Unit III

Part 1

Basics of Economics

economy, economics, goods, services, producer, consumer, factors of production

Text A

Economics and Economy

Every group of people must solve three basic problems of daily living: what goods and services to produce, how to produce these goods and services, and for whom to produce these goods and services.

Economics is the study of how society decides what, how, and for whom to produce.

Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Greek for oikos (house) and nomos (custom or law), hence "rules of the house(hold)."

By goods we mean physical commodities such as steel, cars, and strawberries. By services we mean activities such as massages or live theatre performances which can be consumed or enjoyed only at the instant they are produced. In exceptional circumstances, society may find that some of the questions about what, how, and for whom to produce have already been answered; until the arrival of Man Friday, Robinson Crusoe need not worry about the 'for whom' question. In general, however, society must answer all three questions.

By emphasizing the role of society, the definition places economics within the social sciences, the sciences that study and explain human behaviour. The subject matter of economics is that part of human behaviour which relates to the production, exchange, and use of goods and services. The central economic problem for society is how to reconcile the conflict between people's virtually limitless desires for goods and services, and the scarcity of resources (labour, machinery, and raw materials) with which these goods and services can be produced. In answering the questions what, how, and for whom to produce, economics explains how scarce resources are allocated between competing claims on their use.

Economics is about human behaviour. Economists analyse problems, not the subject matter of economics. Economists aim to develop theories of human behaviour and to test them against the facts.

The modern market economy is populated by three types of economic agents, whose interaction constitutes economic activity: consumers, producers, and the government. The main social purpose of the economy is to produce goods and services for the satisfaction of the needs and wants of consumers.

Consumers, typically, represent households that .provide labour, and other resources to produce against an income which they use to purchase consumer goods or to save.

Producers, typically, represent enterprises or firms that acquire factors of production, or inputs – labour, land, and capital – from households and combine them to produce outputs, or commodities which can be classified into goods-tangible commodities – and services. The activities of firms move around the sale of their output at a profit.

The third basic element, the government, is involved with the economy, on the one hand, as a producer and consumer and, on the other hand, as a regulator, supervisor and promoter of economic activities.

The economic agents are engaged in a complex web of transactions involving factors of production and outputs. However, the volume of the commodities that can be produced and purchased is limited by the scarcity of resources. This fact has two important consequences as regards economic decision-making:

a) the utilization of resources has to be efficient. In terms of the welfare of economic agents, the utilization of resources is efficient when every opportunity has been exhausted to make some individuals better off without hurting the interests of others;

b) individual economic agents and society as a whole cannot simply use more, they have to make compromises between alternative uses.

Given these constraints, consumers, producers, and the government have to make rational decisions over available resources. Rational decisions reflect choices that draw maximum profit from given resources or obtain desired results with the minimum efforts or cost.

Vocabulary list

1. to produce — производить

n. production — производство

n. producer — производитель

2. commodity — товар

3. service — услуга

4. to consume — потреблять

n. consumption — потребление

n. consumer — потребитель

5. factors of production – факторы производства

syn. agents of production

6. to emphasize — подчеркивать, выделять

7. to define — определять

n. definition — определение

8. Economics — экономика (предмет, дисциплина), экономическая теория

9. economy — экономика (хозяйство)

adj. economic — экономический (относящийся к экономике)

adj. economical — экономичный (приносящий экономию)

v. to economize — экономить, экономно расходовать

10. to exchange something for something — обменивать(ся)

in exchange for – в обмен

11. scarcity — дефицит, редкость

12. resources — ресурсы

13. to allocate — распределять, размещать

n. allocation — распределение, размещение

14. to develop — развивать(ся)

15. to apply — применять

16. to involve — вовлекать

    1. tangible — материальный

    ant. intangible

    2. welfare — благосостояние

17. constraint — ограничение

Notes

1. to reconcile the conflict — зд. погасить конфликт, примирить

2. virtually limitless desires — фактически безграничные желания

3. competing claims on — зд. различные притязания на

4. to test smth against the facts — проверять что-либо фактами

5. to be exhausted — зд. быть использованным

Ex 1. Suggest the Russian equivalents:

consumed at the instant they are produced; in exceptional circumstances; the subject matter of economics; how to reconcise the conflict; the scarcity of resources; to develop theories; interaction; the satisfaction of the needs and wants of consumers; consumer goods; tangible commodities; a regulator, supervisor and promoter of economic activities; to be engaged in a complex web; to regard economic decision-making; without hurting the interests of others; given these constraints; to draw profit.

Ex 2. Fill in the gap with the words and expressions from the text.

1. Economics is the … science that studies the ……, ……, and …… of goods and services.

2. The central economic problem for society is how …… between people’s …… and the scarcity of resources.

3. Economists aim …… of human behavior and …… the facts.

4. The economic agents are …… in a complex web of transactions involving ……

5. In terms of the ……, the utilization of resources is …… when every opportunity …… to make some individuals better off.

6. Rational decisions reflect choices that …… from given resources or …… with the minimum efforts or cost.

Ex 3. Find in the text the English equivalents for the following:

распределение и потребление товаров и услуг; потребляться в момент производства; в исключительных обстоятельствах; подчеркивать роль общества; погасить конфликт; конкурирующие притязания на использование чего-либо; их взаимодействие составляет экономическую деятельность; представлять домашние хозяйства; факторы производства; выпуск продукции; быть ограниченным дефицитом ресурсов; использование ресурсов; учитывая эти ограничения…; достичь желаемых результатов.

Ex 4. Match the term with the appropriate explanation.

Economy, inputs, Economics, output, goods, factors of production, services

1. Resources used in the production process, such as labour and raw or semifinished materials.

2. Physical commodities produced by people for other people’s consumption.

3. The social science that studies the production, distribution and consumption of goods and services.

4. An organized system for the production, distribution and consumption of wealth (the needs of society).

5. The total value of all goods produced and services performed by a producer, an industry or a country.

6. A class of economic goods that consists of the work of human in the form of physical labour, knowledge, advice and other activities.

7. The basic things that are used by man, especially land, labour, capital and enterprise, to produce economic goods.

Ex 5. Answer the questions.

1. What are the three basic problems of daily living every group of people must solve?

2. What does Economics study? Why is it placed within the social sciences?

3. What is meant by goods? By services?

4. Comment on the central economic problem for society.

5. In what way is Economics connected with human behaviour?

6. Whose interaction constitutes economic activity? Expand on their roles.

7. What is the volume of commodities to be produced and purchased limited by? What consequences does this fact involve?

8. What stands for the notion “rational decisions”?

Ex 6. Find in the text the words and phrases that mean:

1. the part of human behaviour which relates to the production, exchange and use of goods and services;

2. the production of goods and services for the satisfaction of the needs and wants of consumers;

3. a regulator, supervisor and promoter of economic activities;

4. three types of economic agents;

5. factors influencing economic decision-making.

microeconomics, macroeconomics, household budget, positive economics, normative economics