Types of Economic Systems
A Consumer Economy
A consumer economy refers to an economic system that primarily runs on consumers' spending. In the USA, it is often said and also often disputed that consumers are responsible for 70% of all spending and, therefore, this class of spenders must be constantly stimulated to make money for businesses. There are other classes of spenders that represent a lower amount of spending and are usually ignored by attempts to revitalize the economy. In this economy, some financial experts say consumption is required, while others say production is required to keep the consumer economy satisfied.
A consumer economy simply means that there is an economy where consumers dominate the spending sphere. Instead of businesses, government, pharmaceutical or other spenders, consumers dominate the spending world. For this type of economy to work, consumers must be stimulated to buy products, and products must be produced. To stimulate purchases, the government will usually offer larger tax returns so consumers have more money to spend, which will give businesses more capital so they can create more jobs.
The main principle of a consumer economy is that the consumer must consume. Products must be purchased and used for the economy to function. This economy is so heavily dependent on the cycle of consumption that it can easily break if the consumer refuses to spend money and chooses instead to invest it. To this end, consumers are often given extra money to spend on products to drive the economy. Most other spenders, such as businesses and manufacturers that purchase supplies, often go ignored by these stimulus attempts because they represent a lower percentage of overall spenders.
Others believe a consumer economy is not about consumption but production. If the right product is made, the consumer will purchase it and a variety of different products must be made to satisfy consumer demands. If production stops, there will be nothing to consume, which is what leads many financial experts to state that production is the driving force of a consumer economy.
Notes:
spender – лицо, осуществляющее расходы
to revitalize – восстановить активность
Unit 4
Scarcity and Choice
The Web as a Sales Tool
There is discussion today about how beneficial the Web is as a sales tool. Many companies, even those with a tremendous presence on the Web, are not making a lot of money. They are positioning themselves for the future, with hopes that buying on-line will become an everyday event.
The question that must be answered is whether the World Wide Web will remain a place of information, or evolve into a profitable marketplace for businesses.
Actually, if you trace the history and growth of the Internet, you will realize that extraordinary progress has been made. In the last decade, the number of personal computers has multiplied to the point that potential sellers of products and services now see tens of millions of customers to whom they can market their products. As consumers become more relaxed and secure about buying on-line, market potential will rise. Because of this potential, banner ads are everywhere: on Home Pages, magazines or “webzines”. “Cyberstores” offer everything from automobiles to vacation cruise.
The most successful sellers are those that mainly transact business by phone, selling a product that does not have to be present physically. If you know the title or the author of a book you want to buy, it is easier to order it by computer than to go to the bookstore. Besides, you may get a discount, or save sales tax, even though you have to pay for shipping.
An example of growing use of Web technology is the “Extranet”, which is a company’s private link with its corporate customers. (The “Intranet” is the company’s internal network with its employees.) General Electric, the most successful example of extranets, grosses over a billion dollars a year in sales.
Notes:
to remain – оставаться
to transact – вести переговоры
link – канал связи, связующее звено
Unit 5
Demand and Supply
Import and Export
In the recent decade, the world has seen an international trade boom unlike any other in history. Most large corporations earn a great portion of their revenues from their overseas ventures. And many nations owe a large share of their gross national product to the output of firms based beyond their borders.
In the age when many business people are thinking globally, it is just as important to understand the working of the world economy as it is to understand our national economy. Fortunately, the same concepts of supply and demand, deficit and surplus also apply to international business. They just manifest themselves differently.
There are two sides to every trade relationship: buying and selling goods. In international trade, those who buy are importing goods or services from foreign sources; those who sell are exporting products to customers abroad.
The main difference between domestic trade and international trade is the use of foreign currencies to pay for the goods and services crossing international borders. Although global trade is often added up in euros and US dollars, the trading itself involves various currencies.
Whenever a country imports or exports goods and services, there is a resulting flow of funds: money returns to the exporting nation, and money flows out of the importing nation. Trade and investment is a two-way street, and with a minimum of trade barriers, international trade and investment usually makes everyone better off. The balance of trade (the import-export balance) is determined by the relationship between import and export.
In an interlinked global economy, consumers are given the opportunity to buy the best products at the best prices. By opening up markets, a government allows its citizens to produce and export those things they are best at and to import the rest, choosing from whatever the world has to offer.
Notes:
overseas ventures – иностранные компании, предприятия
domestic trade – внутренняя торговля
currency – валюта
better off – обеспеченный, состоятельный
balance of trade – торговый баланс
Unit 6
Opportunity Cost
A University Education and Opportunity Cost
Unlike most costs discussed in economics, an opportunity cost isn’t always a number. The opportunity cost of any action is simply the next best alternative to that action. Economists believe that opportunity costs play a fundamental role in people’s lives. For example, many school-leavers consider going to Universities for four or five years after finishing schools. What is the cost of acquiring a University education?
Obviously, the cost of tuition, the cost of books and other supplies, and the cost of living in a hostel represent the money cost of going to University. The other uses of this money might have been put to represent its opportunity costs. But what else is a cost of going to University? If a student didn’t go to University, then he or she would most likely find a job instead.
The money that those who choose University might have earned during their years of study is described by economists as foregone earnings. Foregone earnings represent another, very important cost of a University education.
Thus, the opportunity cost of going to University is the goods and services represented by the money cost of the education, plus the value of the foregone earnings.
Notes:
tuition – обучение
foregone earnings – упущенные заработки
Unit 7
Money
The System of Cheques in Britain
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. So, bank-notes and coins are not the most important form of money in developed economies.
In the United Kingdom about 90% of all transactions are settled by means of cheques. But cheques themselves are not money; they are orders to bankers to transfer money from one person to another. The money transferred in this way consists of bank deposits. If there is no money in the form of a bank deposit then any cheques drawn on that account will be worthless.
Cheques were used as early as the second half of the 17th century, but they did not come into general use until the second half of the 19th century. The Bank Charter Act of 1844 put strict limitations on the note issue at a time when the output of goods and services was expanding rapidly. The need for an expansion of the money supply to keep pace with increasing output greatly stimulated the use of bank deposits.
This most developed form of money (bank deposit) consists of entries in the bank ledgers, or more likely nowadays, of records on computer tapes. The greater part, in value terms, of the payments made each day are carried out by adjustments made to the totals in different bank deposits. A payment from one person to another merely requires that the banker reduces the amount in one deposit and increases in another. Transferring money, therefore, has become little more than a kind of bookkeeping exercise, the money itself does not consist of some physical tangible commodity.
Notes:
to transfer – переводить (о деньгах)
to come into use – начинать употребляться
to keep pace with – не отставать от
entry – запись
ledger – главная книга (в бухгалтерии)
bookkeeping – бухгалтерия
Unit 8
Markets and Prices
Market Research
Millions of pounds are spent each year on market research. Nearly 10% of the price we pay for goods in the shops is spent on it.
What is market research? By definition, it is a systematic collection and analysis of data, which is based on the customer’s attitude, needs, opinions and motivation within the context of political, economic and social influences. Market research is always necessary, because to reduce risk, any organization needs to know about the market for a product or service it is going to launch.
Market research makes a positive contribution to business by helping in the decision-making process. There are many different types of market research. Here are the main ones:
1. Market and sales research. It estimates the size of new markets and their potential growth, identifies market segments and trends.
2. Product research. Its purpose is to investigate the customer’s attitude to new products, to find alternative uses for existing products and to generate new ideas for new products.
3. Research on promotion and advertising. It helps to choose the right advertising medium, analyses the effectiveness of advertising and evaluates present sales techniques.
The market research process is a five-step application of the scientific method that includes:
1. Defining the problem.
2. Analyzing the situation.
3. Getting the necessary data.
4. Processing the data.
5. Solving the problem.
As for the information a marketing researcher is interested in, there exist its 3 main sources:
1. Information within the company, such as sales figures, is known as internal information.
2. Information external to the company, such as government reports or published marketing reports, is known as secondary information.
3. The third information source, often characterized by market research opinion polls, is known as primary information.
Notes:
launch – выпускать на рынок (товар или услугу)
Unit 9
Factors of Production
Labour
Labour, in economics, is some effort necessary to satisfy human needs. It is one of the three leading elements in production, the other two being land (natural objects) and capital.
In industry, labour has a great variety of functions, which may be classified as follows: production of raw materials, as in mining and agriculture; manufacturing in the widest sense of the word, or transformation of raw materials into objects serviceable to humans; distribution, or transference of useful objects from one place to another, as determined by human needs; operations involved in the management of production, such as accounting and clerical work; and personal services such as those rendered by physicians and teachers.
Many economists distinguish between productive and unproductive labour. Productive labour consists of those kinds of exertion that produce utility embodied in natural objects. Unproductive labour, like that of the musician, is useful but does not add to the material wealth of the community. As a result of the Industrial Revolution at the end of the 18th century, most workers were employed in large factories and similar undertakings. Those workers were not protected from economic exploitation or from the consequences of illness, disability, or unemployment. In the early decades of the 19th century, increasingly prevalent ideas of freedom caused great changes in the conditions of labour. Workers began to form trade unions and cooperative societies that enabled them to participate in many types of political activities and to protect themselves by political and economic means. Laws for the regulation of labour are now intended not to fix wages as formerly, but to protect the workers.
Notes:
raw – сырьевой
exertion – усилие, физическая нагрузка
utility – польза, полезность
conditions – условия
Unit 10
Forms of Business
Large Corporations in the USA
Although there are many small and medium-sized corporations, bigger business units are needed to perform certain services in the vast economy. Large corporations can supply goods and services to a greater number of people across a wider geographic area than small businesses. They serve consumers across the nation and across the world. Corporate products tend to cost less per unit sold. Moreover, consumers benefit from the availability of corporate “brand names”, which they recognize as guaranteeing a certain level of quality wherever purchased.
Large corporations also have the financial strength to research, develop and produce new goods. Their scientific know-how, innovation and technical capability are critical to maintaining the nation’s competitiveness and productivity.
In the USA, a corporation is a specific legal form of organization of persons and resources chartered by one of the 50 states for the purpose of conducting business. When people and resources are brought together, the result in the eyes of the law – is a person (Indeed, the Latin word “corpus” means “body” or “person”). A US corporation, distinct from any individual human being, may own a property, sue or be sued in the court and make contracts. For this reason, a corporation is an ideal vehicle for the conduct of business by many smaller enterprises as well as larger ones.
The corporate form of business is a more flexible instrument for large-scale economic activity than the sole-proprietorship or partnership.
First, the corporation itself has legal standing, it safeguards its owners. Second, the owners of shares of stock have limited liability; they are not responsible for debts. Third, corporate stock is transferable. An owner of stock can sell his or her holdings at any time or pass the stock along to heirs.
Note:
to sue – подавать в суд
heir – наследник
A Business Plan
Life may be very chaotic when you are starting or running a small business. The telephone calls to make, the letters to write, the decisions to take – all the day-to-day emergencies can push aside the sort of long-term strategic planning which is essential to keep your enterprise on the right track.
Doing a business plan before you start your firm is vital because it will spotlight potential problems before they arise and suggest ways to solve them – saving your time, money and headaches. A business plan consists of organized answers to a series of carefully thought-out questions vital to starting any successful company. Assembling this plan will be your first opportunity to manage your new business.
When people talk about a business plan they are usually referring to a formal written document. A written document helps to focus your thinking and gives you something to refer to later. Doing a business plan you write long-term objectives, estimates and forecasts on paper. There is nothing like writing something down to help clarify your mind and reveal your uncertainties and weaknesses.
But a business plan is more than a document, it is the entire process you go through to clarify and evaluate your prospective company. Once you have put down your plan, do not necessarily accept that it is set in concrete. Forecasts and objectives change as new bits of information and your better experience emerge.
As it is important for your plan to look professional, you may consider seeking advice and help on its production. This is available from enterprise agencies and training courses, accountants and corporate finance specialists. If your forecasts are likely to be fairly complicated and need changing, you might consider using a computer programme designed to enable you to produce forecasts and to examine the effect changes will have on the results.
Notes:
to spotlight – сделать что-либо центром внимания; выдвинуть на первый план
to manage – управлять, руководить
to refer to something – ссылаться на что-либо
to evaluate – оценить
to be set in concrete – быть неизменным, не подлежать изменениям
Unit 11