Ex. 9. Make up sentences for the jumbled words

1. sense / of /study /begin /wonder /of /should /the /economics /with /the

2. science / economy /economics /studying /a social /is

3. discipline /two /as /hundred /a scholarly /is /old /years /economics

4. work / 10 years/ writing /Adam Smith / to /his /”The Wealth of Nations” /devoted

Text 2

ECONOMICS: THE STUDY OF SCARCITY AND CHOICE

VOCABULARY

to satisfy wants and needs - удовлетворять желания и потребности poverty– бедность shortage– нехватка, дефицит luxury- предмет роскоши to solve the problem – решать проблему standard of living – уровень жизни to increase – повышать goods and services – товары и услуги cause– причина to provide – обеспечивать, давать

machinery – машинное оборудование tools – инструменты manufacture - производство skill– умение risk-taking ability – способность к риску enterpreneur– предприниматель scarcity- нехватка, дефицит advertising company – рекламная кампания opportunity cost –альтернативные издержки, стоимость; “цена выбора” imbalance – несоответствие

Everyone goes through life having to make choices. One of the things that young people discover as they grow older is that you can’t have everything. Although there are a lot of goods on sale you have to limit your choice to one or two. Neither individuals, nor societies can have all the things they would like to have.

Most people in the world cannot afford to buy everything they want because our wants are unlimited. Why are there so many wants and needs that we cannot satisfy? Why do millions of people live in povertyin many countries around the world? Most people will answer these questions by saying, “Because there is not enough money”.

Is this the real ECONOMIC PROBLEM – shortage of money? An example may help to show you why more money is not the answer to the problems of being unable to satisfy all people’s wants and needs.

The government of a small country is worried about the large numbers of people who cannot afford enough of the basic needs of life. Even those citizens with more money are always complaining that the country is not producing enough of the luxuries that they want to buy. The government decides to print more bank notes and to double all of the incomes of everybody in the country.

Has the government solved the economic problem of the country? Are there now more goods for the people to buy? Are there more houses for them to live in? Will the standard of living of the population increase?

The answer to all these questions is “No”. Printing more money does not produce more goods and services or satisfy more wants or needs, because prices will rise. What is the point of having more money to spend, if the prices of everything you want to buy have gone up by the same amount?

The real cause of the economic problem

The real cause of the shortage of goods and services in a country is not having too little money. It is too few FACTORS OF PRODUCTION (also called resources of production). There are four factors of production.

Land This term is used to cover all the natural resources provided by nature and includes fields and forests, oil, gas, metals and other mineral resources.

LabourThis is the physical and mental efforts of people needed to make products.

Capital This is the finance, factories, machinery and tools needed for the manufacture of goods.

Enterprise This is the skill and risk-taking ability of the person who brings the other resources together to produce a good or service. For example, the owner of a business. These people are called enterpreneurs

In any one country, and in the world as a whole, these factors of production are limited in supply. As there is never enough land, labour, capital or enterprise to produce all of the needs and satisfy unlimited wants of a whole population, there is an economic problem of scarcity.

Text 3

LIMITED RESOURCES: THE NEED TO CHOOSE

We make choices every day. We have to because, as we have seen, not all of our wants can be satisfied. Therefore we have to decide which wants we will satisfy and which we will not.

Should I take a bus to college or use the money to buy some more paper for my Business studies notes? Do I buy a new coat or spend the money on a new radio? All choices involve giving something up.

This problem exists for governments and businesses as well as for individuals. Should the government build another hospital, or a new road into the city? Should the owner of a business purchase a computer or use the resources to pay for a new advertising company? All of these choices involve giving something up too. If the resources of the factors of production were not scarce, there would be no need to choose. We could all have everything we wanted!

In making any choice, we need to consider what we are giving up, to make sure it is not worth more to us than the option we are choosing. This is called considering OPPORTUNITY COSTof a decision – the lost opportunity resulting from the choice of something else.

To summarize: human wants are unlimited but the resources necessary to satisfy those wants are limited. Thus, economics deals with the problems which every society is faced with throughout history – the problems of scarcity and choice.

Scarcity is the imbalance between our wants and the means to satisfy those wants. The problem of scarcity is faced by rich as well as poor societies. That is why it is fundamental economic problem.

WORD STUDY