EXERCISE 1. Translate the following words and word combinations. А. Pioneer, doctrine, in Marshall’s world, lasting contribution, in the short run, in the long run

А. Pioneer, doctrine, in Marshall’s world, lasting contribution, in the short run, in the long run, the opposite is true, production schedule, in that way, equilibrium, curve, joy stick, to allocate resources, to circumvent the law, the point of intersection of the supply and demand curves, shifts in demand or supply.

B. Учение, идеи восходят к, в краткосрочной перспективе, в долгосрочной перспективе, вплоть до середины 1940-х годов, равновесие, кривая, дефицит, затоваривание [излишек, избыток товаров], нормирование (продуктов) [продажа по карточкам], черный рынок, изменяется прямо пропорционально, обратно пропорционально, точка пересечения двух кривых, колебание [изменение] спроса и предложения.

EXERCISE 2. Translate the following sentences.

А. 1. These ideas have their origins in the writings of the great English economist Alfred Marshall. 2.His doctrines became the standard for the teaching of that subject until well into the 1940's.. 3.He spent most of his adult life as a professor of literature at Oxford University. 4.Einstein is best known for his theory of relativity. 5. Despite the passage of more than 100 years since the publication of his treatise, his ideas are still meaningful. 6. Comparing the two forces to the blades of a scissors, he argued that neither could func­tion without the other. 7. If demand decreases, the opposite will occur. 8.This will enable us to sell our goods at a lower price. 9. Similarly, an increase in supply will result in a decrease in price, and vice versa.

Б. 1.Кейнс называл Маршалла "величайшим экономистом XIX века". 2. Несмотря на то, что со дня его смерти прошло уже более 50 лет, его идеи до сих пор остаются актуальными. 3.В данном случае верно обратное. 4.Одним из наиболее значительных вкладов Маршалла в экономику стала теория формирования цены. 5.Он сравнил рыночные силы с лезвиями ножниц. 6.При снижении спроса произойдет обратное. 7.Если бы компания не внесла изменения в методы производства, ей пришлось бы уйти с автомобильного рынка. 8.Если цены устанавливаются правительством, это может привести к дефициту или к затовариванию. 9.Рыночную цену можно изобразить графически.

EXERCISE 3. Answer the following questions (all the answers must be).

· What roles do prices play in a market economy?

· What affects the demand for goods and services in a market economy?

· What affects the supply of a particular good or service in a market economy?

· How do demand and supply interact to determine prices?

· How do shifts in demand and supply affect prices?

EXERCISE 4. Prepare short reports on the following topics. The reports are to be translated in the class.

· Economic ideas of Alfred Marshall.

· The price system and the What, How And Who questions in a market economy.

4. THE CONSUMER IN OUR ECONOMY

Reading For Enrichment

Engel’s Law

Consumer spending accounts for the lion's share of the gross national product. In a later chapter you will learn that there is a close relationship between the GNP and the state of the economy. In other words, when the GNP is increasing, often economic conditions are improving. When the GNP is decreasing or remaining about the same, things are not going as well for the economy.

How much people spend in a given year depends primarily upon how much they earn. Back in the 19th century, a Prus­sian statistician by the name of Ernst Engel showed that there was a direct relationship between the kinds of goods and services bought and the income of the purchaser. According to Engel's Law, as his conclusions are now called, as income increases the percentage spent for necessities decreases, while the percentage spent for luxuries increases.

Other factors affecting how much consumers spend include such things as age and taste. For example, if you won a $100 cash prize wouldn't you want to spend it differently than your parents? What consumers think the future is likely to bring can also affect their spending.

Although the economic outlook does not have much effect on consumer spending for inexpensive items (such as chewing gum), it does have a substantial effect on the sale of expensive ones. Suppose, for example, you heard just before leaving for a vacation that the company your parent worked for was about to close. Under these circumstances, the trip would probably be postponed. If, on the other hand, you learned that instead of being thrown out of work, all the employees were about to get a raise, you and your family would soon be enjoying mountain views, sunny beaches, or exciting roller coasters.

Who Can Borrow?

Lenders expect their money to be repaid along with the interest and other fees they charge for the use of their money. For that reason lenders will investigate the credit history of all loan appli­cants to determine that they are credit worthy. A credit history is the record of how individuals pay their bills and repay loans.

The Three C's. In judging an individual's credit worthiness, lenders often look at the "three C's" of credit:character, capacity andcapital.

· Character refers to your personal qualities — your honesty and willingness to repay debts. If your record shows you paid your bills on time in the past, lenders will assume you will continue to do so in the future.

· Capacity is a measure of your ability to repay debts. Creditors will want to know about your sources of income, how much you earn and your other financial obligations.

· Capital refers to the things that people own—money in the bank, or property. In general, the more one owns, the easier it will be to repay one's debts. Lenders may also ask that some capital be offered ascollateral, some­thing pledged as security for the loan.

How To Establish Credit. Young people recently out of school frequently have difficulty borrowing or buying on credit because they have no credit history. To establish your "credit" you must prove that you are willing and able to handle your financial obligations.

You might, for example, open a charge account in a depart­ment store or apply for a gasoline credit card. Prompt payment of the bills on these kinds of accounts will help establish a positive credit rating. If you have a savings account, you may already be eligible to apply for a passbook loan against your balance in that account. Here again, prompt repayment will add to your credit rating. If necessary, it is possible to borrow before you have established a credit rating if you can find a co-signer. A co-signer is a person with an acceptable credit rating who guarantees to repay the loan if you are unable to do so. The point is that a good credit rating is a valuable finan­cial tool. While it may take some time to acquire and main­tain, it will increase your financial options. So, go for it.

What Kinds Of Credit Are Available?

Credit for consumers falls into two categories: loan credit and sales credit. Loan credit enables you to borrow money which can then be used to finance a purchase. Sales credit enables you to buy goods and services now and pay for them later. Here are some examples of each.

Home mortgages. Home mortgages are long-term loans (repayable in 10 to 30 years) used to finance the purchase of a home or apartment. Banks, savings and loans and other thrift institutions are the most likely sources of mortgage money. Home mortgages are repaid with interest, in equal monthly installments, over the life of the loan.

Auto and other consumer loans. Loans for financing the purchase of specific items like automobiles, or other goods and services, are avail­able from a variety of thrift institutions and lending agencies. Auto and other consumer loans are usually repaid in equal monthly installments over the life of the loan.

Charge accounts. Charge accounts enable consumers to make purchases up to a specified limit, without paying cash. There is usually no charge for the use of a charge account if the balance is paid in full at the end of the month. However, interest is likely to be charged on balances that are not paid at the end of one month.

Credit cards. A credit card is a kind of charge account that entitles its holders to shop at many different places. Master Charge, Visa, American Express and Diner's Club are four of the most widely used credit cards. Credit card purchases are billed monthly. Like charge accounts, there is usually no charge for credit card purchases that are paid in full when billed. However, there is an additional charge levied on unpaid balances.

Learning To Use Advertising

Advertising is one of our nation's largest industries. In 1986, for example, American business spent over $100 billion to advertise its products. Since consumers are the principal targets of these sales campaigns, we ought to know something about the services advertisers perform, as well as some of the tech­niques they use.

The Benefits of Advertising. Advertising benefits consumers and the economy in a number of ways:

· It provides us with information about prices, recent improvements in certain goods and services, and the avail­ability of new ones.

· Advertising often results in lower prices. As you will learn later, large-scale production can reduce costs. By creating mass markets, advertising enables producers to reduce the costs of their products and pass those savings on to the consuming public.

· Advertising stimulates competition, and competition benefits us all. Advertising by one firm puts pressure on others within the industry to do at least as well to attract the consumer's dollar.

· Advertising pays most of the cost of magazines and newspapers, and all of the cost of commercial radio and TV.

· Advertising helps the economy as a whole by stimulating consumer demand. As will be seen in a later chapter, consumer spending has a direct effect on the health of the economy. Advertising helps to keep that spending at healthy levels.

The Price We Pay for Advertising. Not everyone agrees that advertising benefits the economy. Critics list the following points is its disadvantages:

· The information contained in advertising does not inform and often misleads the consumer.

· Because it costs money to advertise, this cost adds to the price consumers pay.

· Consumers are tempted to spend money for products they do not really need.

· Radio and TV are not really free because the cost of adver­tising on them is also passed on to the consumer.

Advertising Strategies. Three strategies that have been especially popular with advertisers can be classified as slogans, rational appeals, and emotional appeals.

Slogans. Advertisers often use slogans that sound great but mean little or nothing.

"See Charley Prinz. for Your Printing Needs. Remember, Charley Is the Prince of Printers." Charley is not fooling anybody; people know that he is not really a prince. Yet advertisers seem to feel that such slogans, when repeated often enough, do increase sales.

Rational Appeals. Rational appeals rely upon logic or reason to convince the consumer to buy a product.

"Our Cookies Contain 25% Fewer Calories Than the Next Leading Brand." This is an example of an advertisement that appeals to reason. Ads for health foods, pain relievers and home remedies tend to use this technique.

Emotional Appeals. Emotional appeals rely upon the use of psychology to get the advertiser's message across. The following is a sampling of such strategies:

· Testimonials. These are the advertisements in which famous people claim they use and enjoy a particular product. Ads for sports equipment frequently rely on this strategy.

· The Bandwagon. The bandwagon appeal implies that everybody is using a particular product, and that if you don't, you will be left out. The term derives from the practice, during nineteenth-century circus or political parades, of jumping on or following behind the wagon carrying the band. Soft drink and automobile ads use this appeal.

· Popularity. Some advertisements suggest that simply by using the advertised product you will be popular or find romance. Toothpaste ads showing moments of romance between handsome young men and women are typical of these kinds of campaigns.

Every day you as a consumer are the object of the marketing efforts of American and foreign companies that want your busi­ness. The advertising on television and radio and in the newspaper flyers that come to your house are just some of the ways that sales promotions reach you. Can you think of other ways? Most of these marketing strategies represent honest efforts to convince you to buy a product or service. Nevertheless, you are respon­sible for evaluating advertising directed at you, separating fact from emotion, and deciding whether or not to buy the product.

The History of Economic Thought

Ralph Nader