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Britannica LaunchPacks | Costs and Benefits
Costs and Benefits
For Grades 3-5
This Pack contains:
4 ARTICLES
2 IMAGES
1 VIDEO
© 2020 Encyclopædia Britannica, Inc. 1 of 17
Britannica LaunchPacks | Costs and Benefits costs and benefits All choices in life involve benefits and costs. A benefit is what is gained from a decision. A cost is what is given up or lost after a decision is made. The benefits and costs can be amounts of money or they can be things like how you will feel about a decision. People identify the benefits and costs behind a decision so that they can choose to do what is best for their needs. Young people can learn about costs and benefits by opening a lemonade stand. Encyclopædia Britannica, Inc. © 2020 Encyclopædia Britannica, Inc. 2 of 17
Britannica LaunchPacks | Costs and Benefits Costs and Benefits of Personal Decisions In Aesop's fable of “The Hare and the Tortoise” a speedy hare teases a tortoise about his slow pace. … Judie Anderson/Encyclopædia Britannica, Inc. © 2020 Encyclopædia Britannica, Inc. 3 of 17
Britannica LaunchPacks | Costs and Benefits Examples of costs and benefits can be found in the decisions that well-known story characters make. In the story “The Hare and the Tortoise,” a speedy hare teases a tortoise about his slow pace. The tortoise challenges the hare to a race. The hare is so sure that he will win that he takes a nap. When he wakes up, the tortoise has already won. The moral is “slow but steady wins the race.” The hare makes a decision to take a nap. The benefit of his decision is that he gets to rest. The cost of his decision is that he loses the race. Does the hare consider the cost of taking a nap before he decides to nap? © 2020 Encyclopædia Britannica, Inc. 4 of 17
Britannica LaunchPacks | Costs and Benefits The story of “The Three Little Pigs” is a well-known fable. A wolf destroys the houses of two pigs,… Judie Anderson/Encyclopædia Britannica, Inc. In the story “The Three Little Pigs,” the house built by the hardest-working pig is the only one that survives the wolf’s attacks. The cost of building the strongest house is that the hardest-working pig does not have as much free time as the other two pigs. The benefit of having the strongest house is that it keeps the pigs safe. © 2020 Encyclopædia Britannica, Inc. 5 of 17
Britannica LaunchPacks | Costs and Benefits People must make choices about money as well as about their actions. Most people cannot buy everything they want. They do not have enough money to do that. Instead they have to decide how they will spend their money. For example, if a young girl wants a new bike she can decide to save her money until she has enough to buy the bike. That means that she will not be able to buy other things with that money. The benefit of her plan is that she will have a new bike. The cost is that she will not have the other things she could have used that money to buy. Costs and Benefits of Business Decisions A lemonade stand is an example of a business. There are a number of costs and benefits involved in running a lemonade stand. The costs include the money, time, and people needed to make the lemonade and sell it. Then there are the benefits of selling the lemonade. The money gained from selling the lemonade is a benefit to the stand owner. The stand owner makes a profit when the amount of money gained is greater than the amount of money spent. Not all profits are worth the cost. If it takes one week to make a profit of one cent, then the cost in time may be too great. If a profit of one dollar has to be split among five people, then the cost of labor may be too great. The stand owner must consider what profits are worth the trouble of running a stand before he or she decides at what price to sell each serving of lemonade. External Costs and Benefits of a Business A business may bring unexpected costs to people outside of the business. These are called external costs. For example, a lemonade stand that is located on a public lawn near a sidewalk may attract many customers. Over time, customer traffic may cause the grass around the lemonade stand to wear away. The city that cares for the public lawn may need to purchase sod or grass seed and pay workers to take care of the damaged lawn. This is an unexpected cost to the city and its taxpayers. A business may also bring unexpected benefits to people outside of the business. For example, a lemonade stand may cause neighbors to meet new people and make new friends. The new friendships among neighbors may help people solve neighborhood problems together and build a stronger community. Costs and Benefits for Society Governments have to weigh the benefits and costs of projects intended to help society. Such projects might include constructing a road, building a new hospital, or tearing down an unused building. © 2020 Encyclopædia Britannica, Inc. 6 of 17
Britannica LaunchPacks | Costs and Benefits Weighing Costs and Benefits A ratio shows a relationship. It can be written as a fraction. If the benefits to costs are 1 to 2,… Encyclopædia Britannica, Inc. Weighing the benefits and costs of some projects involves math skills. A planner must divide the expected benefits by the expected costs. The result is called the benefit-cost ratio. In general, a project that has a high benefit-cost ratio will be ranked as more important to do than projects with lower benefit-cost ratios. However, complex projects often involve unexpected costs and benefits. This makes it difficult to estimate the benefit-cost ratio correctly. Citation (MLA style): "Costs and benefits." Britannica LaunchPacks: Costs and Benefits, Encyclopædia Britannica, 4 Mar. 2022. packs- ngl.eb.com. Accessed 6 Apr. 2022. While every effort has been made to follow citation style rules, there may be some discrepancies. Please refer to the appropriate style manual or other sources if you have any questions. economics Economics is the study of the economy, or the part of a society that creates wealth. Wealth is not just money. Wealth comes from the production of goods and services, which people buy with money. People who study economics, called economists, look at how people create wealth, how they use it, and how different people get different amounts of it. © 2020 Encyclopædia Britannica, Inc. 7 of 17
Britannica LaunchPacks | Costs and Benefits Goods and services are an important part of a society's economics. A barber provides a service in… © Jose Luis Pelaez Inc—Blend Images/age fotostock Parts of an Economy A society creates wealth by producing goods and services. Goods include such objects as apples, cars, and roads. Services are things that people do for others—for example, gymnastics lessons, banking, and dental care. People who buy these goods and services are called consumers. The process of creating the goods and services is called production. There are three major factors in production. The first is land. Land can mean a large farm or a tiny workshop. Land also includes natural resources like oil and minerals. The second factor of production is labor, or people who work for pay. Workers may be rewarded with wages, or—if they own the business—with profits. (Profits are the money that a business keeps after paying costs.) The third factor of production is capital. This includes the tools, factories, and offices that are used to make the goods and services. Money is not counted as a factor of production. Rather, it is the means by which companies pay for land, labor, and capital. Companies get this money from consumers who buy their goods or services. And most consumers get their money by working for companies. All the companies producing a particular kind of product or service are grouped together in what is known as an industry. Industries that make things are called manufacturing industries. Industries that sell services are called service industries. Producers of similar goods or services compete with each other for consumers. The producers and consumers in an industry together form a market. Branches of Economics There are several different branches of economics. The study of individual consumers and businesses is called microeconomics. The study of how a whole country’s economy works is called macroeconomics. Microeconomics Economists who study microeconomics look at how consumers spend their money. They try to explain why consumers buy one product rather than another. They also look at why companies choose to produce one good or service rather than another. © 2020 Encyclopædia Britannica, Inc. 8 of 17
Britannica LaunchPacks | Costs and Benefits
The amount consumers want to buy is called demand. The amount companies produce is called supply. Price
strongly affects supply and demand. If a manufacturer charges a high price for a product, usually it will sell few
products. If it reduces the price, usually it will sell more products. A manufacturer aims to find the price that will
result in the highest total profit.
Macroeconomics
Economists who study macroeconomics look at the value of all the goods and services that a country produces.
In this way, they measure a whole country’s wealth. They also study economic growth, or how a nation’s wealth
becomes larger.
Governments are interested in macroeconomics, too. A government plays an important role in its country’s
economy. When a government decides which goods and services should be produced and sold, the economy is
said to be planned. Countries with socialist or Communist governments usually have planned economies. In
these countries, the government owns the means of production—capital and land.
By contrast, when a government lets companies and consumers decide what will be produced, the economy is
called a free market. Countries with capitalist governments have free-market economies. But even capitalist
governments affect the economy. They do this by raising or lowering taxes and changing the amount banks can
charge for loans. These actions cause people to have more or less money to spend on goods and services.
Citation (MLA style):
"Economics." Britannica LaunchPacks: Costs and Benefits, Encyclopædia Britannica, 4 Mar. 2022. packs-ngl.eb.
com. Accessed 6 Apr. 2022.
While every effort has been made to follow citation style rules, there may be some discrepancies. Please refer to
the appropriate style manual or other sources if you have any questions.
fractions
Britannica Note:
Weighing the benefits and costs of some projects involves math skills. The comparison
between benefits and costs may be written as a fraction.
In mathematics, the parts of a whole can be described in terms of fractions. The word fraction comes from a
word in the Latin language that means “to break.” The same Latin word is the source of the English word
fracture.
© 2020 Encyclopædia Britannica, Inc. 9 of 17
Britannica LaunchPacks | Costs and Benefits
A fraction describes a part of a whole. For example, one slice of a pizza is a fraction of the whole …
© luchshen/Fotolia
Fractions are written as one number over another. For example, one half is written as 1/2. The…
Encyclopædia Britannica, Inc.
Types of Fractions
Common Fractions
Fractions are parts of a whole. They can be written several different ways.
Encyclopædia Britannica, Inc.
1 3
A fraction is called a common fraction if it is written as one number over another: / or / . The number above
3 4
the line is called the numerator. It describes how many parts out of the whole are being discussed. The number
below the line is called the denominator. It describes the total number of parts that make up the whole. To read
3
a common fraction, begin with the numerator. Read the numerator as part of the denominator. So, for example,
/ is read as three fourths. Any number can be a numerator. Any number except zero can be a denominator.
4
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The three simplest types of common fractions are proper, improper, and mixed. In a proper fraction, the
1 2 5
numerator is smaller than the denominator. The fractions / , / , and / are proper fractions. The value of a
2 3 8
proper fraction is always less than 1.
8 11
In an improper fraction, the numerator is equal to or larger than the denominator. The fractions / and / are
8 4
improper fractions. The value of an improper fraction is greater than or equal to 1.
A mixed fraction, also called a mixed number, is a whole number and a fraction together. The fraction is written
1 1
to the right of the whole number. The numbers 1 / and 33 / are examples of mixed fractions.
2 3
Decimals
A fraction can also be written as a decimal number. A common fraction can be written as a decimal by dividing
1
the numerator by the denominator. The decimal value of / , for example, is 0.25 (1 ÷ 4). In some cases the
4
1 2
result may repeat without end. For example, / is 0.333… with the number 3 repeating forever. Similarly, / is
3 3
0.666…. To make it easier to deal with such numbers, they can sometimes be rounded off.
Comparing Fractions
Different fractions can sometimes describe the same amount. They are called equivalent fractions.
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2 1
Different fractions can sometimes describe the same actual amount. For instance / equals / . These fractions
6 3
are therefore equivalent. Fractions that are equivalent have equal cross products. A cross product is found by
2 1
multiplying the numerator of one fraction by the denominator of the other. For example, / is equivalent to /
6 3
because 2 × 3 and 6 × 1 both have the same product: 6.
If two fractions are equivalent, they have the same lowest terms. One way to find the lowest terms of a fraction
is to divide the numerator and denominator by some common factor. A fraction is expressed in lowest terms
when no number other than 1 can be divided into both the numerator and the denominator evenly. In the
2
example above, / can be reduced because both the numerator (2) and the denominator (6) can be divided by
6
1 1
2. The result is / . No number can be divided into both 1 and 3 evenly, so / has been reduced to its lowest
3 3
terms. To reduce a fraction it is necessary to divide each part by the same number in order to keep the fractions
equivalent.
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If two fractions are not equivalent it can be hard to determine which represents the larger amount at first glance.
There are several ways to compare two fractions. If the fractions have the same denominator, compare the
numerators. The fraction with the larger numerator has the greater value.
If the fractions have different denominators, one way to find which is larger is to make the denominators the
same. This can be done by multiplying the denominators to get a common denominator. Then the numerators
2 4
must also be multiplied by the same numbers. For example, to compare / and / , the denominators can be
3 5
multiplied to get a new common denominator of 15. The numerator of the first fraction must then be multiplied
10 12
by 5, and the numerator of the second fraction must be multiplied by 3. The new fractions are then / and /
15
. The second fraction is therefore the larger of the two.
15
The denominators must be the same in order to add and subtract fractions as well. They do not need to be the
same in order to multiply or divide fractions.
Yet another way to compare fractions is to rewrite them as decimal numbers. Convert each fraction to a decimal.
Then compare the decimal numbers.
Citation (MLA style):
"Fractions." Britannica LaunchPacks: Costs and Benefits, Encyclopædia Britannica, 4 Mar. 2022. packs-ngl.eb.
com. Accessed 6 Apr. 2022.
While every effort has been made to follow citation style rules, there may be some discrepancies. Please refer to
the appropriate style manual or other sources if you have any questions.
tax
Britannica Note:
Governments must weight the benefits and costs of projects meant to help society.
They pay for projects with tax money.
Governments can get money in various ways. For example, they can charge fees for such things as driver’s
licenses. But almost every government gets money simply by demanding a certain amount from its citizens. This
money is called a tax.
© 2020 Encyclopædia Britannica, Inc. 12 of 17Britannica LaunchPacks | Costs and Benefits Purposes of Taxes Some taxes are used to build and to take care of such public areas as parks and roads. © JMB/Fotolia Governments collect taxes for several purposes. The most important purpose is to get money to pay for government services. These services include protection by an army or police, road building, and public education. Some governments use taxes to change people’s behavior. For example, they may put high taxes on tobacco to get people to stop smoking. Finally, governments may raise or lower taxes to help their country’s overall economy. Types of Taxes There are many different types of taxes. Among them are income taxes, property taxes, and sales taxes. A tax on the money that people make is called a personal income tax. Companies in the United States withhold, or hold back, a part of almost every worker’s pay. They send this money to the U.S. government. After the end of the year, people send in income tax returns, which are forms that tell the government how much money they made. Some people then have to pay still more money, while others get back some of their money in a refund. Sometimes governments make rich people pay higher taxes than poor people. Companies also pay taxes on the money they make. This tax is called corporate income tax. Taxes on the value of land, buildings, and some large possessions (cars, for example) are called property taxes. In the United States, state and local governments collect property taxes. When people buy goods and services, they often pay a sales tax on top of the price. Sales tax is usually a certain percentage of the selling price. In the United States, each state has its own sales taxes. However, many countries have national sales taxes. European countries use a form of sales tax called a value-added tax (VAT). History In ancient times, most people gave goods or services to a ruler instead of taxes. A farmer might give part of his crop. An ancient Egyptian might help to build a pyramid. However, the rulers of ancient Rome collected taxes in the form of money. © 2020 Encyclopædia Britannica, Inc. 13 of 17
Britannica LaunchPacks | Costs and Benefits
In the Boston Tea Party of 1773, some American colonists destroyed tea to protest a British tax.
© North Wind Picture Archives
Taxes grew in importance over the years, although people were often unhappy when governments demanded
them. The colonists who started the American Revolution in 1775 were angry because they had to pay taxes to
Great Britain without having votes in Parliament (the British legislature). An unfair tax system was also one of
the causes of the French Revolution, which began in 1789.
In the 1900s governments in the United States and other countries looked for ways to collect money without
raising taxes. Many began using lotteries (gambling games) to raise extra money.
Citation (MLA style):
"Tax." Britannica LaunchPacks: Costs and Benefits, Encyclopædia Britannica, 4 Mar. 2022. packs-ngl.eb.com.
Accessed 6 Apr. 2022.
While every effort has been made to follow citation style rules, there may be some discrepancies. Please refer to
the appropriate style manual or other sources if you have any questions.
Gabby Douglas
Britannica Note:
Athletes spend a lot of time training and staying in shape. They may have to give up
spending time with friends, but they may also win prizes and and feel good about doing
their best.
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Gabby Douglas competes at the 2012 Olympic Games in London, England.
Jae C. Hong/AP
Citation (MLA style):
Gabby Douglas. Image. Britannica LaunchPacks: Costs and Benefits, Encyclopædia Britannica, 4 Mar. 2022.
packs-ngl.eb.com. Accessed 6 Apr. 2022.
While every effort has been made to follow citation style rules, there may be some discrepancies. Please refer to
the appropriate style manual or other sources if you have any questions.
“The Three Little Pigs”
Britannica Note:
In the story of "The Three Little Pigs" two of the pigs do not spend much time building
their house because they want to spend their time playing. In the end, the pig who
worked the hardest on his house benefited from not spending his time playing.
© 2020 Encyclopædia Britannica, Inc. 15 of 17Britannica LaunchPacks | Costs and Benefits
The story of “The Three Little Pigs” is a well-known fable. A wolf destroys the houses of two pigs, but he cannot
destroy a third house. The third pig worked hard to make a sturdy house.
Judie Anderson/Encyclopædia Britannica, Inc.
Citation (MLA style):
“The Three Little Pigs”. Image. Britannica LaunchPacks: Costs and Benefits, Encyclopædia Britannica, 4 Mar.
2022. packs-ngl.eb.com. Accessed 6 Apr. 2022.
While every effort has been made to follow citation style rules, there may be some discrepancies. Please refer to
the appropriate style manual or other sources if you have any questions.
Golden Gate Bridge
Britannica Note:
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Britannica Note:
Officials must think about costs and benefits when they plan large projects like building
bridges.
Video Transcript
The narrow strait that connects San Francisco Bay with the Pacific Ocean is called the Golden Gate. In the 1930s,
the U.S. government built the Golden Gate Bridge over the strait. The bridge connects San Francisco in the south
with Marin County in the north. It saves drivers long detours around the Bay. It took workers four years to build
the bridge. They had to blast rock away to set the foundations of the towers deep into the waters of the bay. The
bridge's famous color is known as "International Orange." The paint on the bridge helps keep the steel from
being worn away by the salt in the air from the ocean waters.
The Golden Gate Bridge has been a landmark in San Francisco since 1937.
Encyclopædia Britannica, Inc.
Citation (MLA style):
Golden Gate Bridge. Video. Britannica LaunchPacks: Costs and Benefits, Encyclopædia Britannica, 4 Mar. 2022.
packs-ngl.eb.com. Accessed 6 Apr. 2022.
While every effort has been made to follow citation style rules, there may be some discrepancies. Please refer to
the appropriate style manual or other sources if you have any questions.
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