UNIT 6. The history of economic thoughts. The basic economic problems

Grammar. The Past Simple Tense

Text 1. The history of economic thought

Text 2. Main economic problems

Exercise 1. Read the text and point the main idea of it.

- General prices are determined by money.

- It is a moral obligation of businesses to sell goods at a just price.

- Various economists saw the subject of economics in different ways.

- Laissez-faire government policy is more desirable than government intervention in the economy.

Text 1. The history of economic thought

Vocabulary

wealth	богатство, материальные ценности
acquisition	приобретение
to raise price	поднимать цены
to boost	поднимать, поддерживать
treasure	сокровищница, богатство
to distribute	распределять
national output	национальная продукция
trade	торговля
alienating	отдаленный, отчужденный
the labour theory of value	трудовая теория стоимости
a free-market economy	свободная рыночная экономика
abstention	ограничение
orthodox	общепринятый
laissez-faire	невмешательство
the quantity theory of money	количественная теория денег
fluctuation	колебание, неустойчивость
employment	занятость

 

The history of economic thought deals with different thinkers and theories in the subject that became political economy and economics from the ancient world to the present day. The philosopher Aristotle examined ideas about the art of wealth acquisition and questioned whether property is best left in private or public hands.

In medieval times, scholars such as Thomas Aquinas argued that it was a moral obligation of businesses to sell goods at a just price. He was sure that that raising prices in response to high demand was a type of theft.

Scottish philosopher Adam Smith is often called the father of modern economics. In his book “The Wealth of Nations” Smith argued for a " system of natural liberty" where individual effort was the producer of social good. Smith's successors included such classical economists as Thomas Malthus, Jean-Baptiste Say, David Ricardo, and John Stuart Mill.

In London, Karl Marx criticized the capitalist system, which he described as exploitative and alienating. One of his well-known theories was the labour theory of value, contrasting to value deriving from a general equilibrium of supply and demand. He supported a free-market economy, arguing it was a natural system based upon freedom and property.

Milton Friedman (1912–2006) stands as one of the most influential economists of the late twentieth century. Friedman argues that laissez-faire government policy is more desirable than government intervention in the economy. He advocates the quantity theory of money, that general prices are determined by money.

The standard model for new classical economics is the real business cycle theory, which sought to explain observed fluctuations in output and employment in terms of real variables such as changes in technology and tastes.

 

Exercise 2. Find the following word combinations into the text, give their translation.

the history of economic thought, the ancient world to the present day, the art of wealth acquisition, private or public hands, to sell goods at a just price, a general equilibrium of supply and demand, upon freedom and property, laissez-faire government policy.

 

Exercise 3. Answer the questions.

1. What does the history of economic thought deal with? 2. Who is often called the father of modern economics? 3. Is the labour theory of value one of his well-known theories by Karl Marx? 4. Why did Karl Marx supported the free-market economy?

 

Exercise 4. Complete the sentences:

1. Aristotle examined ideas about the art of ___ acquisition and questioned whether ____ is best left in private or public hands. 2. Thomas Aquinas argued that it was a moral ___ of businesses to sell goods at a just ___ and that raising ___ in response to high ___ was a type of theft. 3. ___ is often called the father of modern economics. 4. Karl Marx supported a ___ - ____ economy, arguing it was a natural system based upon freedom and ___. 5. Milton Friedman advocates the ___ theory of money, that general ___ are determined by money.

 

Exercise 5. Find the new words and word combinations in the text, translate them into Russian.

Fundamental, assert, scarcity, finite, available, insufficient, wants and needs, to allocate, premise, to determine, to satisfy, consumer, budget, purchasing power, access, the driving force, inflation, unemployment, inequality, balance sheet.

 

Exercise 6. Match the Russian and English equivalents.

	scarcity	A	удовлетворять
	wants and needs	B	балансовая ведомость
	to satisfy	C	потребитель
	demand	D	потребность
	consumer	E	двигательная сила
	purchasing power	F	спрос
	balance sheet	G	нехватка, дефицит
	the driving force	H	безработица
	unemployment	I	предложение
	supply	J	покупательная способность, платежеспособность

 

Exercise 7. Make up the summary of the text «The history of economic thought» according to the model:

1) The title of the text is ____. 2) This text informs us on ___. 3) It is necessary to point out that ___. 4) In conclusion I'd like to say that ___.

Exercise 8. Read the text and do several exercises to it.

Text 2. Main economic problems

Vocabulary

demand	спрос
supply	предложение
scarcity	дефицит
to satisfy	удовлетворять
wants	потребности
influence	влияние
purchasing power	покупательная способность
consumer	потребитель

The economic problem, sometimes called the basic, central or fundamental economic problem, is one of the fundamental economic theories of the operation of any economy. It asserts that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs. The problem then becomes how to determine what is to be produced and how the factors of production (such as capital and labor) are to be allocated.

The economic problem is most simply explained by the question " how do we satisfy unlimited wants with limited resources? " Due to the limited resources available, businesses must determine what to produce first to satisfy demand. Consumers are considered the biggest influences of this choice, and the goods which they want must also fit within their budgets and purchasing power parity.

Needs are material items people need for survival, such as food, clothing, housing. While the basic needs of survival are important in the function of the economy, wants are the driving force which stimulates demand for goods and services. In order to curb the economic problem, economists must classify the nature and different wants of consumers.

Except these main problems there are 4 more stumbling points: inflation, unemployment, inequality where government tries to decrease the gap between rich and poor, by taking money from rich people and distributing it to poor people and balance sheet.

 

Exercise 9. Say whether the statements true or false.

1) The economic problem is one of the fundamental economic theories of the operation of any economy.

2) The main task is to satisfy a consumer’s wants and needs.

3) The problem is how to satisfy unlimited wants with limited resources.

4) Resources in the world to satisfy human wants are unlimited and will always available.

5) Wants are the driving force which stimulates demand for goods and services.

 

Exercise 10. Make up the word combinations:

to operate	resources
the factors	wants
finite	demand
unlimited	of production
to stimulate	economy

Exercise 11. Correct the mistakes.

1) Scarcity is sufficient to satisfy all human wants and needs.

2) There is no problem how to determine what is to be produced and how the factors of production are to be allocated.

3) The premise of the economic problem model is that wants are inconstant and finite due to constantly changing demands.

4) Businesses must determine what to produce first to satisfy demand due to the unlimited resources.

5) While the basic needs of survival are the driving force which stimulates demand for goods and services, wants are important in the function of the economy.

Exercise 12. Answer the questions.

1.What do we callthe basic, central or fundamental economic problem?

2. By what question do we explain the economic problem?

3. What is needs?

4. What are additional main problems in modern economy?

Exercise 13. Translate these sentences into Russian.

1. В условиях дефицита невозможно полностью удовлетворить потребности человека. 2. В экономике существуют три основных вопроса: «Как производить», «Что производить? » и «Для кого производить? ». 3. Потребности человека должны совпадать с его платежеспособностью. 4. Потребности – это материальные предметы, необходимые для выживания, например, еда, одежда, и пр. 5. В целях разрешения экономических проблем необходимо классифицировать потребности потребителей.

Exercise 14. Independently study the information about the economists known all over the words (5-6 persons). Fill in the table.

Country	Personality	Title of work	Year
Austria	Carl Menger	“Principles of economics”

 

Exercise 15. Think of examples of basic economic problems and the ways of their solution. Write an essay of 100-150 words.

 

Exercise 16. Make up the summary of the text «The history of economic thought» according to the model:

1) The title of the text is ____. 2) This text informs us on ___. 3) It is necessary to point out that ___. 4) In conclusion I'd like to say that ___.

Exercise 17. Test.

1. What does the history of economic thought deal with?	a. with different thinkers and theories from the ancient world to the present day. b. with a moral obligation of businesses to sell goods at a just price. c. with a " system of natural liberty" where individual effort was the producer of social good.
2. Who is often called the father of modern economics?	a. Adam Smith b. Karl Marx c. Aristotle
3. What is the main question in the modern economics?	a. how do we satisfy unlimited wants with limited resources? b. how do we struggle against inflation? c. how do we decrease the gap between rich and poor?
4. What is the main task of the modern economics?	a. to satisfy a consumer’s wants and needs. b. to take money from rich people and to distribute it to poor people. c. to struggle against unemployment.

 

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