Revision Vocabulary Units 1 to 4(24)
Complete the crossword. Some letters have been given to help you.
ACROSS
1 This kind of economy is both planned and free market.
3 The first kind of economy that existed.
4The point where demand and supply meet.
5 This kind of economics simply describes the economy.
6 A measure of how much demand influences price.
10 This kind of economics makes recommendations.
11 This kind of economics locks at the details of the economy.
DOWN
2 This kind of economics looks at the whole picture. 7 In this economy, the government decides everything. 8 This falls as prices rise.
9 In this kind of economy, price is set by supply and demand.
12 Something that can be measured, like money spent or babies born.
B1 Find six pairs of opposites.
| ■ benefits | ■ consumer | ■drawbacks |
| ■ drought | ■ flood | ■ manufacturer |
| ■ private sector | ■ save | ■ shortage |
| ■ spend | ■ state sector | ■ surplus |
B2 Now write five example sentences using as many words as possible from this exercise.
C Complete the text with one word for each gap. The first letter has been given.
The traditional economy is the oldest form of economy. It has existed for thousands of years, although today it has almost disappeared. People in a traditional economy do not own (l)p........................They do not earn a
(2) s.......................and thus neither do they pay
(3) t........................In fact, there is no money.
They live on the raw (4) m.......................that the
forest provides them. They don't grow food or
have any organised (5) a.......................with farms
and (6) с.......................growing in fields. Instead,
they (7) g.......................wild fruit and vegetables
or (8) h.......................wild animals. They eat most
of the food they find, and may (9) h.......................
some food for the winter, but they do not sell it. It's
a difficult life. There are often (10) s.......................
of food when there is not enough to eat. When this
happens, the (11) t.......................must move on to
another part of the
25 CNH
Before you read _
With your partner discuss how you make choices about what you arc going to buy. Think about: budget the price
satisfaction with the goods
A Vocabulary
Choose the correct word or phrase.
1 If you are m a hurry, it can be difficult to make a maximum / rational decision.
2 The amount of money you have to spend is your budget constraint / deciding factor.
3 The maximum / rational speed limit on this road is 120 kilometers per hour.
4 Quality is often the deciding factor/ budget when people choose something to buy.
5 Some people how much they spend every week.
6 Green is a combination / an alternative of yellow and blue.
7 When you buy something from a shop, you make a purchase / budget constraint.
8 When you something is true, you guess that it is true.
9 The use or satisfaction you get from something you buy is called utility / purchase.
10 Olive oil is a healthy alternative / combination to butter.
Reading 1
Consumer choices
Its a hot summer day. You've been out walking all morning and you're getting thirsty. It's also about lunchtime, and you're feeling pretty hungry, too. What luck! Here's a kiosk selling snacks. You've got six euros to spend. You can buy bars of chocolate or bottles of water ... or a combination of both. Now you've got another problem: consumer choice.
It you're a neoclassical economist, however, there's nothing to worry about. Neoclassical economists believe that consumers make rational choices. Before a consumer buys something, they think about the cost and the amount of satisfaction the purchase will give them They then compare the price and satisfaction of possible alternative purchases. In the end. they buy what gives them maximum satisfaction at the lowest cost.
So. what will you buy from the kiosk? An important deciding factor is the amount you have to spend. Economists call this your budget constraint Your total budget is six euros. Bottles of water are two euros each, chocolate bars are
(26)
oneeuro each. You could buy three bottles of water, or you could buy six chocolate bars. Or you could buy any combination that adds up to your total budget We can put all of this information on a budget line, like the one in figure 1. The budget line shows what combinations ofgoods are possible. Economists call these combinations of goods bundles But which is the best bundle? This depends on something called utility. Utility is the economists' word tor the satisfaction we get from a purchase. Each good has its own utility value for the consumer The utility of a bundle depends on two things: the utility of the goods in the bundle, and how much of each good is in the bundle. Figure 2 on page 25 shows the bundles of chocolate and water that give the same level of utility. This kind of chart is called an indifference curve. Any point on the curve has the same utility value as any other point. For example, two bottles of water and two chocolate bars has the same Utility as one bottle of water and four chocolate bars.
In figure 2. we assume that chocolate and water havethe same utility value for the consumer. But it water had a higher utility value than chocolate, the curve would be a different shape. Many things can affect the utility of a good. These include the cost of the good, the consumer's income and something called marginal utility.
To understand marginal utility, just think about chocolate bars. Every time you consume a bar of chocolate, the satisfaction you get from the next bar will be less. In other words, you get less utility every time you eat another bar. This decrease in utility is called the marginal utility. The marginal utility is the one of an additional item, for example:
| bars of | Marginal | Total |
| chocolate | Utility | Utility |
| - | ||
| 9 | ||
Out very simply, budget, price and level of utility will all affect your choice at the kiosk. The neoclassical theory of consumer choice says that it is possible to calculate demand for products if we know this kind of information. However, not all economists agree!
В Comprehension
Now read the text again and answer the questions.
1 According to neoclassical economists, what do consumers want?
A The most satisfaction at the lowest cost.
B The cheapest product.
СTo spend all their money.
2 What is budget constraint? AAn amount of money you want to save. B combination of money and satisfaction. C The total amount of money you have to spend.
3 What is utility?
A How much of a product you get.
B The satisfaction you get from a product or service.
C The cost оf a product.
4 What explains marginal utility? AThe morasatisfaction something gives you. the more you want it.
B The more satisfaction something gives you, the less you want it.
C The more you have of something, the less
satisfaction it gives you.
5 What do neoclassical economists believe about consumers?
A They make logical decisions.
B They Alwaysknew what they want before they go shopping. СThey don't know what they want.
Before you listen_
Not all economists agree with the theory of consumer choice described in the text. Here is a list of reasons why. Complete each sentence with a word from the box.
С Listening
■ advertising ■ constraints
■ information ■ mistakes ■ rational
1 Consumers are not always........................
2 Consumers often don't have enough
3 Choices are affected by........................
4 Consumers make........................
5 Budget.......................may not guide consumers'
choice.