March 22, 2000
Students study supply and demand
East Junior High seventh-graders play economics game
By Garret Leiva
Herald editor
You won't find Turkey Jerkies, Eeny Meeny Miney or Mutated Gnomes on this year's 'Fortune 500' list, but that doesn't mean these corporations lack business sense. It just so happens that these company CEOs are still in the seventh-grade.
Studying and playing the game called economics, 400 geography students at Traverse City East Junior High School spent last week learning the laws of supply and demand. They also learned that a laissez faire market sometimes means a fair amount of production costs, loans and lean bottom lines.
Effects of supply and demand on price is the principle concept behind the week-long economics game, noted EJH geography teacher, Ken Bell.
"We want to show students how businesses get started, how they work and more practically, why we pay what we pay when we go to the store," said Bell, who originated the economics game 15 years ago.
This year's firsthand experience with economics started with the formation of 96 corporations comprised of a president, treasurer, buyer and seller. Using a running record sheet, corporations pay fixed expenses, buy raw materials, create a product and sell it. At the end of each turn or month, companies can make capital investments (i.e. buy factories) take out loans or pay back creditors. The game is played for 12 turns or one game year.
Initially, corporations are supplied with two standard factories, a set amount of cash and one raw material. They are also given supply-demand formulas and a list of monthly expenditures. The rest is left up to calculators and business savvy.
"If we give them all the answers right away, the simulation becomes pointless. We want the kids to learn through doing," Bell said. "We tell them that big can be good or it can be bad. You have a chance to make it big or lose it big."
Keeping track of those big ups and downs, students check their corporation daily on a posted standing sheet. This list tallies number of factories, raw materials, finished products, loans and corporation value. Using this print out, companies estimate product demand and use secret bid sheets to purchase raw materials. The bid sheets are also used to sell finished products to the game's buyers - geography teachers Bell, Libbet Horvath, Dessie Hughes and Nancy Fitzpatrick.
While some corporations hedged their bottom line bets, fourth-hour Team #2 took a more aggressive approach. "We maxed out our credit cards," said company buyer, Jeff McCray. The strategy seemed successful: Team #2 was the number one corporation after one week.
For Tanning Wall Street Women, the adage of spending money to make money sent this corporation to the bank; unfortunately to pay off debts. While the economic strategy of more- as in more factories, more production, more money- had yet to pay off, the Wall Street Women remained hopeful. Even the prospect of filing for chapter 11 was met with optimism.
"At least everyone will remember the last place team," noted Katelyn Scanz, corporation treasurer.
Whether possessing a bountiful or beleaguered bottom line, the ultimate goal of the week-long game was a greater understanding of economics. Students could see how the laws of supply and demand not only affect Fortune 500 companies but a seventh-grader's weekly allowance.
"We want students to see that free enterprise means the freedom to succeed or the freedom to fail," Bell said. "Making money and spending money. How people get their needs and wants is economics."