Activity: The Magic of Markets – Trade Creates Wealth

Overview:

Trade is the voluntary exchange of goods and services. People engaging in trade must be willing to bear a cost (give up something). Therefore, we know that people will only participate voluntarily when they expect to gain from the exchange. If even one of the trading partners believes he cannot gain, the exchange will not take place.

Video Demonstration:

Concepts:

• Trade
• Voluntary exchange
• Costs
• Benefits
• Property Rights

Lesson Description:

This lesson involves students in a trading simulation designed to illustrate a complex marketplace in which goods and services are traded. Students use this experience to investigate the conditions that encourage or discourage trade among individuals.

Time:

• One class period.

Materials:

A large number of small, easy to exchange items – such as miniature candy bars, small boxes of raisins, inexpensive small toys, packages of sticky notes, pencils, stickers, library passes, hall passes, answers to a quiz, etc., and enough small brown bags for each student.

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The Magic Of Markets combines procedures used in “Why Do People Trade,” Master Curriculum Guide In Economics International Trade, by Donald R. Wentworth and Kenneth E. Leonard (Copyright 1988 by the National Council on Economic Education, 1140 Avenue of the Americas, New York, NY 10036. All rights reserved. No part of the Master Curriculum Guide In Economics International Trade materials may be kept in an information storage or retrieval system, transmitted, or reproduced in any form or by any means without permission in writing from the National Council. Used with permission.) Questioning strategies and procedures developed by Kathy Ratté and Kenneth Leonard for the Foundation for Teaching Economics.