a pair of shoes for sacks of grain that his wife could make bread from. STORY OF BARTER Rahul and Amit were standing at the counter of the book shop waiting to pay for a book Amit was buying. 9 Shopkeeper: That will be Rs 215. Amit took out two crumpled 100 Re notes from his pocket. Amit: That‟s all I have. Can you give it to me for Rs 200? Shopkeeper: I am sorry but you will have to pay Rs 215. Amit: Oh dear! I do not have any more money. He dug into his pockets and took out a pen. Offering the pen to the shopkeeper he said, „I have this pen that I purchased from you last week. Maybe you can take this‟. Shopkeeper: Sorry son! We do not have the barter system anymore. Rahul: What is barter? Shopkeeper: You must go home and ask your grandfather. I am sure he will be able to tell you. Rahul and Amit headed for Amit‟s home and found his grandfather sitting in the garden. Amit: Grandpa, what is barter? Grandpa: Oh barter! That used to happen very long ago when there was no money. Rahul: No money! How did people manage without money? Grandpa: They exchanged one good for another. This process of exchanging goods and services directly is called barter. Amit: Tell us more about it. What was it like? Grandpa: I will tell you the story of farmer Jackson. He lived in the times when there was no money. One year he had a very good harvest. He was very happy. Now he would be able to get a lot of new things for the house. He gave five sacks of wheat in exchange of a cow. Wheat was given to the cobbler and all members of the family got a new pair of shoes. Also the entire roofing of the house was repaired and strengthened and the workers were given wheat in exchange for their services rendered. The cobbler used the wheat for his family. He took a pair of shoes to the cloth merchants‟ and exchanged them for cloth. The cloth merchant went to farmer Jackson to get wheat and gave him cloth in exchange. The farmer‟s family was able to get new clothes. Rahul: It must have been difficult. 10 Grandpa: Well, I am sure it was. But since there was no money they all had to manage. The farmer‟s wife baked bread and gave it to the woodcutter in exchange for firewood. You see what they did not need they exchanged for what they needed. At times the exchange rate became difficult. If one had a goat and wanted carrots and potatoes it was difficult to know how many carrots he would be able to get in exchange for a goat. Amit: That sounds so interesting. Rahul: I think it‟s difficult. Thank God we have money. Amit: I think barter would be good if you have things you do not need. Grandpa: But, somebody has to want what you have and do not need. Read the above case study and answer the following:What do you understand by barter? What do you think was the main drawback of the barter exchange? Do you feel barter can be followed today? Most of the time, bartering was a good way of getting things. But sometimes there were problems. What happened when you had something to trade but nobody wanted it? What happened when the traders couldn't agree on what was a fair trade? People had to agree as to how many eggs would equal a sack of grain or how many fish were enough to trade for a pot. What if you had something to trade that almost everybody wanted? 11 Then it was easy to make a trade! Do you Know? Bartering was first recorded in Egypt over 4,500 years ago. Source: http://www.lkfshow.com/funfacts/moneyecon.html Moreover, the biggest problem in barter exchange is that both the trading partners would need to have what the others want and both parties have to agree to buy and sell each other‟s commodities. This is known as double coincidence of wants. To overcome all these problems people began to use certain objects as a medium of exchange, i.e., money. Both livestock, particularly cattle, and plant products such as grain, come to be used as money in many different societies at different periods. Cattle are probably the oldest of all forms of money, as domestication of animals tended to precede the cultivation of crops, and were still used for that purpose in parts of Africa in the middle of the 20th century. But people needed things that would last a long time, still be valuable, and could be carried around. At about 1200 B.C. in China, cowry shells became the first medium of exchange, or money. The cowry has served as money throughout history even to the middle of this century. China, in 1,000 B.C., produced mock cowry shells at the end of the Stone Age. They can be thought of as the original development of metal currency. In addition, tools made of metal, like knives and spades, were also used in China as money. From these models, we developed today's round coins that we use daily. The Chinese coins were usually made out of base metals which had holes in them so that you could put the coins together to make a chain. The first coins were known as cowry money - minted in China 12 At about 500 B.C., pieces of silver were the earliest coins. Eventually in time they took the appearance of what we have today and were imprinted with numerous gods and emperors to mark their value. The first country in the world to make metal coins was called Lydia, sometime around 650 BC, in the A 640 B C state coin from Lydia western part of what is now Turkey. The methods of making coins were used over and over again, and further improved upon by the Greek, Persian, Macedonian, and Roman empires. Not like Chinese coins, which relied on base metals, these new coins were composed from scarce metals such as bronze, gold, and silver, which had a lot of intrinsic value. Coins of the Roman Empire 13 First coins minted in America Silver coins from the lifetime of Buddha 14 Coin of the Byzantine Empire In 118 B.C., banknotes in the form of leather money were used in China. One-foot square pieces of white deerskin edged in vivid colors were exchanged for goods. This is believed to be the beginning of a kind of paper money. From the ninth century to the fifteenth century A.D., in China, the first actual paper currency was used as money. Today, modern money includes not only coins, paper money but also plastic money(credit cards) which is widely used especially for transactions done on the internet. Do you know? In 1916, you could get your money laundered for free! If your money was in good enough shape, you could take it to Washington, D.C., where it could be washed, ironed and reissued. Do you know? Do you know? Parker Brothers printed more money for its There are only 5 currencies in the world that Monopoly games than the Federal Reserve has have unique symbols to represent them. issued in real money for the United States. If These are US Dollar, Yen, Pound, Euro and you stacked up all the Monopoly sets made, Indian Rupee (latest addition). Of these only the pile would be more than 1,100 miles high. the pound sterling has its symbol printed on the notes 15 Do you know? Do You Know? Paper money isn‟t made out of paper; it's The world‟s smallest coin weighed only .002 made out of cotton grams and was from Nepal. The world‟s heaviest coin was from Sweden and weighed 43 pounds 7 1/4 oz. 16 WORKSHEETS WORKSHEET-1 Crossword puzzle 1. 2 3. 4. 5. 6. Across 2. Activity of converting raw cotton into yarn and cotton textiles 3. Limited resource, unlimited wants 17 5. Deciding which book to buy out of how many 6. We use it to buy things Down 1. Final use of goods and services. 4. Round metallic object first used to buy goods 18 WORKSHEET-2 Research Based Q 1. What is “Token Money”? Find out. __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ Q 2. What is Plastic Money. What is E. Money transaction? __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ 19 WORKSHEET-3 Q.1. Given below are the symbols of currencies of a few countries. Write the name of the country next to its currency. _______________ _______________ ________________ _________________ ______________ _______________ 20 WORKSHEET-4 Euro money Today, the countries of France, Germany, Italy, Greece, Finland and Spain use a common currency called the „Euro‟. 1. Can you find out the orignal currencies of these countries? ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ 2. Also, name all the countries which use the „Euro‟ and form part of the „Euro Zone‟. ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ 21 WORKSHEET-5 Your class is going on a trip. Plan your expenses (you may want to spend on shopping, Sight- seeing, food, gifts, etc.). Ask your parents for money accordingly. After the trip, analyse why more money was spent on some things and less on others. Can you relate your behavior to the definition of economics? Tings Expected Money exceptive 22 Actual money spent Resources / Wed references http://www.bized.co.uk/educators/16-19/economics/micro/lesson/econintro.htm http://findarticles.com/p/articles/mi_qa3889/is_200204/ai_n9083304/ http://www.proteacher.com/090041.shtml http://www.google.co.in/#hl=en&source=hp&q=activity+to+introduce+economics+as+ a+subject+for+grade++6&btnG=Google+Search&oq=activity+to+introduce+economics+a s+a+subject+for+grade++6 http://www.econedlink.org/ http://www.google.co.in/search?hl=en&q=scarcity%20in%20economics google images http://www.buzzle.com/articles/barter-services-history-of-barter-system.html 23 CENTRAL BOARD OF SECONDARY EDUCATION Shiksha Kendra, 2, Community Centre, Preet Vihar, Delhi-110 092 India
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