Basics of Economics

Vocabulary

basic – основной, главный

to buy – покупать

be concerned with – заниматься чем-л., касаться чего-л.

business – дело, занятие

capital goods – основные средства, средства производства

capital resources – капитал компании, собственные фонды

choice – выбор

to choice – выбирать

to make a choice – делать выбор

to consume – потреблять

consumer – потребитель

consumer goods – товары народного потребления

consumption – потребление

to define – определять

definition – определение

distribution – распределение

economic – экономический

economic forces – экономические факторы

economical – экономичный, экономный

economically – экономично, экономно

economics – экономика (как наука)

economist- экономист

economy – экономика (страны, мира)

to economize – экономить

to employ – нанимать на работу

envisage – рассматривать

expenditure – расходы

goods – товары

income – доход

to invest – вкладывать

to meet one′s wants – удовлетворять потребности

money – деньги

need – первостепенная необходимость

precisely – точно

producer – производитель

product – продукт, продукция

production – производство

to produce – производить, выпускать

to purchase – покупать, закупать

purchase – покупка, закупка

relationship – связь, отношение

resource – ресурс, средство

resources – ресурсы

human resources – кадры, персонал

natural resources – природные ресурсы

scarce – дефицитный

science – наука

service – оказание услуг, обслуживание

tax – налог

to use – использовать, применять, употреблять

use – использование, применение, употребление

wants – потребности

wealth – богатство

Vocabulary Exercises

Exc. 1. Choose the right variant.

1. I am a student of (economy, economics) now.

2. At school I didn’t study the (economy, economics) of Great Britain.

3. I hope he will be a good (economist, economy).

4. There are many (economic, economical) problems in the world.

5. This car is very (economic, economical).

6. I try to spend money and time (economical, economically).

7. This car (economize, economy) fuel.

Exc. 2. Match the words with their definitions.

1. produce a) an amount of money that you must pay to the government

2. money b) when a person has his own company and he produces, buys or sells goods or services

3. tax c) to make things for sale

4. choice d) it helps you to buy things

5. business e) the right to choose between several things

Exc. 3. Choose the right variant and complete the sentences.

economist resource employ economy use

1. The system by which a country’s money and goods are produced and used is called ... .

2. Canada is rich in mineral ... .

3. The main aim of an ... is to study the way in which money and goods are produced and used and the systems of business and trade.

4. I always ... this sort of toothpaste.

5. The company ... 2000 people worldwide.

Exc. 4. Read and translate the text.

Defining Economics

What do you think of when you hear the word economics? Money, certainly, and perhaps more complicated things like business, inflation and unemployment. The science of economics studies all of these, but many more things as well. Perhaps you think that economics is all about the decisions that governments and business managers take. In fact, economics study the decisions that we all take every day.

Economics is a science concerned with how people use available resources to satisfy their wants through the process of production and exchange.

There have been many definitions of economics in the past. The earliest definitions envisaged economics as the study of wealth and the older name for economics was “political economy”. Later economics was defined as “the practical science of the production and distribution of wealth”.

At the turn of the 19^th century economists defined economics as a study of man’s actions in the ordinary business of life. At that time economics focused on how men got their incomes and used them.

In more recent years, the subject of economics was defined more precisely as “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses”.

Today economics deals with data on income, employment, expenditure, prices, production, consumption, transportation and trade.

Exc.5. Discuss the following:

• What does economics study?

• Does it study only such things as business, inflation, money?

• What is economics as a science concerned with?

• What is the earliest definition of economics?

• What definition of economics do you like more?

• What does economics deal with today?

Part I

Text 1. Basics of Economics

Task 1. Read and translate the text, paying attention to the italicized words.

The study of the choices people make in an effort to satisfy their wants and needs is called economics. Wants and needs refer to people’s desires to consume certain goods and services. In economic terms, a good is a physical object that can be purchased. A record, a house, and a car are examples of a good. A service is an action or activity done for others for a fee. Lawyers, plumbers, teachers, and taxicab drivers perform services. The term product is often used to refer to both goods and services.

The people who wish to buy goods and services are called consumers and the goods that they buy are called consumer goods. The people who make the goods and provide services that satisfy consumers’ wants and needs are called producers.

Economists generally classify as needs those goods or services that are necessary that are necessary for survival. Food, clothing, and shelter are considered needs. Wants are those goods or services that people consume beyond what is needed for survival.

The need for making choices arises from the problem of scarcity. Scarcity exists because people’s wants and needs are greater than the resources available to satisfy them. Thus people must choose how best to use their available resources to satisfy the greatest number of wants and needs.

A resource is anything that people use to make or obtain what they want or need. Resources that can be used to produce goods and services are called factors of production.

Economists usually divide these factors of production into three categories: (1) natural resources, (2) human resources, (3) capital resources. Today many economists have added technology and entrepreneurship to this list.

Natural Resources

Items provided by nature that can be used to produce goods and to provide services are called natural resources. Natural resources are found in/or on the earth or in the earth’s atmosphere. Examples of natural resources on the earth are fertile land, vegetation, animals, and bodies of water. Minerals and petroleum are examples of natural resources that are found in the earth. Atmospheric resources include the sun, wind and rain. A natural resource is considered a factor of production only when it is used to produce goods and to provide services.

Human Resources

Anyone who works is considered a human resource. Any human effort that is exerted in production process is classified as a human resource. The effort can be either physical or intellectual. Assembly-line workers, ministers, professional sports figures, physicians, store clerks, and sanitation engineers are all human resources.

Capital Resources

The money and capital goods that are used to produce consumer products are called capital resources. Capital goods include the buildings, structures, machinery, and tools that are used in the production process. Department stores, factories, industrial machinery, dams, ports, wrenches, hammers, and surgical scalpels are all examples of capital goods.

Economists make an important distinction between capital goods and consumer goods. Capital goods are the manufactured resources that are used in producing finished products. Consumer goods are the finished products – the goods and services that consumers buy.

Some products can be either capital goods or consumer goods, depending on how they are used. A bicycle purchased for personal use is a consumer good. The same is not true when the bicycle is purchased by a New York messenger service. Because the messenger service will use the bicycle to make deliveries – to provide a service – the bicycle is considered a capital good.

Technology

The use of science to create new products or more efficient ways to produce products is called technology. Technology makes the other factors of production – natural, human, and capital resources – more productive. Technological advances in the computer industry, for example, have increased efficiency in the workplace.

Entrepreneurship

The risk-taking and organizational abilities involved in starting a new business or introducing a new product to consumers are called entrepreneurship. The goal of entrepreneurship is to create a new mix of the other factors of production and thereby create something of value. The entrepreneur is a person who attempts to start a new business or introduce a new product.

Essential Vocabulary

entrepreneur – предприниматель

entrepreneurship – предпринимательство

factor of production – движущая сила производства

fee – вознаграждение, гонорар

for a fee – за плату

satisfy – удовлетворять (кого-л.; чьи-л. требования, запросы)

scarcity – нехватка, дефицит

survival – выживание

technological advances – технический прогресс

technology – техника, технические и прикладные науки

Task 2. Translate the following words and word combinations or find Russian equivalents.

1. to make delivery

2. wide range of goods

3. existing resources

4. necessary for survival

5. beyond what is needed for survival

6. to provide a service

7. to increase efficiency in the workplace

8. to take the risk

9. to start a new business

10. to introduce a new product

Task 3. Translate the following sentences into Russian.

1. In economic terms, a good is a physical object that can be purchased.

2. The need for making choices arises from the problem of scarcity.

3. Resources that can be used to produce goods and services are called factors of production.

4. A natural resource is considered a factor of production only when it is used to produce goods and to produce services.

5. Economists make an important distinction between capital goods and consumer goods.

6. Technological advances in the computer industry, for example, have increased efficiency in the workplace.

Task 4. Fill the gaps in the sentences below with the words and expressions from the box. There are two expressions which you don’t need to use.

producers, factors of production, human resource, technology, wants, service, capital resources, consumer goods, entrepreneur, economics

1. The study of the choices people make in an effort to satisfy their wants and needs is called _______.

2. A __________ is an action or activity done for others for a fee.

3. The people who make the goods and provide services that satisfy consumers’ wants and needs are called _________.

4. ________ are those goods or services that people consume beyond what is needed for survival.

5. Resources that can be used to produce goods and services are called _______.

6. The money and capital goods that are used to produce consumer products are called __________.

7. The use of science to create new products or more efficient ways to produce products is called ____________.

8. The _________ is a person who attempts to start a new business or introduce a new product.

Task 5. Find English equivalents for the following Russian expressions and words.

1. движущая сила производства

2. природные богатства

3. кадры

4. выживание

5. открыть новое дело / бизнес

6. за плату

7. товары народного потребления

8. средства производства

9. технический прогресс

10. внедрить новый продукт

Text 2. What are microeconomics and macroeconomics?

Task 1. Read and translate the text.

Economists talk about microeconomics and macroeconomics. Microeconomics deals with people like you and me and private businesses. It looks at the economic decisions people make every day. It examines how families manage their household budgets. Microeconomics also deals with companies – small or large – and how they run their business. Macroeconomics, on the other hand, looks at the economy of a country – and of the whole world. Any economist will tell you, though, that microeconomics and macroeconomics are closely related. All of our daily microeconomic decisions have an effect on the wider world around us.

Another way to look the science of economics is to ask, “what’s it good for?” Economists don’t all agree on the answer to this question. Some practice positive economics. They study economic data and try to explain the behaviour of the economy. They also try to guess economic changes before they happen. Others practice normative economics. They suggest how to improve the economy. Positive economists say, “this is how it is”. Normative economists say, “we should …”.

So what do economists do? Mainly, they do three things: collect data, create economic models and formulate theories. Data collection can include facts and figures about almost anything, from birth rates to coffee production. Economic models show relationships between these different data. For example, the relationship between the money people earn and unemployment. From this information economists try to make theories which explain why the economy works the way it does.

Task 2. Now read the text again and match each paragraph with the correct heading.

1. How economists work

2. Making deals every day

3. Various ideas about economics

4. Two areas of economics

5. Two types of economists

Task 3. Match the words with the definitions

1. budget A. the people who control a country and make laws

2. business B. information

3. convenience C. company that sells goods or services

4. data D. easiness

5. demand E. the amount of money you have for something

6. government F. how much people want something

7. inflation G. the number of people without work

8. resources H. rising prices

9. trade – off I. giving away something in exchange for something

10. unemployment J. something such as money, workers or minerals belonging to an organization, country, etc. which can be used to function properly

Text 3. Macroeconomics

Task 1. Read and translate the text.

In the 1930s one of the world’s strongest economies suffered a devastating collapse. It was the American economy and the disaster was the Great Depression. The effects of the Great Depression were felt all around the world and it brought about a change in economic thinking. Economists began to realize that looking at the behaviour of individual consumers and suppliers in the economy was not enough. Economists and governments had to understand how the whole economy worked. In other words they had to have an understanding of macroeconomics.

Microeconomics looks at how the details of the economy work. Macroeconomics takes a few steps back and looks at the whole picture. While microeconomics looks at supply and demand for a single product or industry, macroeconomics follows supply and demand patterns for the whole economy. Whereas microeconomics is about economic events at home, macroeconomics looks at how the domestic economy interacts with the economies of other countries.

However, macroeconomics isn’t only about knowing what’s happening in the economy. After the shock of the Great Depression governments realized that an economy needs to be managed. Most governments aim to have steady economic growth to control inflation and to avoid recessions. Just managing an individual business is a hard enough task. How do you manage a whole economy? Governments have certain mechanisms which help them to do this.

The first of these mechanisms is fiscal policy. Fiscal policy refers to the tax system and to government spending. By increasing or decreasing the amount of tax people must pay, the government can affect how much money people have available to spend (disposable income). This, in turn, has an effect on demand in the market. By increasing or decreasing their own spending governments can have a huge effect on the growth of the economy.

The second mechanism is monetary policy. With its monetary policy a government sets interest rates and also controls the amount of money that circulates in the economy. The interest rate the government sets influences the rate that commercial banks set when they lend money to customers. Interest rates have a big impact on the economy. For example, they can affect people’s decisions about saving or spending money.

The third mechanism is administrative approach. This is a range of things that governments do to increase the supply of goods and services to the economy but without increasing prices. There are a number of ways governments try to do this. For example, improvements in education and training can make the workforce more productive. Investment in technology can make industry more efficient. Governments can also change employment and business laws to make the market more competitive.

With a combination of these methods governments try to steer or guide the economy on a steady and predictable path. They aim for gradual economic growth and to avoid disasters like the Great depression.

Task 2. Now read the text again and answer the questions.

1. Which countries were affected by the Great Depression?

1. only America

2. just America and Europe

3. the whole world

2. Which of the following is interested in foreign economies?

1. microeconomics

2. macroeconomics

3. both microeconomics and macroeconomics

3. The three different mechanisms which governments use are …

1. all concerned with how much money people have to spend.

2. aimed at improving education and training.

3. all different ways of managing an economy.

4. Which mechanisms involve changing interest rates?

1. fiscal policy

2. monetary policy

3. administrative approach

5. Which mechanisms might involve creating job training schemes for school leavers?

1. fiscal policy

2. monetary policy

3. administrative approach

6. What do governments want to achieve with their macroeconomic policies?

1. to predict what will happen in the economy

2. to create steady economic growth

3. to combine different paths for economic growth

Task 3. Match the words and phrases with the definitions.

devastating collapse something that happens

fiscal policy a method or tool for doing something

domestic control of spending through taxation

steady growth money you gave to spend after paying tax

monetary policy a serious slowing down of the economy

recession at a slow, unchanging rate

mechanism move around

disposable income control of the cost of borrowing and movement of money in economy

interest the members of the population able to work

circulate something you know will happen

depression complete destruction

predictable the cost of borrowing money

event not foreign

workforce a very bad period for the economy

Task 4. Complete the crossword. Some letters have been given to help you.

ACROSS	DOWN
1. This kind of economy is both planned and free market.	2. This kind of economics looks at the whole picture.
3. The first kind of economy that existed	7. In this economy, the government decides everything.
4. The point where demand and supply meet.	8. This falls as prices rise.
5. This kind of economics simply describes the economy.	9. In this kind of economy, price is set by supply and demand.
6. A measure of how much demand influences price.	12. Something that can be measured, like money spent or babies born.
10.This kind of economics makes recommendations.
11.This kind of economics looks at the details of the economy.

Task 5. Find six pairs of opposites.

• benefits ■ consumer■ drawbacks

• drought ■ flood ■ manufacturer

• private sector ■ save ■ shortage

• spend ■ state sector ■ surplus

Task 6. Now write five example sentences using as many words as possible from this exercise.

Task 7. Complete the text with one word for each gap. The first fetter has been given.

The traditional economy is the oldest form of economy. It has existed for thousands of years, although today it has almost disappeared. People in a traditional economy do not own (1) p………They do not earn a (2) s ……..and thus neither do they pay (3) t………In fact, there is no money. They live on the raw (4) m………that the forest provides them. They don't grow food or have any organized (5) a………with farms and (6) с………growing in fields. Instead, they (7) g………wild fruit and vegetables or (8) h………wild animals. They eat most of the food they find, and may (9) h………some food for the winter, but they do not sell it. It's a difficult life. There are often (10) s………of food when there is not enough to eat. When this happens, the (1l) t………must move on to another part of the forest.

For the next session