Market Economy (1400)

In market economy, two societal units are very important: the individual and the firm. Individuals own resources and con­sume products, while firms use resources and produce products. The market mechanism involves an interaction of price, quan­tity, supply, and demand of resources and products.

The key factors that make the market economy work are consumer sovereignty and the freedom of the enterprise to operate the market. As long as both units are free to make deci­sions, the interplay of supply and demand should ensure prop­er allocation..

The market economy has been highly successful in most in­dustrial countries, especially in the United States. A perfect mar­ket economy does not exist in the United States owing to three major factors: large corporations, labour unions, and the govern­ment. The large corporation can reduce market procedures some­what by exerting control over the purchase of resources or the resale of products. Because of the large size of the firm and rel­ative smallness of each individual shareholder, there is a wide gap between ownership and control of decision making. Decisions may or may not be strictly motivated by the market.

Labour unions evolved to response to the power exerted by the owners and managers of business over the labour market. Tremendous benefits in terms of salaries, fringe benefits, work conditions have been won by the unions, but market forces have been disrupted seriously. Many unions control entry into the work force and restrict the freedom of workers to change occu­pations in response to supply and demand.

Centrally Planned Economies (350)

In centrally planned economies the government tries to har­monize the activities of the different economic sectors. In the extreme form of central command, goals are set for every en­terprise in the country and must be followed. The government determines how much is produced, by whom and for whom.

At the heart of a centrally planned economy is its blueprint, generally a five-year plan. Based on this overall plan, special targets are set each year for each sector of economy.

Mixed Economies (500)

By definition, no economy is purely market determined or centrally planned. The United States and the former Soviet Union represent different ends of the spectrum of mixed econ­omies. In practice, however, mixed economies generally have a higher degree of government intervention than is found in the United States and a greater degree of reliance on market forc­es than is found in the former Soviet Union. Government in­tervention can be regarded in two ways: actual government ownership of means of production and government influence in economic decision making.

Vocabulary list:.

to define — определять, давать определение;

definition — определение;

mixed — смешанный;

allocation — размещение, распределение;

allocation of resources — распределение ресурсов;

property — собственность;

ownership — владение, собственность, право собственности;

private — частный;

public — государственный;

postal service — почтовая служба;

utilities — коммунальные службы;

to consume — потреблять;

supply — предложение;

demand — спрос;

adequate — соответствующий;

to purchase — приобретать;

gap — пропасть, разрыв;

to evolve — возникать;

fringe benefits — дополнительные льготы;