Microeconomics and macroeconomics

МИНИСТЕРСТВО ОБРАЗОВАНИЯ РЕСПУБЛИКИ БЕЛАРУСЬ

УО «Белорусский государственный экономический университет»

С.К. Родион, А.И. Савинова

ENGLISH: FIRST INSIGHTS INTO ECONOMICS

АНГЛИЙСКИЙ ЯЗЫК:

ИЗУЧАЕМ ОСНОВЫ ЭКОНОМИКИ

Электронное учебно-методическое издание

по дисциплине «Иностранный язык (английский)»

для студентов заочной формы обучения

Минск 2012

Рецензент: старший преподаватель кафедры теории и практики английской речи БГЭУ Левченко Л.П.

Рекомендовано кафедрой теории и практики английской речи БГЭУ.

Родион, С.К., Савинова, А.И.

Английский язык: Изучаем основы экономики = English: First Insights into Economics: учебно-методическое пособие (ЭУМИ) / С.К. Родион, А.И. Савинова. – Минск: БГЭУ, 2012. – 95 с. (4 усл. печ. л.)

Учебно-методическое пособие содержит учебный материал по развитию навыков профессионально ориентированного чтения, устной речи и письма на английском языке в рамках тематики, связанной с основными положениями экономической теории.

Предназначено для студентов экономических специальностей заочной формы обучения.

CONTENTS

Предисловие ……………………………………………………………… 4 Unit1. Economics as a Science …………………………………………… 5 Unit 2. Microeconomics and Macroeconomics …………………………… 10 Unit 3. Types of Economic Systems ……………………………………… 15 Unit 4. Scarcity and Choice ……………………………………………… 20 Unit 5. Demand and Supply ……………………………………………… 24 Unit 6. Opportunity Cost ………………………………………….............. 29 Unit 7. Money …………………………………………………………. 34 Unit 8. Markets and Prices ………………………………………………… 39 Unit 9. Factors of Production ……………………………………………… 44 Unit 10. Forms of Business ……………………………………………… 49 Unit 11. Government and Business ……………………………………… 54 Unit 12. Corporate Culture ………………………………………………… 59 Unit 13. Employment ……………………………………………………… 65 Unit 14. Globalization …………………………………………………… 71 Unit 15. The First Modern Economists …………………………………… 76 Supplementary Reading ……………………………………………............. 81

ПРЕДИСЛОВИЕ

Данное учебно-методическое пособие предназначено для студентов экономических специальностей заочной формы обучения и может быть использовано как для работы в аудитории, так и для самостоятельной внеаудиторной работы.

Целью пособия является развитие навыков чтения текстов экономической тематики, развитие и совершенствование навыков устного высказывания, умений выражать собственное мнение, а также формирование навыков реферирования на английском и русском языках.

Все 15 разделов учебного пособия имеют одинаковую структуру и включают следующие блоки: Lead-in (введение), Key Vocabulary (базовая лексика), Pre-reading Activities (предтекстовые упражнения), Reading (тексты для чтения), Comprehension Check (упражнения на понимание текста), Vocabulary Focus (лексические упражнения), Talking Points (коммуникативные упражнения), Summary Points (упражнения на реферирование).

При подборе тематики текстов и определении их объёма авторы учитывали специфику обучения студентов-заочников в вузе экономического профиля, а также актуальность активизации самостоятельной работы студентов в связи с увеличением времени, отводимого на самостоятельную работу Текстовый материал, пред- и послетекстовые упражнения направлены на развитие как навыков чтения, так и речевых навыков студентов-заочников экономических специальностей путём обучения пониманию и осмыслению прочитанного текста, активизации словарного запаса и речевых структур в процессе работы над текстом.

Задания в блоке Talking Points носят преимущественно творческий характер и направлены на совершенствование коммуникативных навыков, а также умения формулировать собственное мнение на английском языке. Особое внимание уделяется умению выражать свою точку зрения через согласие/несогласие, а также аргументированно доказывать или опровергать предложенное утверждение.

Целью заданий блока Summary Points является формирование одной из важнейших компетенций студента университета – умения выполнять реферирование текстов.

Раздел Supplementary Reading включает в себя набор текстов, дающих дополнительную информацию к текстам основных разделов, которые могут быть использованы для развития как навыков чтения, так и речевых навыков, а также могут служить материалом для обучения студентов реферированию.

Unit 1

ECONOMICS AS A SCIENCE

Lead- in

Discuss the following issues in small groups and then report your findings.

1. Is economics a science? Prove it.

2. Should people of different professions know the basics of economics? What makes you think so?

3. Why have you decided to enter the Economic University and study economics on the professional level?

Key Vocabulary

Study the following list of vocabulary.

1. originate v	происходить; возникать, появляться
2. household management	ведение домашнего хозяйства
3. outline v	изложить; обрисовать, наметить в общих чертах
4. deal with smth	иметь дело с чем-л.
5. production n	производство
6. distribution n	распределение
7. consumption n	потребление
8. consume v	потреблять
9. allocate v	размещать, распределять
10. scarcity n	недостаток, нехватка, дефицит
11.scarce adj	недостаточный, дефицитный
12. goods and services	товары и услуги
13. resources n	ресурсы; средства
14. meet needs	удовлетворять потребности
15. available adj	доступный, имеющийся в наличии
16. equipment n	оборудование; оснащение
17. improve well-being	улучшать благосостояние
18. gain satisfaction	получать удовлетворение
19. consider v	рассматривать, обсуждать, обдумывать
20. aggregate outcome	совокупный результат
21. enterprise n	предприятие
22. make a decision	принимать решение
23. make a choice	сделать выбор
24. make efforts	прилагать усилия
25. machinery n	машинное оборудование

Pre-reading Activities

1. Study the different meanings of the following words.

1. economy n – экономика, народное хозяйство, экономия

2. economics n – экономика, экономическая теория, экономическая наука

3. microeconomics n – микроэкономика (анализирует взаимоотношения между отдельными хозяйственными единицами)

4. macroeconomics n – макроэкономика (анализирует экономику в целом, в том числе денежную массу, безработицу)

5. economist n – экономист

6. economic adj – экономический, относящийся к сфере экономики

7. economical adj – экономный, экономичный, бережливый

8. economize v – экономить

2. Complete the following sentences with the appropriate word from exercise 1.

1. If you can ………. your time, you will manage to do a lot of things.

2. This country is in the period of ………. and financial crisis.

3. My car is more ………. than yours and it uses less petrol.

4. ………. is my favourite subject at the University.

5. Manufacturing has always been a significant part of the British ………. .

6. My father graduated from the ………. University and he works as an ………. .

Reading

Read the text and find out what economics is.

The term «economics» originated from the Greek word «oikonomika» which means household management. It became a separate field of study with the publication of Adam Smith’s «The Inquiry into the Nature and Causes of the Wealth of Nations» in 1776 in Scotland. Adam Smith is considered to be the founder of economics because he was the first economist to outline the activity of a free market economy.

By definition, economics is the science that deals with production, distribution and consumption of goods and services. It is the study of how human beings allocate scarce resources to satisfy their unlimited wants. Different societies face with the problem of scarcity, that is why it is important to study the way resources are distributed to meet the needs of the greatest number of people.

But what do resources include? They include the time and talent people have available, land, buildings, equipment and knowledge. By the way, people’s knowledge helps them to combine all the available resources to create useful products and services. Economists emphasize that people use resources to improve their well-being and gain satisfaction from products and services they choose to consume.

There are two major subdivisions of economics: microeconomics and macroeconomics. Microeconomics is the study of how the system affects an enterprise and it considers how individuals make decisions. Macroeconomics is the study of the entire system of economics and it considers aggregate outcomes.

In general, economics is involved in all spheres of people’s activity. It examines how we make choices among alternatives and gives us a logical way of understanding how to make the best use of natural resources, machinery and people’s work efforts.

Comprehension Check

1. Agree or disagree with these statements about the text.

1. John Maynard Keynes is considered to be the founder of economics.

2. Economics is the science that deals with production, distribution and consumption of goods and services.

3. People use resources to gain profit.

4. There are four major subdivisions of economics.

5. Economics is involved almost in all spheres of people’s activity.

2. Choose the answer (A, B or C) which you think fits best according to the text.

1. According to the first paragraph, what is the origin of the term «economics»?

A. it originated from the Latin word «oikonomika» which means household management.

B. it originated from the Greek word «oikonomika» which means household management.

C. it originated from the Greek word «oikonomika» which means effective use of resources.

2. What do resources include?

A. the time and talent people have available; land, buildings, equipment and knowledge.

B. the time people have available; computers and knowledge.

C. the talent people have available; land, equipment and money.

3. What are the major subdivisions of economics?

A. economy and scarcity

B. resources and profit

C. microeconomics and macroeconomics

3. Complete the sentences using the information from the text.

1. Economics became a separate field of study ………

2. People’s knowledge helps them ………

3. Macroeconomics is the study ………

4. Microeconomics is the study ………

5. Economics examines how we …..

Vocabulary Focus

Use the words from the list of Useful Vocabulary to complete the sentences.

1. The development of national ….. is based on certain laws and principles.

a. economize

b. economy

c. economics

2. The increase in the ….. of goods is always limited by the budget constraints.

a. consumption

b. efficiency

c. reliability

3. Economists ….. forces of demand and supply to determine the prices of goods and services.

a. ignore

b. consider

c. improve

4. One of the urgent tasks of the Government is to ….. people’s well-being.

a. improve

b. manage

c. analyze

5. The management of the company is expected to ….. effectively and quickly.

a. fire the staff

b. make decisions

c. improve well-being

2. Give the synonyms to the following words and word combinations. Mind the list of Useful Vocabulary.

manufacturing

using

company

to satisfy wants

to try

3. Give the English equivalents to the following expressions.

производство товаров и услуг

распределять доступные ресурсы

улучшать благосостояние

получать удовлетворение

совокупный результат

сферы деятельности

выбирать из альтернатив

сталкиваться с проблемой

размещать недостающие ресурсы

проблема нехватки, дефицита

Talking Points

1.Explain in your own words how you understand the problem of scarcity.

2.Comment on the quotation

“Economics is the study of people in the ordinary business of life” (Alfred Marshall)

Prove that the subject of economics is interesting to you. Use the following expressions in your answers.

- I really enjoy economics because ………

- I’m quite interested in economics because ………

- I would like to know more about economics because ………

- I think economics is interesting for studying because ………

Summary Points

1. Study the guidelines to summarizing.

Реферирование (англ. summary) – это сжатое изложение основной информации первоисточника на основе её смысловой переработки. Как правило, реферат состоит из трёх основных частей: введение, основная часть, заключение и соответствует следующим требованиям:

1. Реферат представляет собой краткое изложение основного содержания текста, статьи и т.д. и составляет примерно 1/3 оригинала.

2. Предпочтительно при реферировании излагать информацию своими собственными словами.

3. Вводная часть реферата включает в себя заглавие оригинала, его главную тему и идею.

2. Look through the text from Reading and define its topic and main idea, using the following phrases.

The basic topic is ……… The subject (subject matter) of the text is	Основная тема ………
The main idea is that ………	Основная идея заключается в том, что ………
The text (passage) discusses (considers, focuses on, addresses) the problem of ………	В тексте (отрывке) обсуждается (рассматривается, сосредоточивается внимание на…) проблема(е) ………
The text (passage) deals with ………	В тексте (отрывке) говорится о ………

UNIT 2

MICROECONOMICS AND MACROECONOMICS

Lead-in

1. Do you know what the difference is between macroeconomics and microeconomics?

2. Are the following statements about microeconomics or macroeconomics?

· … deals with topics of inflation and unemployment.

· … studies how people make decisions to allocate limited resources.

· In … the focus is placed on factors that affect the decisions made by firms and individuals.

· ... includes a national, regional, or global economy.

Key Vocabulary

Study the following vocabulary and do the tasks that follow.

1. allocation n	распределение
2. distribute v	распределять
3. divide v	делиться, подразделять
4. behaviour n	поведение
5. affect v	влиять
6. make a profit	получать прибыль
7. study v	изучать
8. entire adj	весь, взятый в целом
9. unemployment n	безработица
10. income n	доход
11. rate of growth	темп роста
12. gross domestic product (GDP)	валовый внутренний продукт (ВВП)
13. price level	ценовой уровень
14. cause v	быть причиной, вызывать
15. trend n	направление, тенденция
16. interdependent adj	взаимозависимый

Pre-reading Activities

1. Use a dictionary and underline the odd word (лишнее слово) in each line. Explain your choice and learn the vocabulary.

a) distribution – allocation – consumption

b) examine – deal with – study

c) effect – affect – influence

d) allocate – connect – distribute

2. Complete the crossword puzzle using your active vocabulary.

1. the state of not having a job

2. complete or full

3. money earned by work or investments

4. to make something happen

5. distribution

6. the amount of money expected, required, or given in payment for something

7. a general direction in which something is developing or changing

8. to inspect (someone or something) thoroughly in order to determine their nature or condition

9. to have an influence on someone or something, or to cause them to change

Reading

Read the text and check whether you answered the Lead-in questions correctly.

Economics is the science that deals with production, allocation, and use of goods and services. It is important to study how resources can best be distributed to meet the needs of the greatest number of people. As we are more connected globally to one another, the study of economics becomes an extremely important issue.

Economics is a broad subject that can be divided into two areas: microeconomics and macroeconomics.

Microeconomics, the study of the economic behaviour of small economic groups such as firms and families, is one of the largest subfields in economics. Microeconomics deals with economic decisions made at a low, or micro, level. It is the analysis of the decisions made by individuals and groups, the factors that affect those decisions, and how those decisions affect others.

Microeconomics asks questions: “How do individuals make consumption decisions?”, “How do firms make profits and price their goods and services?”, etc.

“Macro” means “large”. Macroeconomics is the field of economics that studies the behaviour of the economy as a whole, not just specific companies, but entire industries and economies. This area of economics examines economy-wide phenomena such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels. Macroeconomics asks questions like: “What causes inflation?”, “What effect does the national debt have on economic growth?”, etc.

So, macroeconomics is focused on the movement and trends in the economy as a whole, while in microeconomics the focus is placed on factors that affect the decisions made by firms and individuals. These two studies of economics are different, but they are interdependent and complement each other. The factors that are studied by macro- and microeconomics often influence each other.

Comprehension

1. Match these sentence halves describing economics and its two areas.

1. Microeconomics is	a) the economic behavior of individual consumers, firms, and industries.
2. Economics is	b) one of the two main fields of the social science of economics.
3. Microeconomics is the study of	c) the influence of all economic factors on each other.
4. Macroeconomics seeks to understand	d) a social science concerned with the production, distribution, exchange, and consumption of goods and services.

2. Decide whether the following statements are True or False.

1. Resources should be distributed in the best way to meet the needs of people.

2. The study of macroeconomics is an extremely important issue.

3. Microeconomics is one of the largest subfields in economics.

4. Microeconomics is the analysis of the decisions made by individuals and groups.

5. Macroeconomics deals with economic decisions made at a low level.

6. The two studies of economics complement each other.

3. Answer the questions.

1. What is economics?

2. Why is it important to study economics?

3. Is microeconomics the study of the economic behaviour of small economic groups?

4. What kind of analysis is microeconomics?

5. What does macroeconomics examine?

6. What questions are asked by the two areas of economics?

7. Do factors that are studied by macro- and microeconomics influence each other? In what way?

Vocabulary Focus

1. Complete the gaps choosing the right alternative.

1. The current … rate is six percent.

a) behaviour

b) unemployment

c) allocation

2. Cold weather … the crops.

a) affected

b) studied

c) caused

3. I haven't had much … from my business this year.

a) income

b) rate of growth

c) price level

4. Digital technology is the latest … in television.

a) income

b) trend

c) behavior

5. An accountant (бухгалтер) has been employed to … the company's books.

a) cause

b) distribute

c) examine

6. We need to find the best way to … our resources.

a) divide

b) allocate

c) influence

2. Fill in the gaps with prepositions, where necessary.

1. The bank deals directly … the private sector.

2. I need time to study … this contract before signing it.

3. No one knows how this decision will influence … the outcome of the election.

4. Consumer magazines can be divided … a number of categories.

5. What may cause … unemployment?

3. Look through the text once again and find the words and phrases which mean the following.

-to satisfy the needs

- a very important subject or problem

- to influence decisions

- the industry as a whole

-to study economy-wide phenomena

Talking Points

1. Imagine that your friend has got an opportunity to take one course in economics, so he has a choice between macroeconomics and microeconomics. Which course would be more interesting and useful? What would your advice be? Why?

Use the following expressions:

I think, I would… (Я думаю, я бы …)

He should perhaps …(Возможно, ему следует …)

In his position, I would … (На его месте я бы …)

2. Prepare to talk about the differences and similarities between macroeconomics and microeconomics. Complete the statements and share your opinions.

a) Microeconomics and macroeconomics are the fundamental tools to be learnt, in order to understand … .

b) While the two studies are different, they are interdependent, and together they … .

c) The main differences between … are … .

Summary Points

1. Skim the text once more and identify its main idea. Use the necessary vocabulary from Unit 1 Summary Points.

2. Make up a plan of the text about micro- and macroeconomics. Discuss it in pairs, then report to the whole group.

This text can be divided into … parts.	Текст можно разделить на … частей.
The text consists of … parts.	Текст состоит из … частей.
The first part is about … .	Первая часть текста – о …
The second (third, fourth) part describes (analyzes) … .	Вторая (третья, четвертая) часть описывает (анализирует) …

UNIT 3

TYPES OF ECONOMIC SYSTEMS

Lead-in

Answer the following questions before you read the text below. If you can’t answer them now, try to answer them after reading the text.

1. What types of economic systems do you know? What is the difference between them?

2. What factors may affect the type of economy a country holds? When would it be beneficial for a country to change its economy?

Key Vocabulary

1. Study the following list of vocabulary.

1. produce v	производить
2. market n	рынок
3. determine v	устанавливать, определять
4. price n	цена
5. trade n	торговля
6. exchange n	обмен
7. government n	правительство
8. society n	общество
9. alleviate v	уменьшать, ослаблять
10. advancement n	развитие
11. decide v	решать
12. free enterprise	свободное предпринимательство
14. private adj	частный
15. wages n	зарплата
16. regulate v	регулировать
17. provide v	предоставить, обеспечить наличие
18. run v	управлять
19. tax n	налог

2. Mind the following forms of the irregular verb “to sell”:

sell (sold, sold) - продавать

Pre-reading Activities

1. Match synonyms from the two columns. Learn these pairs of words.

1. market	a) to manage
2. to regulate	b) to manufacture
3. to produce	c) to control
4. to run	d) marketplace

2. Consult a dictionary and complete the chart. Some boxes will not be filled.

NOUN	VERB	ADJECTIVE
production	to produce	productive
	to price
		governmental
decision
	to regulate

Reading

Read the text focusing on the main ideas.

There are three main questions any economy has to answer, whether it is a highly developed economy, the poorest of countries, or a small group of people.

· What is to be produced?

· How will it be produced?

· Who will get what is produced?

To answer these questions, different economic systems have been developed.

Traditional economies are dictated by tradition, customs, and religion. One of the features of this type of economy is very little economic growth. In traditional societies people use methods of production and distribution which were invented in the past and have become accepted ways of doing things.

A market economy is an economy in which the prices of goods and services are determined in a free price system. Trading and exchange of goods, services and information takes place in a free market. A market economy may, therefore, also be known as a free market economy. In the real world, market economies do not exist in pure form, as societies and governments regulate them to different degrees rather than allow self-regulation.

The opposite of a market economy is a planned or command economy, where the government decides what to produce, in what quantity, and to be sold at what price. A planned economy alleviates the use of private enterprises and allows the government to determine everything from distribution to pricing. Planned economies can provide stability, but they can also limit the growth and advancement of the country if the government does not allocate resources to the innovative enterprises.

A mixed economy is the one in which there exists a mixture of free enterprise and government control. In some areas of a mixed economy, the government may even have a monopoly. In a typical mixed economy, the government may run such things as the postal service, rail lines, libraries, and in some cases, the health care service. Even in industries which are not owned or run by the government, its influence is very noticeable in the form of taxes and regulations like wage controls.

Comprehension Check

1. Are these statements True or False? Use the following expressions:

I (don’t) agree that… (я (не) согласен, что…)

I think that… (я думаю, что…)

1. Any highly developed country has to answer three main questions.

2. Traditional economies are dictated by very little economic growth.

3. A free market economy is an economy in which the prices of goods and services are determined in a free price system.

4. A planned or command economy is the opposite of a mixed economy.

5. A planned economy is the one that can limit the growth and advancement of the country.

6. A mixed economy is a mixture of market and planned economies.

7. In a mixed economy the influence of the government is considerable.

2. Complete the sentences.

1. Three main questions any economy has to answer are: … .

2. Different economic systems have developed to … .

3. One of the features of traditional economies is … .

4. In a market economy … takes place in a free market.

5. In a command economy, the government decides … .

6. Planned economies can provide stability, but … .

7. … the government may have a monopoly.

3. Check how well you know some characteristic features of different types of economic systems. Are these statements about market, command, or traditional economies?

1. You can decide what job you would like to do in this economic system.

2. Making a profit is highly stressed in this economic system.

3. Making money is not stressed in this economic system.

4. You will work at the same job that your ancestors worked at in this economic system.

5. You produce what your ancestors produced in this economic system.

6. The government decides what you will produce in this economic system.

7. You decide what you will produce in this economic system.

8. You work in this economic system to make as much money as you want.

9. Competition, material rewards, self-gain, and freedom are the basic values for this economic system.

10. Custom, traditional ways and beliefs are the basic values of this economic system.

Vocabulary Focus

1. Complete the sentences, choosing the right word.

1. It’s … property!

a) market b) private c) free

2. He … the car to me for $1000.

a) produced b) determined c) sold

3. This shop … my favorite brand.

a) determines b) sells c) regulates

4. Our manager … not to leave.

a) has provided b) has determined c) has decided

5. The Prime Minister has formed a new … .

a) market b) government c) society

6. Most shops allow the purchaser … goods.

a) to alleviate b) to sell c) to exchange

2. Look through the text and find English equivalents.

устанавливать цены

торговля и обмен товарами и услугами

саморегулирование

решать, в каком количестве производить

обеспечить стабильность

правительственный контроль

находиться во владении и управляться государством

3. Match the words from Key Vocabulary with their definitions.

a) an organized group of people associated together for religious, cultural, scientific, political, patriotic, or other purposes

b) a sum of money demanded by a government for its support or for specific facilities or services

c) the sum or amount of money or its equivalent for which anything is bought, sold, or offered for sale

d) money that is paid or received for work or services, as by the hour, day, or week

e) the act or process of buying, selling, or exchanging commodities within a country or between countries

Talking Points

1. Think about features, advantages and disadvantages of different types of economic systems. Discuss these issues in pairs or small groups first, and then make a report.

	Traditional economies	Market economies	Planned economies	Mixed economies
Features
Advantages
Disadvantages

2. List countries which have these economic systems.

Summary Points

1. Look through the text about different types of economic systems once more and identify its main idea.

2. Draw up an outline of the text.

3. Can this text be divided into some parts? How many and what are they? Give a one-sentence summary of each point of your plan.

Use the following vocabulary:

This text can be divided into … parts.	Текст можно разделить на … частей.
The text consists of … parts.	Текст состоит из … частей.
The first (second, third, etc.) part deals with …	В первой (второй и т.д.) части говорится о…
In the first (second, third, etc.) part the author describes (discusses, studies, offers, states, analyzes) …	В первой (второй, третьей) части автор описывает (обсуждает, изучает, предлагает, утверждает, анализирует) …
Finally, the author shows …	В заключение, автор показывает …

UNIT 4

SCARCITY AND CHOICE

Lead-in

Working in a group, try to identify the term ‘scarcity’ and answer the following questions.

1. Why does scarcity exist?

2. How do individuals, communities and countries attempt to solve the problem of scarcity?

Key Vocabulary

Make sure you know the following words and word-combinations.

1. satisfy v	удовлетворять
2. face v	сталкиваться с
3. land n	земля, земельные угодья
4. labour n	труд, рабочая сила
5. capital n	капитал
6 insufficient adj	недостаточный
7. exist v	существовать
8. economic activity	экономическая деятельность
9. benefit n	польза, прибыль
10. forgo v	отказываться, воздерживаться от чего-либо
11. opportunity costs	альтернативные издержки; издержки неиспользованных возможностей
12. evaluate v	оценивать
13. non-monetary adj	неденежный

Pre-reading Activities

1. Consult a dictionary and find in the columns groups of synonyms and antonyms.

Match synonyms:
desire n	profit n
forgo v	select v
benefit n	give up v
choose v	want n

Match antonyms:
balance n	abundance n
scarcity n	non-monetary adj
monetary adj	unlimited adj
limited adj	imbalance n

2. Translate in writing the following paragraph.

Scarcity is the fundamental economic problem: humans have unlimited wants and needs in a world of limited resources. It states that society has insufficient productive resources to satisfy all human wants and needs. Goods (and services) that are scarce are called economic goods (or simply goods). Other goods are called free goods if they are desired but in such abundance that they are not scarce, such as air and seawater.

Reading

Read the text and explain what the terms “scarcity” and “opportunity cost” mean.

Scarcity is the fundamental economic problem. Not all human needs and wants can be satisfied, scarcity limits us both as individuals and as a society. As individuals, we face scarcity of time and ability. As a society, our resources, land, labor, and capital, are insufficient to produce all the goods and services we might desire.

So, scarcity is the condition of not being able to have all of the goods and services a person wants. It exists because a society can only produce limited amounts of goods and services with the limited resources. The resources, however, have alternative uses and can be combined in various proportions. With the alternative use of scarce resources, choices must be made.

People must choose how to use scarce resources and which of their desires they will satisfy and which they will leave unsatisfied. When we, either as individuals or as a society, choose more of something, scarcity forces us to take less of something else.

Economics is sometimes called the study of scarcity because economic activity would not exist if scarcity did not force people to make choices. The fact that choices must be made reflects the fact that scarcity exists.

Scarcity is an imbalance between what is wanted and the amount that is freely available. Choice, in economic terms, is rational choice and is defined as an act of making calculated, self-interested decisions. Basically, this type of choice is about choosing what will cost the least and have the highest benefit.

In making a choice, some alternatives are forgone. Economists use the term ‘opportunity cost’ to mean the cost of a specific choice measured in terms of the next best alternative choice. In other words, it is what the decision-maker must forgo in order to make the choice that is finally made. Another term for opportunity cost is “real cost”. Opportunity cost is useful when evaluating the cost and benefit of choices. It is often expressed in non-monetary terms.

Comprehension Check

1. Answer the questions.

1. Why are scarcity and choice basic problems of economics?

2. What is scarcity? Give different definitions.

3. Why must people make choices?

4. What is choice?

5. What do economists mean when they use the term ‘opportunity cost’?

6. In what way is opportunity cost expressed?

2. Are these statements True or False? Prove your decision.

1. Human needs and wants can’t be satisfied.