Exercise 1. Listening (Guide to Economics, unit 8 “Factors of Production” – track 23)

“Entrepreneurship is the fourth factor of production”. Which things from the list below do you think entrepreneurs bring to the economy?

• Managing people

• Motivating people

• Finding solutions to problems

• Communicating with customers

• Inventing new products

• Finding new markets

• Making profits

• Organising things

• Taking risks

Listen and check your predictions

Exercise 2. Listening (Guide to Economics, unit 5 “Opportunity cost” – track 15)

Exercise 1.4 (study Guide, unit 1). Use the words - economic, economical, economist, economics, economy, economize - to complete the sentences below. Use each word once only.

1. The subject matter of ______________________________ is that part of human behavior which relates to the production, exchange and use of goods and services.

2. The heart of Adam Smith’s philosophy was his belief that the __________________________ would work best if left to function on its own without government regulation.

3. Since there is not enough of everything to go around, everyone needs to make choices from among things they want. In the process they will try to ___________________________.

4. David Ricardo is one of history’s most influential _______________________________.

5. In many cases ___________________________ issues can not be solved with theories and models alone. Solution to these problems involves opinion, politics and personal value judgements.

6. It is usually more ___________________ to buy large quantities of a product than small quantities.

• Video (ttc Economics 01) “How Economists Think”

• Exercise on Listening (Basic Economics). “What is economics?” Chapter 01

I-1. The Basic Economic Problems

The central problem of economics is to determine the most efficient ways to allocate the factors of production and solve the problem of scarcity created by society’s unlimited wants and limited resources. In doing so, every society must provide answers to the following three questions:

What goods and services are to be produced and in what quantities are they to be produced?

How are those goods and services to be produced?

Who will receive and consume (get to use) those goods and services?

What Goods and Services Are to be Produced and in What Quantities Are They to be Produced?

Individuals and societies can obtain things by producing them themselves, exchanging things that they already own for them, or receiving them as gifts. Since a society cannot have everything, it must decide which goods and services it will have now and which ones it is willing to postpone having or give up completely. For example, there are those who say that the United States should put more of its efforts into improving production of basic commodities, such as automobiles and steel. They wish to prevent the further loss of trade to competitors such as the Japanese. In order to achieve this goal, they urge our nation to devote more effort to developing basic goods and services rather than luxury items.

Sometimes the choices can be quite difficult. For example, there are nations today, known as less-developed countries (LDC's), that are so poor it takes the effort of most of their labor force just to feed and clothe their people. For such a society to raise its living standards it would be necessary to increase production beyond present levels. But if everyone in the country is already working at a full-time job, how can total production be increased?

One way to increase total production in the future would be to modernize. This might require shifting workers out of the production of food and clothing and into the production of additional capital such as machines, tools and factories. To do so, however, would mean that less food and clothing would be produced for present use in order to increase output some time in the future. For a nation with large numbers of people living in poverty even the slightest reduction in the food supply could trigger widespread hunger. Fortunately, there are many international agencies and generous nations, such as the United States, that have provided aid to the LDC's, helping them modernize while feeding their people.

How Are Those Goods and Services to be Produced?

There is more than one way to build a home or a school, manufacture an automobile, or farm a piece of land. Will the school consist of many stories or one floor? Will the automobile assembly line use robots? How much farmland will be used for corn and how much for wheat?

With the exception of the school building, which in most instances would be a government project, all these questions would be answered in this country by private individuals. In other parts of the world, however, how to manufacture an automobile might well be a decision made by the government. As for farming practices, some societies leave that to government to decide, others follow long-honored traditions, while in still others the farmer decides.

Who Will Get to Use the Goods and Services Produced by the Economy?

Since there will not be enough produced to satisfy everybody's wants, some way will have to be devised to determine how the output is divided. Who, for example, will get to ride in limousines; who will have to use public trans­portation; and who will have to walk?

Society has answered these questions in many ways. In some countries those of noble birth are entitled to a larger share of the nation's output than others. In other countries membership in a particular political party has been the key to wealth. Here, in the United States, the market system and the ownership of wealth are the key elements in determining who will be rich, middle class or poor.

Exercise . Understanding a lecture: Yates, Unit 3.

1. You are now going to hear part of a lecture, divided into sections to help you understand it. As you listen, answer the questions below.

Section 1

• Complete the following statement correctly:

The lecturer has mentioned two economic issues. In this lecture he is going to talk about

the first issue _________

the second issue _________

• Note down what the issue is: ______________________________________________________________________

Section 2

• The lecturer mentions five necessities of life. Note down as many as you can:

_____________________________________________________________________________________________

_____________________________________________________________________________________________

• Complete the following statement correctly:

By 'neighbours' the lecturer means:

people living next door to you _________

people living in the same town as you _________

people living in the same country as you ________

people living anywhere in the world _________

Section 3

Are these statements correct or incorrect? If the answer is correct put a tick. If it is wrong, put a cross.

• National income is the money received by the government. _________

• World income is the total of what every individual in the world earns. _________

Sections 4, 5 and 6

• Fill in the figures the lecturer gives you in the table below.

Table 1-1
World Population and Income in the Early 1980s
	Poor countries	Middle-income countries	Major oil countries	Industrial countries	Soviet bloc
Income per head
Percentage of world population
Percentage of world income
Source: World Bank, World Development Report

Section 7

• Complete the following statement correctly

Most of the world's goods are produced for poor countries _________

middle-income countries _________

major oil countries _________

industrial countries _________

Section 8

Are these statements correct or incorrect?

• Workers in poor countries produce less than those in rich countries.

• There is nothing governments can do about the distribution of income.

2. Write a summary of the lecture, based on your notes.