Lessons: 1 | 2 | 3LESSON THREE: Should We Let Them In?: A Cost-Benefit Analysis of Allowing a New Chain Store Into Town
Lesson Objectives2. Relevant National Standards
- List the large chain stores in their area and discuss their opinions of these stores.
- Watch video segments and discuss Wal-Mart's strategies and its opponents' viewpoints.
- Define and discuss the terms "costs" and "benefits."
- Discuss different types of costs and benefits.
- Discuss the advantages of conducting a cost-benefit analysis to help make a decision.
- Use information from the video and Web sites to conduct an informal cost-benefit analysis related to a potential new chain store.
- Discuss their charts.
- Pretend they've conducted the cost-benefit analysis at the request of a town's mayor, and write recommendations explaining whether they think a large chain store should be allowed to be located in the town.
- VCR and TV
- Computer with Internet connection
- One copy of the Student Handout for each student or pair of students
4-5 class periods
Civics Standards3. Related Resources
- Understands ideas about civic life, politics and government
- Understands the role of diversity in American life and the importance of shared values, political beliefs and civic beliefs in an increasingly diverse American society
- Understands the character of American political and social conflict and factors that tend to prevent or lower its intensity
- Understands issues concerning the disparities between ideals and reality in American political and social life
- Understands the formation and implementation of public policy
- Understands issues regarding the proper scope and limits of rights and the relationships among personal, political and economic rights
- Understands how participation in civic and political life can help citizens attain individual and public goals
Curriculum Standards for Social Studies
- Understands that scarcity of productive resources requires choices that generate opportunity costs
- Understands the roles government plays in the United States economy
(listed at the National Council for the Social Studies Web site: http://www.ncss.org/standards/2.0.html)
- Individuals, Groups, and Institutions: Social studies programs should include experiences that provide for the study of interactions among individuals, groups and institutions.
- Power, Authority and Governance: Social studies programs should include experiences that provide for the study of how people create and change structures of power, authority and governance.
- Production, Distribution and Consumption: Social studies programs should include experiences that provide for the study of how people organize for the production, distribution and consumption of goods and services.
- Civil Ideals and Practices: Social studies programs should include experiences that provide for the study of the ideals, principles and practices of citizenship in a democratic republic.
Video segments:4. Ask students to define the words "cost" and "benefit." Under what circumstances would they compare the costs and benefits of something? They might mention that they consider costs versus benefits when they're shopping for something expensive or when they're deciding whether to sign up for a club or athletic team.
Timecodes Summary 9:52-11:50 summary of the different points of view, including that of the Pink Flamingos 17:26-18:23 description of Wal-Mart's "saturation strategy"
Questions to answer:
- What is Wal-Mart's "saturation strategy"?
- What is meant by "one-stop shopping," and what role does Wal-Mart play in this type of shopping? Can this type of shopping be done downtown?
- Why are the Pink Flamingos concerned with Wal-Mart's strategies and opposed to an Ashland Wal-Mart?
Note: The definitions above are not strict definitions used by economists but lend themselves well to the issues raised in the video. If you're teaching advanced economics students, inform them that different economists have different ways to define these types of costs and benefits. For example, environmental costs and benefits are often considered a subset of social costs and benefits.6. If you're teaching high school economics, inform students that social, environmental, and some economic costs are forms of externalities. An externality is "A cost or benefit that's not included in the market price of a good because it's not included in the supply price or the demand price" (from the Economic GLOSSarama: http://www.amosWeb.com/cgi-bin/gls_dsp.pl?term=externality). In other words, an externality is a cost or benefit that's a side effect of an action or investment, affecting people or groups of people who have not directly contributed to the investment. In the dog park example below, neighborhood residents would experience costs and benefits from the park even if they did not invest directly in the financing or construction of the park.
Note: Be sure to make students aware that they will most likely not be able to directly compare the numbers they find for the economic costs and benefits. For example, the numbers stated above for Iowa refer to different measurements (sales losses versus state tax contributions) as well as different time periods. It is not likely that students will be able to gather monetary figures that they can directly compare. Instead, when they're drawing their final conclusions about the costs versus benefits (see step 12), they should analyze the significance of the individual figures and try to determine which ones carry the most weight based on the evidence they've seen in the video and Web sites. If they were economists who were seriously studying this problem, they'd have to compare costs and benefits in the same measurements and units. However, finding this type of information would require more advanced research and calculations than is practical for this lesson.
Video Segments:11. Discuss students' cost-benefit charts as a class. Did they tend to come up with the same costs and benefits for each category, or were there notable differences between students or pairs of students? Ask more advanced students (upper high school) to think about the ways in which the cost-benefit analyses might look different for different towns. What factors do they think might affect whether or not a town benefits from a new chain store? Might some towns suffer greater costs or incur greater benefits than others? Why or why not?
Timecodes Summary 9:52-11:50 summary of the different points of view 13:03-17:18 Al Norman's viewpoint (the consultant from Sprawl-Busters) 19:20-23:04 the Mayor and Councilman research the effects of Wal-Mart on a neighboring town 32:34-34:13 Wal-Mart's director of community affairs explains his company's position 34:13-35:19 the professor denies making the claims that appear in the Wal-Mart ad 35:19-36:40 a discussion of the possible economic benefits Wal-Mart will provide 36:40-37:23 a discussion of Wal-Mart's employment situation 40:50-45:11 town council meeting, with a description of possible economic costs and benefits