The economic environment

Pre-reading tasks

Task 1

Practice the reading of the following words:

luxury ['lʌkʃǝrɪ] amount [ə'maυnt] resource [rı′so:s] science ['saɪəns]

conclusion [kən'kluʒ(ə)n] consumption [kən'sʌmpʃǝn] commodity [kə'mɒdətɪ] determine [dɪ'tɜ:mɪn]

distribute [dɪ'strɪbju:t] quantity ['kwɒntətɪ] recognize ['rekəgnaɪz] survival [sə'vaɪv(ə)l]

Task 2

Make sure you can read these words correctly and say what words in the Russian language help you (to) guess their meaning:

production; private; formulate; aspects; various; individual; fundamental; efficient; civilization; analyze; vital; universal; determine; resources; administration; principle; industrial; recreation; generate; nature; productive.

Task 3

Give the initial forms of the following words:

limited; leads; concerned; could; knows; deciding; aspects; attempts; covers

Task 4

Read and translate the following words paying attention to the stress displacement:

produce – production; necessary – necessity; economy – economic; benefit – beneficial; divide – division; consume – consumption; prosper – prosperity

Task 5

Write down five things you spend money on. Then think about each item and decide if it is a need or a want. Examples are given for you.

Need?	Description	Want?
	bread and eggs for breakfast
	eggs to bake cookies
	transportation to work

Economics and the economy

Task 6

Read the text and be ready to do the exercises:

Every society must determine what commodities shall be produced, how these goods should be made, and for whom they will be produced.

OBJECTIVES

As a science, economics must first develop an understanding of the processes by which human desires are fulfilled. Second, economics must show how causes that affect production and consumption lead to various results. Furthermore, it must draw conclusions that will serve to guide those who conduct and, in part, control economics.

PROBLEMS OF ECONOMICS

What commodities are to be produced and in what quantities? How much of each of the many possible goods and services should the economy make? Should we produce pizzas or shirts today? A few high-quality shirts or many cheap shirts? Should we produce many consumption goods or few consumption goods and many investment goods? How shall goods be produced? By whom and with what resources and in what technological manner are they to be produced? For whom shall goods be produced? Who is to enjoy and get the benefit of the nation's goods and services?

The Law of Scarcity

Why are we concerned with the fundamental questions of what, how and for whom? These problems arise because people want to consume far more than an economy can produce.

Needs and Wants

We all recognize that people sometimes want things that they do not need. They sometimes want things that they should not be permitted to have. By contrast with "wants," "needs" suggest a degree of urgency. By contrast with needs, mere wants ("mere" is often used) are things that are optional or trivial or inessential.

It is hard to draw the line precisely between wants and needs. There might be a biological minimum rooted in human nature, but there is a second minimum that varies to a significant extent with culture. In some cultures, it is almost impossible to receive respect if one does not wear a shirt or one cannot read. In other cultures (especially at other, earlier times) one could get by without a shirt (at least in warm weather) and inability to read was not noticed since nobody could.

Human Interests

Individual human interests are in some ways constant, in some ways variable. Healthy people have a smaller interest in medical care than those who are chronically ill. Stronger people have a smaller interest in assistance in moving furniture than weaker people. Those with greater knowledge can solve problems and relate new facts to preexisting information better than those with less.

Unhealthy Human "Interests"

Most people will agree that there is a difference between what one can take a healthy interest in, and what one could call a perverse or unhealthy interest. It is clear that not everyone will agree where we should draw the line, but most people will want to draw the line somewhere. Unhealthy preferences correspond pretty closely to what is known as moral vice, bad habits associated with inappropriate desires and, in most if not all cases, associated with an inability to respect one's fellow human beings as persons.

Motive

When a desire or wish is effective in moving us to action, it is possible to say that we are motivated by it. To say that a person is motivated by revenge is to say that he desires to injure another person or social group whom he perceives as having injured him or persons or groups with whom he identifies. Motive appears to be little more than a renaming of desire or wish in those cases in which desire or wish is effective in moving us to act.

Unlimited wants

By comparison with the poor nations or early civilizations, advanced industrial economics seem very wealthy indeed. But higher incomes bring in their train higher consumption standards and ever higher ‘needs’. An investigation of consumption patterns would find that people want and need central heating and cooling, movies and compact disks, autos and personal computers, concerts and recreation, leisure time and privacy, clean air and pure water, safe factories and clean streets, and innumerable other goods and services . The law of scarcity states that goods are scarce because there are not enough resources to produce all the goods that people want to consume. Faced with this undeniable truth - that goods are scarce relative to wants - economics describes and analyzes how different societies cope with limited resources - choosing different bundles of goods (the what), selecting among different techniques of production (the how), and deciding in the end who should consume the goods (the for whom).

Task 7

Give the Russian equivalents to the following:

basic understanding; to draw conclusions; technological manner; a degree of urgency;moral vice;significant extent; to receive respect; to solve problems; preexisting information; to amass resources in one’s hands

Task 8

Match a line in A with a line in B (as in the text)

understanding various fundamental human small solve social poor higher undeniable scarce

nations nature incomes questions process truth group results problems interests resources

Task 9

Choose the correct preposition

1. The design stage typically lasts ____two months.

a) for

b) no preposition

c) in

2. We'll let you know about our decision _____ tomorrow.

a) until

b) by

c) at

3. I like working ____ Bill. He's really laid-back.

a) on

b) with

c) along

4. The design process _____this product is fairly complicated.

a) for

b) in

c) along

5. Please inform me ____your decision.

a) in

b) by

c) of

6. This is an issue that came up _____the early stages of the project.

a) during

b) along

c) with

7. The demand for our product has risen by 50% ____ the last two years.

a) over

b) among

c) with

8. John will be in charge ______ all the technical aspects.

a) to

b) for

c) of

9. Are you working ____the project that I assigned you to?

a) with

b) on

c) in

10. I work ______ the center of the city.

a) in

b) on

c) at

11. The process ______selecting candidates is a difficult one.

a) of

b) in

c) about

Task 10

Match the definitions:

amass significant recognize desire grovel associate fulfill revenge

to wish or long for; crave; want to connect or bring into relation, as thought, feeling, memory to humble oneself or act in an abject manner, as in great fear or utter servility to collect for oneself, accumulate to collect into a mass to identify as something or someone previously seen, known to exact punishment or expiation for a wrong on behalf of, especially in a resentful or vindictive spirit important; of consequence, having or expressing a meaning; indicative to carry out, or bring to realization, as a prophecy or promise, to perform or do

Task 11

Find the Russian equivalents to the following English words and word combinations

understanding of the process to affect production by contrast with consumption goods to face with by comparison with to get the benefit to solve problems to respect somebody to draw the line precisely

получать прибыль уважать провести четкую грань между чем-либо столкнуться с решить проблему понимание процесса по сравнению с потребительские товары в противоположность чему-либо влиять

Task 12

Match up the words which have an opposite meaning

various precisely constant to produce significant perverse cause grovel scarce 10. permit

restricted to fall behind result ban sufficient sell similar frightened consume local

Task 13

Match up the words which have a similar meaning

quality trivial habit to produce to permit urgent scarce fundamental 9. precisely 10. to affect

to allow basic limited explicitly, correctly caliber (or calibre), class, grade, rate custom to bring out to influence insistent inessential

Task 14

Form the necessary parts of speech

NOUN	ADJECTIVE			NOUN	VERB
society	----			----	produce
knowledge	----			allocation	----
----	different			conclusion	----
efficiency	----			----	formulate
possibility	----			----	choose
desire	----			----	cause
scarcity	----			----	invest
wealth	----			----	distribute

Task 15

Form the new words by using the following suffixes and prefixes:

-less; -tific; -able; in-; -ity; inter-; under-; -tion; -ment; -ly; -ize

possible; produce; dependent; take; consume; formulate; invest; private; economic; distribute; care; science; understand; numerable

Task 16

Read and translate the following sentences paying attention to the meaning of the words and word combinations given below:

a) amount - сумма , величина , количество

to amount - равняться, составлять, достигать

1. The repair bill amounts to $300.

2. It is stated differently but amounts to the same thing.

3. With his intelligence, he should amount to something when he grows up.

4. The purchases amounted to 50 dollars.

5. That plan will never amount to anything.

6. Her action amounted to a rebellion.

b) rather than -a не, скорее чем, вместо того, чтобы;

1. I'd like to go home early rather than risk the roads later

2. “Gibson guitars—with their carved tops and necks that are fitted and glued to the body, rather than bolted on—are expensive to make” (Joshua Rosenbaum).

3. We would rather rent the house than buy it outright.

c) to affect - воздействовать, влиять, любить, часто употреблять, притворяться

1. Cold weather affected the crops.

2. The music affected him deeply.

3. He affects to the old ways.

4. The experience affected me deeply.

5. The heat of the sunlight affected the speed of the chemical reaction.

6. He was deeply affected by the themes in the play.

7. He managed to affect a smile despite feeling quite miserable.

d) еffect - следствие, результат, воздействие, действие, сила

to effect - выполнять , осуществлять

1. Exposure to the sun had the effect of toughening his skin.

2. We had the feeling that the big, expensive car was only for effect

3. The effect of the hurricane was a devastated landscape.

4. The new law will come into effect on the first day of next year.

5. The best way to effect change is to work with existing stakeholders.

6. The law is still in effect.

e) guide - проводник, гид; экскурсовод

1. We hired a guide for our trip to the mountains.

2. He was my friend and my guide in the early years of my career.

3. They used the stars as a guide to find their way back.

4. If past experience is any guide, we're in for a long and difficult project.

5. He guided us through the forest.

6. He guided the country through the war.

f) barely - просто, только, всего лишь, едва, еле-еле, с трудом

1. We barely spoke the entire time we were in the car.

2. There are barely any new features in this software.

3. There is barely a difference between the two brothers.

4. He had barely enough money to pay for the car.

5. They gave the facts to him barely.

g) infinite - бесконечный, очень большой; бесконечность, множество

1. Withdrawing the troops would create an even more infinite set of problems for the coalition.

2. You need a nearly infinite amount of patience to do the job.

3. There is a misunderstanding by marketers in our culture about what freedom of choice is. In the market, it is equated with multiplying choice. This is a misconception. If you have infinite choice, people are reduced to passivity. (Gitlin,Todd)

4. Man's unhappiness, as I construe, comes of his greatness; it is because there is an Infinite in him, which with all his cunning he cannot quite bury under the Finite. (Carlyle,Thomas)

5. Likewise, space is often assumed to be infinite in extent

Task 17

a) Increase your vocabulary. There is a set of words related to the word economics. In a table we can show them like this:

econom	y
	ics
	ic	al	ly
	ist

Each word has a different use. Try to put the right word in the blanks in these sentences:

1. Marx and Keynes are two famous ----.

2. Those people are studying the science of ----.

3. People should be very ---- with the money they earn.

4. We sometimes call a person’s work his ---- activity.

5. The ---- system of a country is usually called the national ----.

6. The people in that town live very ----.

Translate into English

1. Состояние экономики очень тревожное .

2. Экономическая политика правительства часто подвергается справедливой критике.

3. Она очень экономная хозяйка.

4. Мировая экономика - это наука, которая изучает состояние экономики в разных странах мира.

5. Моя новая машина гораздо экономичнее старой.

b) The table shows how words are formed around the verb to produce.

produc	e	r
		tiv(e)	ity
		tion

Use the words in the suitable blanks in the sentences below:

1. The company --- a new commodity every year.

2. The company’s newest --- is a special blue soap powder.

3. The --- of soap powders met last year to discuss prices.

4. The factory is not as --- now as it was 5 years ago.

5. The --- of that factory has gone down over the last 5 years.

6. The manager of the factory has decided that they must increase their --- of packets of soap powder.

Task18

Answer the following questions:

1. What limits the choice between different goods and services?

2. What principles does economics formulate?

3. What laws is economics concerned with?

4. Is economics a social science?

5. What are the objectives of economics?

6. What are the three economic problems?

7. How do you understand The Law of Scarcity?

8. Are there enough resources to produce all the goods people want?

9. Do societies cope with resources differently?

10. What are the ways to use limited resources?

11. Which definition of economics do you think best? Why?

12. What is a scarce resource?

13. What is the difference between needs and wants?

14. Are human interests constant or variable?

15. Do all people have unhealthy interests?

16. Is it possible to satisfy unlimited wants?

Task 19

Write a brief summary of the text. Use the following key-patterns:

1. The article deals with…	а) Эта статья касается…
2. As the title implies the article describes…	b) Согласно названию, в статье описывается
3. It is spoken in detail....	c) Подробно описывается…
4 .The text gives valuable information about	d). В тексте дается информация о…
5. Much attention is given to....	e) Большое внимание уделяется…
6. The article is of great help to...	f) Эта статья поможет……

Task 20

Translate into Russian

1. Графической иллюстрацией проблем выбора между производством тех или иных благ, эффективности использования ресурсов и технологии, служит кривая (граница) производственных возможностей.

2. График, изображающий кривую спроса, демонстрирует взаимосвязь цены и величины спроса. Кривая имеет отрицательный наклон. Данная характеристика взаимосвязи называется законом спроса

3. Точки за пределами границы производственных возможностей показывают уровень производства, недостижимый при данном количестве ресурсов и имеющейся технологии.

4. Кривая производственных возможностей показывает совокупность всех точек или решений, в пределах которых следует выбирать оптимальный вариант. Все остальные точки представляют собой упущенные возможности или альтернативные затраты.

5. Кривая производственных возможностей - в экономической теории - кривая, показывающая различные комбинации двух товаров или услуг, которые могут быть произведены в условиях полной занятости и полного объема производства в экономике с постоянными запасами ресурсов и неизменной технологией.

6. “Principles of Economics“ – вышедший в 1890г. труд А.Маршалла, в котором впервые был предложен термин "экономикс".

7. Экономика каждой страны — это система, которая охватывает множество разных видов деятельности, и каждое ее звено, компонент может существовать только потому, что получает что-то от других, т.е. находится во взаимосвязи и взаимозависимости с другими звеньями. Для того чтобы решить главную проблему экономики — распределение редких ресурсов, каждая экономическая система по-своему отвечает на три следующих вопроса: «Что? Как? Для кого?»

8. Так как ресурсы ограничены, а потребности людей безграничны, то общество должно делать выбор: от чего оно вынуждено отказаться, чем поступиться, т.е. какую жертву принести, чтобы получить желаемый результат. Здесь мы сталкиваемся с проблемой альтернативности использования ресурсов. Например, если экономические ресурсы (земля, материалы, рабочая сила) используются для строительства жилых домов, то общество отказывается от строительства больниц, офисов, школ, которые могут быть построены из этих же ресурсов. Таким образом, общество вынуждено от чего-то отказываться, чем-то жертвовать, чтобы получить желаемый результат. Количество одного товара, которым нужно пожертвовать для увеличения производства другого товара, называется альтернативными издержками.

9. Принцип эффективного распределения ресурсов получил в экономической теории название Парето-эффективности по имени итальянского экономиста Вильфредо Парето (1848?1923).

Парето-эффективность – такой уровень организации экономики, при котором общество извлекает максимум полезности из имеющихся ресурсов и технологий и уже невозможно увеличить чью-либо долю в полученном результате, не сократив другую.

10. Экономический рост означает, что на каждом данном отрезке времени облегчается решение проблемы ограниченности ресурсов и становится возможным удовлетворение более широкого круга потребностей человека. Значит, экономический рост – это процесс расширения производственных возможностей общества.

Text B

Production Possibility Frontier (PPF)

Task 21

Read the text to yourself and be ready for a comprehension check-up

Under the field of macroeconomics, the production possibility frontier (PPF) represents the point at which an economy is most efficiently producing its goods and services and, therefore, allocating its resources in the best way possible. If the economy is not producing the quantities indicated by the PPF, resources are being managed inefficiently and the production of society will dwindle. The production possibility frontier shows there are limits to production, so an economy, to achieve efficiency, must decide what combination of goods and services can be produced.

Production Possibility Frontier (PPF)

When the PPF shifts outwards, we know there is growth in an economy. Alternatively, when the PPF shifts inwards it indicates that the economy is shrinking as a result of a decline in its most efficient allocation of resources and optimal production capability A shrinking economy could be a result of a decrease in supplies or a deficiency in technology.

The production-possibility frontier can also illustrate the inherent need to choose among limited opportunities of many kinds. People have limited time available to pursue different activities.

Efficiency is one of the central concepts of economics. Efficiency means absence of waste, or using the economy's resource as effectively as possible to satisfy people's needs and desires. More specifically, the economy is producing efficiently when it cannot produce more of one good without producing less of another-when it is on the production-possibility frontier.

Productive efficiency occurs when society cannot increase the output of one good without cutting back on another good. An efficient economy is on its production-possibility frontier.

The production-possibility frontier provides a rigorous definition of scarcity.

Economic scarcity refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources, which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good. The PPF shows the outer limit of the combination of producible goods.

Scarcity is a reflection of the fact that the PPF constrains our living standards.

The production-possibility schedule can also illustrate the three basic problems of economic life: what, how and for whom. What goods are produced and consumed can be depicted by the point that ends up getting chosen on the PPF.

How goods are to be produced involves an efficient choice of methods and a proper assignment of different amounts and kinds of limited resources to the various industries. For whom goods are to be produced cannot be discerned from the PPF.

OPPORTUNITY COST

Life is full of choices. Because resources are scarce, we are constantly deciding which good we want to buy or which activity we will pursue. Should we go to a movie or read a book? Should we take a vacation or get some extra work done? In each of these cases, making a choice in a world of scarcity requires us to give up alternative activities, in effect costing us the opportunity to do something else. That alternative forgone is called the opportunity cost.

Opportunity cost is the value of what is foregone in order to have something else. This value is unique for each individual. You may, for instance, forgo ice cream in order to have an extra helping of mashed potatoes. For you, the mashed potatoes have a greater value than dessert. The opportunity cost of an individual's decisions is determined by his or her needs, wants, time and resources (income).

This is important to the PPF because a country will decide how to best allocate its resources according to its opportunity cost.

A trade-off (or tradeoff) is a situation that involves losing one quality or aspect of something in return for gaining another quality or aspect. It implies a decision to be made with full comprehension of both the upside and downside of a particular choice.

In economics the term is expressed as opportunity cost, referring to the most preferred alternative given up. A trade-off, then, involves a sacrifice that must be made to obtain a certain product, rather than other products that can be made using the same required resources. For a person going to a basketball game, its opportunity cost is the money and time expended; say that would have been spent watching a particular television program.

Task 22

Copy out the dominant noun/verb/adjective for each part and find the words associated with them in meaning.

Task 23

Read each paragraph and find the sentence(s) that reveal(s) the idea of the title

Task 24

Give the adequate translation of the sentences from the text containing degrees of comparison.

Task 25

Copy out the topic sentence in each paragraph

Task 26

Single out the most characteristic feature(s) of opportunity cost.

Task 27

Answer the questions:

1. What is opportunity cost?

2. How is the opportunity cost of an individual’s decision determined?

3. What does a trade-off imply?

4. Opportunity cost of different people is different. Agree or disagree.

5. Why is opportunity cost unique for each person?

6. Why is water so cheap while diamonds so expensive?

7. Do you use all of your resources efficiently?

Task 28

Make a plan to retell the text.

Task 29

Points for discussion

1. Economists should be good historians.

2. Economists should be good mathematicians.

3. Economists be should good statisticians.

4. More opportunity cost problems to be solved using economic analysis. Consider both implicit and explicit costs, now and in the future:

5. Speak on the opportunity cost of going to college.

6. Speak on the opportunity cost of your current job.

7. The likely future of a city or town which has no more open land for development.

8. Decision rule you use in choosing a mode of transportation to go to work.

9. Speak on which comes firs - the want or the good?

10. Comment on the following:”The first lesson of economics is scarcity. There is never enough of anything to satisfy all those who want it”. (Thomas Sowell)

11. Define the term “resource”.

12. “From an economic perspective, few things are actually free. Even wilderness is not really free”. Comment on this quotation. ( Isn’t wilderness provided free by Mother Nature?)

13. Speak on the money as a capital resource.

14. Wants and needs in our everyday life.

15. List the three basic questions that we can ask about a society’s economy. Speak on how the production possibilities curve helps us answer.

16. Speak on which of the following is not held constant in drawing up a nation’s PPF.

1. the nation’s technology

2. the nation’s labor

3. the nation’s capital resources

4. the nation’s money income

5. the nation’s land

UNIT 2

There can be economy only where there is efficiency.

(Benjamin Disraeli)