Grades 3-5, 6-8
State coordinators have opened up registration for local high school competitions that lead into CEE’s National Personal Finance Challenge and National Economics Challenge! Teams of three-to-four students with one teacher/coach compete in each subject for the national titles and cash prizes! Teachers, register today!
Click here for the National Economics Challenge
Click here for the National Personal Finance Challenge
Students explore budget constraints by solving a contextual problem involving the purchase of goods on a fixed income. Adjustments to the quantities of two goods are used to explore the meaning of points on a graph and relationships between quantities and disposable income. Students scale and label axes as they create graphs of relationships between two goods they want to purchase with a fixed income. Students create a representation of a budget constraint and predict the effects of changes in income and the prices of goods on the representation of the budget constraint.
Review the key points of the lesson using the following questions:
Budgets are an important part of personal finance and meeting financial goals. While a budget is a spending and saving plan, based on estimated income and expenses for an individual or an organization over a specific time period, budget constraints are limits. Goods are tangible objects and services are activities that people perform for us. Both satisfy economic wants. The prices of goods and services and the amount of personal income-(i.e., payments earned by households for selling or renting their productive resources which may include salaries, wages, interest and dividends)-limit spending and serve as constraints to budgets. This lesson considers a problem situation in which only two goods can be purchased with a given income. This simplified approach should enable students to extend the decision-making process to more complex (e.g., real-world) challenges virtually everyone faces. The budget line is represented using tables, graphs, and linear functions. Equations use constants and variables to represent relationships between quantities. Variables are symbols used to represent numbers. The impact of shifts in income and prices of goods can be analyzed by exploring transformations of the budget line that represent relationships between these quantities.
Grades 3-5, 6-8