2. According to the text, mark these statements T (true) or F (false):
1. Microeconomics is the study of the behaviour of the economy as a whole while macroeconomics studies the effect of widespread unemployment on the whole nation.
2. Scarcity exists when there are not enough resources to meet human wants.
3. Factors of production can be divided into four broad categories: land, labour, service, and entrepreneurship.
4. Buried deposits of minerals, gas, and oil do not belong in the category of land.
5. Labour is a measure of the work done by human beings.
6. Offices, warehouses, stores, roads and airplanes are all forms of capital.
7. Businesses invest in real capital while workers invest in human capital.
8. Variable factors of production are sometimes called supplementary factors.
3. Give the best definition for the following economic terms.
Fixed factors of production; human capital; natural resources; scarcity; wants and needs; productive capacity; aggregate demand and aggregate supply; to meet human wants; real capital; capital goods.
4. Choose the variant that best explains the idea of the sentence below.
Economists view economic information through the most useful lens.
a) Economists study economic data.
b) Economists observe economic behaviour through microeconomics and macroeconomics.
c) Economists aim to study economic behaviour of agents, firms and individuals.
5. Give profound answers to the following questions:
1. What is microeconomics? What is macroeconomics?
2. What is the difference between needs and wants? Explain how a need may also be a want.
3. What is scarcity and why does it exist? What is a shortage?
4. How does scarcity affect consumers? Producers?
5. Why are people affected by scarcity regardless of their income?
6. What helps economists identify the factors of production?
7. What are the factors of production? What categories are they divided into?
8. What is the difference between fixed and variable factors?
9. Why are fixed factors supplementary in nature?
10. How do nations get wealthier even when available land diminishes over time? Consider the factors of production in your answer.
6. Practise reading §5 of the text. Translate it into Russian. Give a short summary of the passage.
C. How the text is organised
1. What do these words refer to in the text?
1) it (§ 1); 2) them (§ 5); 3) it (§ 6); 4) it (§ 7); 5) that (§ 13).
2. Find the paragraphs of the text dealing with the following concepts.
1) the difference between capital goods and consumer goods; 2) divisible and indivisible factors of production; 3) relationship between needs and wants; 4) the fourth factor of production; 5) the starting point of all production; 6) economic resources needed to produce goods and services; 7) the basic economic questions; 8) the study of the behaviour of individual players in an economy and the economy as a whole; 9) supplementary and prime factors of production.
V. Speaking
A. Giving your opinion
Give your opinion on the following issues.
1. Can you imagine a world without scarcity – a world where nobody had to work and people could have everything they wanted free of charge? Would you enjoy living in such a world? Why / why not? Have there ever been any attempts in the history of mankind to create a society without scarcity?
2. Think of a product you have recently purchased. How do you think the four factors of production were used to create this product?
B. Discussion
Work in pairs or groups. Discuss your answers to the following questions.
1. Is famine during a drought the result of scarcity or of a shortage?
2. What theory, macroeconomic or microeconomic, would apply to the following situations?
1) a government manages its imports and exports;
2) an individual chooses what to buy at a store.
C. Simulation
Divide into two or three groups for a simulation. It will focus on starting up a business. Appoint a moderator to evaluate the groups’ performance. Follow the procedure below.
1. With your group, decide on a business you want to start. This could be anything that has a realistic chance of succeeding: computer technician, T-shirt printer, clothes retailer, window cleaner, babysitter, or anything you think may fulfil a want.
2. On a chart like the one below, list the factors of production you will need to start and run your business.
Land 1. 2. 3. | Labour 1. 2. 3. |
Capital 1. 2. 3. | Entrepreneurship 1. 2. 3. |
3. Develop a business plan – a way that you can use the factors of production so efficiently that you will be able to make money.
4. Present your plan to the rest of the class. When all pairs or groups have made their presentations, hold a class vote to select the best plan.
VI. Writing
Write an essay on one of the following topics.
1. What strategies can governments use to encourage entrepreneurship among their citizens?
2. Think of a business you would like to start. What steps could you take to start it? Include which factors of production the business would require and which factors could increase profits.
Unit 3 Economic Systems. Market and Market Economy
I. Anticipating the Issue
Discuss your answers to the following questions.
1. What is an economic system? Why do different countries have different economic systems?
2. What is a market economy? Do you believe it to be the best type of economy? Does a “pure” market economy exist in any country?
II. Background Reading
Read the following text. Focus on the meaning of the boldfaced words. Determine whether what you anticipated coincides with the information of the text.
Types of Economies. Market and Market Economy
1. Every human being in the world would like to have a high standard of living. The dream of all the times and peoples is a society without scarcity, but unfortunately it exists only in myths. In real world scarcity is a fact of life. To address it, every society must make choices about three basic economic questions: output, input and distribution. These are the questions of “What to produce?”, “How?” and “For whom?”
2. Societies can make their economic choices by the social process of tradition, the political process of command, or a market process which responds to the free actions of individuals and businesses and works through a price mechanism. All three of the processes (social, political and market) are at work to some extent in every society. The kind of economic system which exists in a society depends mostly on the relative importance of these three choice-making processes. According to them economists define a traditional economy, a command economy and a market economy.
3. There have always been disputes of what type of economy is the most efficient. In our diverse and multi-cultural world with societies of different development levels it is impossible to introduce the same model. Let's take, for example, a primitive society. Their main goal is to survive, so families, clans or tribes make economic decisions based on the traditions, customs and beliefs handed down from generation to generation and make up the type of system called a traditional economy, as they don't know any other ways. On a more advanced stage, where a society is being advanced but is still on the way to its benefit, certain control in order to keep social order is necessary. So the government decides what goods and services will be produced and how they will be distributed. And this is just what a command economy is. This type of economy may be considered socially just, but without any competitiveness it leads to stagnation and as a result to social dissatisfaction. So finally, the most proper type by now has seemed to be a market economy.
4. We can hardly develop the idea of a market economy without understanding the concept of a market. What is “a market?” Suppose the government isn't getting involved in the production and distribution choices. And suppose there is no tradition directing the economic activities and choices in the society. Without governmental or social control over the economic choices we are all on our own. But somehow things must be produced and distributed. Otherwise we will all starve! The only way seems like this: if you want something, produce it for yourself!
5. But perhaps you can induce someone else to produce things for you. This great idea might easily be realized. Just offer a high price, and someone will produce and sell whatever you want. And that, in a nutshell, is a market process.
6. Ideally, the market process is only an extension of the way things work in nature. That's the way it is with all the animals and birds – and even plants! The productive ones get to consume and live. The unproductive ones die.
7. The market process modifies this natural “produce and consume” cycle in only one way: it gives each person the opportunity to produce one thing and then consume a different thing. The market process lets you specialize in producing something you are good at, and then trade to get the other things you want on the market.
8. The historical origin of markets is the physical marketplaces which would often develop into small communities, towns and cities. So is it a place? A thing? Neither, it is a concept. If you are growing tomatoes in your backyard “for sale”, you are producing “for the market”. If you mow lawns to earn money, you are producing a service “for the market”. When you spend your income, you are buying “from the market”.
9. In professional terms, the concept of a market may be defined as any structure that allows buyers and sellers to exchange any type of goods, services and information. The exchange of goods or services for money is a transaction. Market participants consist of all the buyers and sellers of a good who influence its price. This influence is a major study of economics and has given rise to several theories and models concerning the basic market forces of supply and demand, which are to be discussed in one of the following chapters of this book.
10. Returning to the concept of a market economy, now we may define it as an economy based on market principles and using market mechanisms for its functioning. In other words, consumers and producers drive the economy. The former are free to spend their money as they wish, to enter into business and or to send their labour to whomever they want. The latter will decide what goods and services they will offer. They make choices of how to use their limited resources to earn the most money possible.
III. Vocabulary Reinforcement
A. Vocabulary
Match the words with their definitions.
competition, n | the repeated process of an event from the beginning to the end |
income, n | a transfer of the ownership of personal property to the buyer |
sale, n | communication, personal interaction, activity or request such as orders, purchases, changes |
cycle, n | someone who buys goods and services |
transaction, n | advantage |
advance, n | a “game” which firms play to achieve a long-term advantage on the market |
customer, n | an exchange of a security (goods, bonds, currencies, or any valuable financial instrument) for "cash" |
exchange, v | give lacking money to a person or a company for a certain purpose |
subsidize, v | transferring smth to another person (or an agency) getting from him another thing in return |
benefit, n | rise in amount or rate; increase |
B. Word Families
Complete the chart.
Verb | Adjective | Noun |
transact | ||
competitive | ||
beneficial | ||
advance | ||
consume | ||
trade | ||
sell | ||
productive | ||
distributive |
C. Word Groups
1. Match the words having similar meanings.
benefit | transaction |
advance | manufacture |
business | advantage |
consume | cost |
produce | improve |
price | use |
2. Match the words having opposite meanings.
produce | spend |
starve | output |
supply | accept |
offer | demand |
input | survive |
earn | consume |
3. Form antonyms to the following words by means of prefixes or suffixes. Use a dictionary to make sure you are right.
Competitive, advantage, productive, use, beneficial, traditional, order,
satisfaction, limited, stable, efficient.
D. Word Fields
1. Which of the words and phrases below are associated with the following: 1) the concept of the market, 2) the concept of traditional economy?
Tradition, distribution, an advanced society, planning, stability, transaction, governmental control, innovation, supply, demand, fixed prices, buyer, seller, command economy, competitiveness, stagnation, inflation, benefit, transaction, competition, social disorder, a primitive society, inefficient type of economy.
E. Word Usage
plete: use an appropriate preposition where necessary.
from, to, between, on, at, for (2) |
1. If you buy bread at a local shop, you buy it … the market.
2. A transaction is a deal … a buyer and a seller.
3. We produce tractors … international markets.
4. Your goods are not competitive … the domestic market.
5. We produce practically everything … ourselves as we live in a remote village.
2. Linking: match the first half of each sentence with the most appropriate second half.
1. A market can be defined as … | a) governmental or social control. |
2. Primitive societies base their economies on... | b) the extension of how things work in the nature. |
3. We live on our own without ... | c) demand. |
4. A market process is... | d) customs, beliefs and traditions. |
5. The economy stagnates if there is no... | e) price mechanism. |
6. A market process is regulated through the … | f) buyers, sellers, producers, distributers. |
7. The participants of a market are... | g) the structure that allows buyers and sellers to transact. |
8. It is unreasonable to start producing anything without learning the... | h) competition. |
plete: use appropriate information from the text to finish the following sentences:
1. To answer the three basic economic questions is necessary to … .
2. Economic choices are made by the following processes: … .
3. The main distinctions of traditional economy are: … .
4. The main features of a command economy are the following: … .
5. The “produce and consume” cycle is considered to be the concept both of a market and the nature because…
4. Translate: give the English equivalents for the following word combinations:
Выйти на мировой рынок, распределение товаров, обойти конкурентов, конкурентоспособная продукция, обмен товарами и услугами, заключить сделку, декларировать доход, потребительские товары, снизить капиталовложения, ценовой механизм, продать по высокой цене, выйти на более высокий уровень производства.
5.Translate the following sentences into English.
Из выступления бизнес-консультанта перед руководством компании.
…Всем известно, что компания производит потребительские товары и услуги не только для внутреннего, но и международного рынка. И если вы хотите экспортировать свою продукцию, то необходимо принять правила международной торговли.
Помимо этого, если бы ваша продукция была конкурентоспособной, то вы бы давно уже вышли на мировой рынок. А выйти на более высокий уровень производства и обойти конкурентов возможно только за счет внедрения новых технологий.
Анализируя ситуацию на внутреннем рынке, не будем забывать, что только в обществе с традиционным укладом экономики обмен товарами и услугами может осуществляться без помощи денег. В условиях же рыночной экономики просто необходимо хорошо отрегулировать ценовой механизм. Продавать одежду невысокого качества по такой высокой цене было неразумно с вашей стороны. Спрос на вашу продукцию и так невысокий. Лучше бы вы получили прибыль путем снижения затрат.
IV. Reading
A. Reading for the Main Idea
Read the text to understand the main idea of it and try the following tasks.
1. Choose the statement that best summarises the main idea of the text.
1. A market economy is one of the three types of economy based on market principles.
2. A market economy is the best type of economy.
3. This is only a market economy which provides a decent life without scarcity.
2. Answer the following questions.
1. According to the text, what are three basic economic questions?
2. What are the most common types of economy?
3. What is a market? What is a market economy?
B. Reading for Details
Read the text again to understand details and try the following tasks.
1. Understanding Expressions: give the best explanation for each of these phrases used in the text.
A society without scarcity; to make economic choices; social dissatisfaction; an advanced stage of development; to keep social order; a society is on the way to its benefit; a “produce and consume” cycle; to exchange goods and services; to spend one`s income; to drive the economy.
2. According to the text, mark these statements T (true) or F (false):
1. To address scarcity, every society must introduce market principles.
2. A market process works through the price mechanism.
3. If the government is not involved in the production and distribution choices, you will have to produce everything for yourself.
4. If you offer a high price, someone will produce and sell whatever you want.
5. In a modern society only if you produce much, will you live well.
6. The market process modifies the natural “produce and consume” cycle in the following way: each human being must produce things they need.
7. If you spend your income buying something at a local shop, it means you buy something from the market.
8. A market can be viewed as a place, a concept and a structure.
3. Explain the meaning of the following words and word combinations.
The social process of tradition, the political process of command, a market process, a transaction, a competitor, to produce a service, an economic system, a market economy.
4. Choose the variants that best explain the ideas of the sentences below.
1. All the three processes (social, political and market) are at work to some extent in every society.
a) The elements of all the three processes can be found in any society.
b) All the three processes exist until the government interferes in them.
2. If you are growing tomatoes in your backyard “for sale”, you are producing “for the market”.
a) If you are growing tomatoes for sale you are involved in a market process.
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