Friday, February 15, 2008

Supply & Demand - Cause & Effect - Understanding Interdependence

One of the concepts that can easily be integrated in both economics and personal finance is interdependence. The fact that people depend on each other and that interaction in the marketplace affects others is fundamental to understanding both one's personal financial situation as well as the larger global economy.

Earlier this week, a very short piece on Public Radio's Marketplace caught my attention. The title, Wheat is the New Corn may not mean much to urban dwellers, but it should. It alludes to the fact that increased demand for corn for conversion to ethanol is having a spillover effect on other grains -- particularly wheat -- as they are used as substitutes elsewhere in the food chain.

Then today's issue of The Wall Street Journal brought this article about how grain demand is boosting the economy of America's heartland. Combine it with this article from USA Today about how global demand is lifting grain prices, and this piece (link no longer operative) from the Times-Transcript in Canada and I think you may have what you need for a lesson plan on interdependence and how changes in one market impact others. (You might have to assure some students that what is happening to Canadian food prices is also happening here. It may even be more pronounced here given the purchasing power of the Canadian dollar vs. the U.S. dollar on world markets.)

What do you think? Are there other articles you prefer or would add to this mix?

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