The development of economic reasoning in young children is examined from the theoretical perspective of Piaget's work on cognitive development. To determine a possible correlation between grade level and the type of reasoning children use to approach economic problems, 70 urban children, preschool through grade 3, answered questions which measured understanding of basic economic concepts--scarcity, choice, opportunity costs, monetary value, price and exchange, and advertising. Responses were categorized as indicating either unreflective reasoning (characterized by linear, literal responses) or emerging reasoning (characterized by flexible responses and an awareness of reciprocal relationships). Findings indicated that the type of child's reasoning was statistically different by grade level for all concepts except exchange and scarcity. Moreover, the pattern of responses in all cases but opportunity costs showed an upward progression from simple to abstract reasoning by grade level. Thus, the hypothesis that economic understanding develops in a way reflective of Piaget's theory is supported. Results also indicate that economic understanding varies, depending on children's experience. This suggests that children's economic reasoning could be enhanced through class activities and field trips. The report concludes with a table illustrating study findings. (LP)