Collecting for Fun . . . and Profit?

EDUCATOR'S VERSION

This lesson printed from:
http://www.econedlink.org/e553

Posted December 27, 2004

Standards: 5, 7, 8, 9

Grades: 6-8, 9-12

Author: Patricia Bonner

Posted: December 27, 2004

Updated: September 22, 2009

DESCRIPTION

Art, baseball cards, coins, comic books, dolls, jewelry and stamps are just a few examples of the many things people collect. While some people collect for fun — others hope to profit. In this lesson, students explore how supply and demand influence the price of collectibles. They also evaluate speculation in collectibles as an investment option. They learn that collectibles are one of the riskiest ways people can invest their money.

KEY CONCEPTS

Demand, Investing, Investment, Price, Risk, Supply

STUDENTS WILL

  • Explain why collectibles are a high-risk investment option.
  • Explain how supply and demand affect the value of collectibles.
  • Identify collectibles they believe will increase in value.
  • Offer advice to a person who is interested in collecting for a profit.

INTRODUCTION

[NOTE: Students will need a basic understanding of supply, demand and market prices for this lesson. You may want to review these concepts before you begin the lesson. For the purposes of this lesson, supply describes the quantity or amount of a collectible that is available for sale. Demand measures the desire, willingness, and ability to purchase a collectible – in other words, how many people want to buy it. If an item is scarce, people who want an item may be willing to pay a premium price. When an item is plentiful and demand goes down, sellers may need to lower the price so people will buy them. This seemingly simple process forms the basis of our market economy:]

On the board, copy this list of items in this order.

Coins
Old bottles
Legos
Lunch boxes
Eagle photographs
Candy wrappers
Tea pots
Ice cream scoops
Beanie Babies
Lanterns
Elephants (stuffed)
Salt and pepper shakers

legosHave students look at the list of items on the board. Ask them to guess what all these items have in common. If they are unable to come up with the correct answer, erase all but the first letter of each word to expose the connection. [All of the items are things people collect – they are called collectibles]

[NOTE: IF you have used this technique for introducing a lesson before and students have discovered “the trick,” scramble the words; this will force the students to unscramble the first letters.]

Tell students that they are going to learn about investing in collectibles.

Distribute copies of this worksheet. Direct students to follow the instructions throughout the lesson and be prepared to answer the THINK ABOUT IT questions. Have them record their responses on this worksheet. This will help them remember their answers; it will also enable you to use their responses as you assess their learning.


PROCESS

In the activities for this lesson, students are asked to respond to querstions about what they have just read. They are directed to email their responses to you. If you prefer having a hard copy of their responses, distribute copies of this werksheet before they begin working online.

Activity 1: What is a Collectible?

Students read these articles to learn more about investing in collectibles:

1. Coin Collecting for Fun and sometimes profit
2. What is a Collectible?

Here students learn what people collect and why. They learn how supply and demand influence the price of collectibles. The articles also discuss other aspects of collecting, including the condition of a collectible as a factor affecting price, and the buyer's expected return on collectibles.

THINK ABOUT IT
collectible doll

  1. Why do people collect things? Give at least 2 reasons. [Potential responses include for fun and enjoyment, to learn something, and to make money.]
  2. What collectibles were in demand at the time these articles were written? Give 2 examples. [Comic books, toys, dolls (especially Barbie, GI Joe, and Beanie Babies,) collectible cards (such as sports and Pokemon), items associated with recent movie releases, anything related to dinosaurs.]
  3. What factors help increase the value of a collectible? Identify at least 3 factors. [The item is rare (limited supply), in good condition, in demand, and people expect the item to increase in value (expected return).]
  4. Some collectibles are in demand by more than one group of collectors, which can help increase the item’s price. Give an example of this phenomena. [Answers will vary. For example, a poster promoting a Star Wars movie may be collected by poster collectors as well as fans of the film and its actors. Another correct response would be a Beauty and the Beast lunch box that is of interest to lunch box collectors, fans of the movie, and collectors of Disney memorabilia.]

    Activity 2: Collecting for Profit?

    Students are told collectibles don't fare well when compared to other popular investment options. Return is usually limited to profit (if any) when an item is sold. Collectibles are considered an extremely risky investment. Another concern is liquidity - the collectors's ability to sell the collectible.

    Students read two more articles concerning collectibles.

    1. Whatever Happened to Cabbage Patch Dolls?
    The Cabbage Patch Doll – a fad of the 1980s – provides an example of the market price risk associated with collectibles. Read Source: About.com.
    2. How to Sell Collectibles
    This article provides information related to liquidity – specifically, how collectibles are sold, read.

    THINK ABOUT IT

     

  1. What was the price of Cabbage Patch Dolls in the 1980s? [The price of Cabbage Patch Dolls in the 1980s was about $30 in the stores, but twice that much when sold by speculators.]
     
  2. How much are most of the Cabbage Patch Dolls worth today? [Prices range from $5 to over $100, with most dolls selling for under $30.]
     
  3. What dolls are likely to bring the highest prices? [Certain rare varieties that are likely to bring the highest prices are 1) black and freckled dolls as well as 2) very early cloth dolls still in the box and never used.]
     
  4. What reason is given for the low prices on other Cabbage Patch Dolls? [Supply - the large quantity of dolls produced is the reason given for the low prices on other Cabbage Patch Dolls.]
     
  5. Have Cabbage Patch Dolls been a good investment so far? [With the rare exception, no Cabbage Patch Dolls have not been a good investment so far.]
     
  6. Could this change in the future? Explain your answer. [The oversupply may continue to keep prices down. On the other hand, the article notes that as children of the 1980s age they may show increased interest in the dolls and have the resources to buy them that development would increase demand]
     
  7. Where can you get information on the value of collectibles? [Online auction sites such as ebay.com and amazon.com, online collector forums such as Wizardworld.com (comics and toys) or classicpink.com (Barbie dolls), books on collectibles, dealers]
     
  8. What advice would you give someone who is interested in collecting for a profit? [Potential responses include: Collect things you are interested in because there is no guarantee you will profit, organize collectibles so you know what you have, use and store collectibles carefully to prevent damage, collect and trade something you know well, collect things that are of interest to more than one group of collectors to increase the chance you will be able to sell at a favorable price, and let others know you are a collector—you might get items for your collection as gifts.]

CONCLUSION

If you have not already done so, discuss student responses to the THINK ABOUT IT questions throughout the lesson. Then discuss:

  • Are there any recently marketed items that have had a buying frenzy similar to the Cabbage Patch Dolls? [Responses that might be given include Furbies, Tickle-Me-Elmo, and Pokemon cards. Nearly every Christmas, something new can be added to this list.]
  • Why do you think there was such a frenzy, in the case of each new item named? [Potential answers include that buyers liked the item, they wanted to have the same thing as everyone else, or they viewed the item as an investment on which they could make a profit.]
  • What do you predict will happen to the value of this item in the future? Use the principles of supply and demand to help explain your answer.
  • Do you think this item is a good investment? Why or why not?
  • Why are collectibles considered one of the riskiest forms of investment? [When an investor decides to sell there is no guarantee someone will be willing to buy at a price that is higher than its original price.]
  • Emphasize that for every rare toy that is sold for $1,000 and every antique that unexpectedly sold for many times what it cost new, there are piles and piles of flea market junk that aren’t worth much of anything.

ASSESSMENT ACTIVITY

Several opportunities for student evaluation are provided in this lesson.

1. Worksheet - Investing in the Future
In the Assessment Section of the student version, students are asked to identify five items they predict will increase in value in the future. For each item, they must give a reason in terms of supply and demand why they think the value will increase.

2. Responses to questions in the THINK ABOUT IT sections reflect student understanding throughout the lesson. These may be oral responses or written responses using Worksheet - Collecting for Fun . . . and Profit?

3. The extension activities offer several additional opportunities for assessment.

These rubrics are provided for assessing the worksheets and the student's contribution to the class discussion – adjust and weight the rubrics to fit your specific needs.

EXTENSION ACTIVITY

Have students:

  1. Research current prices on Cabbage Patch Dolls or another collectible at an online auction site. Use supply and demand to analyze possible explanations for the differences in bid prices.

    card
  2. Survey parents, grandparents, or an elderly acquaintance, asking questions a-c below. This activity can reinforce how difficult it is to predict the future value of collectibles. Suggested survey questions to ask and report on include:

    a. Do you own anything – for instance, a baseball card, coin, book, piece of furniture — that has increased significantly in value during your lifetime?
    b. Did you think when you got the item that it would become so valuable?
    c. Is there anything you have gotten rid of that you now wished you had kept?

  3. Read The Trading Game by Alfred Slote (Harper Trophy, 1990). Eleven-year-old Andy spends the summer playing baseball and trading baseball cards. He is willing to trade his $2,500 Mickey Mantle card for a card valued at just $.25 that features his grandfather, a former professional baseball player.
     
  4. Bring to class an example of something the students collect, or something that someone they know collects. If the item is valuable, encourage the students to bring a picture instead of the real item. After the students display their collectibles, discuss:

    a. How much do these collectibles cost today?
    b. Which of your collectibles are worth more today than when they were first acquired?
    c. Why do you think these items are worth more today than then? [Help students connect responses to market supply and demand. For example, a rare baseball card or coin reflects a scarcity of supply. In other cases, demand may drive the value. Some items may be fad collectibles that are in presently high demand.]