Ex 2. Fill in the gaps with the words and expressions from the text

1. Any economic system is trying to find most …… and …… way of …… for the production of goods and services.

2. One of the main laws of the market is the ……

3. Supply is the …… between the price of a good and the quantity …… for sale from suppliers.

4. In free markets, prices direct …… of firms that make the most …… use of them.

5. The price …… also guides the decisions of producers concerning the …… of their ……

6. In economics, opportunity cost, or ……, is the cost of something in terms of an …….

7. Opportunity cost is not the sum of the ……, but rather of …… of them.

Ex 3. Find in the text the English equivalents for the following:

сырье; трудовые ресурсы; использование ресурсов; справедливое распределение доходов; свободное предпринимательство; бесчисленный; действующий от чьего-либо имени; по цене за единицу продукции; предложение превышает спрос; управлять процессом распределения; выгоды, которые могли быть получены; скрытые издержки; оцененный в денежном эквиваленте; иметь ценность для кого-либо.

Ex 4. Match each term with the appropriate explanation.

market, labour resources, supply, demand, cost

1. The amount of a commodity that the public are ready to buy at a certain price.

2. The amount of an economic good that will be offered for a sale in the market at a certain price and time.

3. The mechanism which allows individuals and organizations to trade with each other.

4. The physical and mental talents that people can make available for production.

5. The real effort and sacrifice needed to produce goods and services.

Ex 5. Answer the questions and do the assignments.

1. How can economic resources be classified?

2. What is the most efficient economic system?

3. How does the market operate?

4. What is the price determined by?

5. What role does the price mechanism play in free-market economy?

6. What does the allocation of resources reflect?

7. What does the law of supply and demand say?

8. What stands for the notion “opportunity costs”? Is it necessary assessed in monetary terms? Give examples.

Ex 6. Find in the text the words and phrases that refer to the following notions and comment on them:

1) scarcity of resources

2) the law of supply and demand

3) the market mechanism

4) an opportunity forgone

5) hidden costs (losses)

Ex 7. Comment on the statements.

1. The higher the price at which the good can be sold, the more of it producers will supply.

2. Opportunity cost need not be assessed in monetary terms.

3. Most opportunities are difficult to compare.

Text B

There are a number of ways in which a government can organize its economy and the type of system chosen is critical in shaping environment in which businesses operate.

An economic system is quite simply the way in which a country uses its available resources (land, workers, natural resources, machinery etc.) to satisfy the demands of its inhabitants for goods and services. The more goods and services that can be produced from these limited resources, the higher the standard of living enjoyed by the country’s citizens.

Planned Economies

Planned economies are sometimes called “command economies” because the state commands the use of resources (such as labour and factories) that are used to produce goods and services as it owns factories, land and natural resources. Planned economies are economies with a large amount of central planning and direction, when the government takes all the decisions, and decides on production and consumption. Planning of this kind is obviously very difficult, very complicated to do, and the result is that there is no society, which is completely a command economy. The actual system employed varies from state to state, but command or planned economies have a number of common features.

Firstly, the state decides precisely what the nation is to produce. It usually plans five years ahead. It is the intention of the planners that there should be enough goods and services for all.

Secondly, industries are asked to comply with these plans and each industry and factory is set a production target to meet. If each factory or farm meets its target, then the state will meet its targets as set out in the five-year plans. You could think of the factory and farm targets to be objectives which, if met, allow the nation’s overall aim to be reached.

A planned economy is simple to understand but not simple to operate. It does, however, have a number of advantages:

1. Everyone in society receives enough goods and services to enjoy a basic standard of living.

2. Nations do not waste resources for duplication of production.

3. The state can use its control of the economy to divert resources to wherever it wants. As a result, it can ensure that everyone receives a good education, proper health care or that transport is available.

Several disadvantages also exist. It is these disadvantages that have led to many nations abandoning planned economies over recent years:

1. There is no incentive for individuals to work hard in planned economies.

2. Any profits that are made are paid to the government.

3. Citizens cannot start their own businesses and so new ideas rarely come forward.

4. As a result, industries in planned economies can be very inefficient.

A major problem faced by command economies is that of deciding what to produce. Command economies tend to be slow when responding to changes in people’s tastes and fashions. Planners are likely to underproduce some items as they cannot predict changes in demand. Equally, some products, which consumers regard as obsolete and unattractive, may be overproduced. Planners are afraid to produce goods and services unless they are sure substantial amounts will be purchased. This leads to delays and queues for some products.

Market Economies

The best examples of this type of economy are to be found in small South-East Asian states like Hong Kong and Singapore, though even they are not pure examples of market economies. Even they contain some businesses owned and run by the state.

In a true market economy the government plays no role in the management of the economy, the government does not intervene in it. The system is based on private enterprise with private ownership of the means of production and private supplies of capital, which can be defined as surplus income available for investment in new business activities. Workers are paid wages by employers according to how skilled they are and how many firms wish to employ them. They spend their wages on the products and services they need. Consumers are willing to spend more on products and services which are favored. Firms producing these goods will make more profits and this will persuade more firms to produce these particular goods rather than less favored ones.

Thus, we can see that in a market economy it is consumers who decide what is to be produced. Consumers will be willing to pay high prices for products they particularly desire. Firms, which are privately owned, see the opportunity of profits and produce the new fashionable and favorable products.

Advantages:

1. The economy adjusts automatically to meet changing demands.

2. No planners have to be employed, which allows more resources to be available for production.

3. Firms tend to be highly competitive in such an environment.

4. New advanced products and low prices are good ways to increase sales and profits. Since all firms are privately owned they try to make the largest possible.

5. In a free market individuals are free to pursue their interests. They can become millionaires, for example. Suppose you invent a new kind of a car. You want to make money out of it in your own interests. But when you have that car produced, you are in fact moving the production possibility frontier outwards. You actually make the society better-off by creating new jobs and opportunities, even though you become a millionaire in the process, and you do it without any government help or intervention.

Problems:

1. Some goods would be underpurchased if the government did not provide free or subsidizes supplies. Examples of this type of goods and service are health and education.

2. There are other goods and services, such as defense and policing, that are impossible to supply individually in response to consumer spending. Once defense or a police force is supplied to a country the everyone in this country benefits.

A cornerstone of the market system is that production alters swiftly to meet changing demands. These swift changes can, however, have serious consequences. Imagine a firm, which switches from labour-intensive production to one where new technology is employed in the factory. The resulting unemployment could lead to social as well as economic problems.

In a market economy there might be minimal control on working conditions and safety standards concerning products and services. It is necessary to have large-scale government intervention to pass laws to protect consumers and workers.

Some firms produce goods and then advertise heavily to gain sufficient sales. Besides wasting resources on advertising, firms may also duplicate one another’s services. Rival firms, providing rail services, for example, could mean that two or more systems of rail are laid.

Finally, firms have to have confidence in future sales if they are to produce new goods and services. At certain times they tend to lack confidence and cut back on production and the development of new ideas. This decision, when taken by many firms, can lead to a recession. A recession means less spending, fewer jobs and a decline in the prosperity of the nation.

Vocabulary list

1. a directive – директива

2. centralplanninganddirection – центральноепланированиеируководство

3. tocomplywith – подчиняться, соответствовать
incompliancewith – в соответствии с

4. a production target to meet – производственнаязадача, которуюнадовыполнить
v. to meet (the target, the challenge, the expectations)

5. to overproduce – перепроизводить
n. overproduction

6. to intervene – вмешиваться
n. intervention

7. private ownership – частнаясобственность

8. public property– общественнаясобственность

9. syn. common ownership

10. personal property – личнаясобственность

11. state-ownedproperty – государственнаясобственность

Notes

1. an overall aim – общаяцель

2. to enjoy a basic standard of living – иметьсреднийуровеньжизни

3. to duplicate production – дублировать производство

4. to divert - отвлекать

5. obsolete – устарелый, вышедший из употребления

6. delaysandqueues – перебои с товарами и очереди

7. private supplies of capital – частныйкапитал

8. surplus income available for investment in new business activities – дополнительныйдоход (излишекдохода), которыйможновложить (инвестировать) вновоедело (бизнес)

9. to pursue one’s own interests – преследовать свои интересы

10. to move the production possibility frontier outwards – продвинутьвпередпределпроизводственныхвозможностей

11. toprovidefreeorsubsidizedsupplies – обеспечить бесплатное или субсидированное предоставление (товаров, услуг)

12. a cornerstone – краеугольный камень

13. to alter swiftly – быстро меняться

Ex 1. Suggest the Russian equivalents:

each factory is set a production target to meet; to divert resources to wherever it wants; new ideas rarely come forward; tend to be slow when responding to changes; new advanced products; products which are favored; they try to make the largest profits possible; provide free or subsidized supplies; produce goods and then advertise heavily; a firm which switches from labour-intensive production to a new one; a decline in the prosperity of the nation.