UNIT 7. The world economy. The WTO

Grammar. The Gerund

Text 1. Scarcity

Text 2. Command and market economy

Text 3. Marketing Mix. What is Marketing?

Text 4. Price

Text 5. The World Trade Organization

Exercise 1. Read the text and answer the following questions:

1. Why must all societies deal with scarcity?

2. Why economics is sometimes called “the study of scarcity and choice”?

3. What is understood by tradeoffs and opportunity costs?

4. Why should everybody understand basic economics?

Text 1. Scarcity

Vocabulary

borrowing power / ability to borrow / credit capacity	кредитоспособность (эк.); кредитная сила (бирж.)
savings	сбережения
trade(-)off	закупать товары
cause-and-effect relationships	причинно-следственные связи
enact a law	принимать закон
hoard of gold	золотой запас
to attain a goal	достигать цель
subsistence level	прожиточный минимум; уровень жизни
to cut back production	сократить объёмы производства
wage rates	ставки заработной платы
the means of production	средства производства
to result in sth	привести к ч-л
economic forces	экономические факторы
opportunity cost	цена возможности; упущенная прибыль
private individuals	частные лица
private ownership	частная собственность

One of the things that young people discover as they grow older is that you can’t have everything. You are reminded of it every time you shop. Although you may see twenty or thirty items that you would really like to buy, you know that you will have to limit your selection to one or two. Everyone goes through life having to make choices. Every business must pick and choose from among the things they would like to have, because, like you and me, they cannot have everything. Governments, too, cannot have everything. Every year the most important political debates concern questions about spending taxpayers’ money. Neither individuals nor societies can have all the things they would like to have. There simply is not enough of everything to go around. Economists note that there is no limit to the amount of kinds of things that people want. There is, however, a limit to the resources, things used to produce goods and services, available to satisfy those wants. Once the limit is reached, nothing else can be produced. To summarize: human wants are unlimited, but the resources necessary to satisfy those wants are limited. Thus, every society is faced with the identical problem, the problem of scarcity.

Since there is a limit to the amount of resources available at any point of time, there is also a limit to the amount of goods and services that can be produced. So, individuals, business firms, and governments must pick and choose from among the things that they would like in order to get the most from their resources. The way in which society goes about answering fundamental questions «what? ”, “how? ” and “who? ” is known as its economic system.

 

Exercise 2. Translate the following sentences into Russian.

1. Everyone goes through life having to make choices. 2. Every society is faced with the identical problem, the problem of scarcity. 3. The need to choose is imposed on us all by our income, wealth and ability to borrow. 4. The opportunity cost of something is its cost measured in terms of what you have to give up in order to get it. 5. The government went out of its way to attain that goal. 6. It followed that the wisest thing the government could do would be to keep its hands off business and let nature take its course.

 

Exercise 3. Read the sentences from the text. Decide whether each sentence is true, false or not stated in the given text.

This sentence is

- true; - false; - not stated.

Everyone goes through life having to make no choice.

This sentence is

- true; - false; - not stated.

Economists note that there is no limit to the amount of things that people want.

This sentence is

- true; - false; - not stated.

Human wants are unlimited, but the resources are limited.

This sentence is

- true; - false; - not stated.

Not every society is faced with the problem of scarcity.

This sentence is

- true; - false; - not stated.

The way in which society solve «what? ”, “how? ” and “who? ” to produce is known as its economic system.

 

Exercise 4. Match the Russian equivalents to the English ones.

	валовой внутренний продукт	A	overheated economy
	потребительские расходы	B	public savings
	перегретая экономика	C	rate of economic growth
	текущая стоимость	D	Gross National Product (GNP)
	уровень безработицы	E	consumption spending
	темпы экономического роста	F	medium of exchange
	акции высокодоходных компаний	G	Gross Domestic Product (GDP)
	норма обязательных резервов	H	transaction costs
	общественные сбережения	I	blue chips
	совокупный спрос	J	labor force
	валовой национальный продукт	K	required reserve ratio
	невидимые рычаги рынка	L	invisible hands of the market
	операционные издержки	M	present value
	средства обращения; средство обмена	N	aggregate demand
	рабочая сила	O	aggregate demand
	безотзывный аккредитив	P	irrevocable letter of credit

 

Exercise 5. Choose the synonyms from the column B to the words in the column A.

A	B
cost	administration
growth	expenditure
benefit	merchandise
equilibrium	increase
consumption	income
management	stability
goods	value

 

Exercise 6. Make up the summary of the text «Scarcity» 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 7. Read, translate and discuss the text.

Text 2. Command and market economy

Vocabulary

the command economy	командная экономика
the market economy	рыночная экономика
predominant	преобладающий
to charge	ставить
advantage	преимущество
standards of living	уровень жизни
incentive	мотивация
to intervene	вмешиваться
wage	заработная плата
shortage	дефицит
improvement	улучшение

 

Traditionally, three models of an economy have been used: the command or planned economy, the market economy where government has little interference and laissez-faire is predominant, and the mixed economy.

In a command economy, decisions about what and how much to produce, where to locate economic activities, and what prices to charge for goods and services are made by a single, central government agency or authority. In a command economy, the government controls the price of goods including agricultural products. A planned economy has a number of advantages:

- everyone in society receives enough goods and services to enjoy a basic

standards of living;

- the state can use its control of the economy to divert resources to

whatever it wants. As a result, it can ensure tat everyone receives a good education, proper health care and so on.

Several disadvantages also exist:

- there is no incentive for individuals to work hard;

- any profits that are made are paid to the government;

- citizens cannot start their own businesses.

In a market economy, decisions about what and how much to produce, where to locate economic activities, and what prices to charge for goods and services are determined by laws of supply and demand and the market. Profit drives decisions in a market economy. There are several advantages of it:

- the government does not intervene in the management of the economy;

- workers are paid wages by employers according to their skills and how

many firms with to employ them;

- consumers spend their money on goods and services they are favoured;

- firms get more profits;

- new advanced products and low prices;

But there are the following problems:

- some goods would be underpurchased;

- there are goods and services that are impossible to supply individually;

The former USSR is an example of a command economy. Stalin's emphasis on centralization, state ownership of the means of production, and centrally planned production and distribution set the tone for the development of the Soviet economy through the State Planning Commission (GOSPLAN). However, these gains were obtained at the expense of consumer goods. The civilian population constantly suffered from a low standard of living and shortages of consumer goods.

A mixed economy contains elements of both market and planned economies. Here some resources are controlled by the government whilst others are used in response to the demands of consumers. The aim of mixed economy is to avoid the disadvantages of both systems while enjoying the benefits that they both offer.

In contrast to centralization, individuals pursue their own best interests and this mutual pursuit of individual interest encourages innovation and improvement. Competition encourages innovation, and capitalism has produced well over a century of dizzying technical progress.

 

Exercise 8. Explain the word combinations, translate them into Russian. Quote the sentences in which they are meat:

laissez-faire	consumer goods
consumer goods	standard of living
to charge prices	shortages of consumer goods
supply and demand	pursue their own best interests
imbalances in distribution	competition
means of production

 

Exercise 9. Fill in the gaps.

1. Three models of an economy have been used: the …economy, the … economy and the … economy. 2. Individual freedom is one of the … of the market economy. 3. In a … economy, the government controls the price of goods including agricultural products. 4. In a … economy, decisions about what and how much to produce, where to locate economic activities, and what prices to charge for goods and services are determined by laws of … and … and the market. 5. The civilian population constantly suffered from a low … of … and shortages of … goods. 6. … encourages innovation, and capitalism has produced well over a century of dizzying technical progress.

 

Exercise 10. Say whether the sentences are true or false.

1. In the market economy each person is free to choose how they wish to put their income to use. 2. In a command economy, decisions about what and how much to produce and what prices to charge for goods are made by a businessmen to whom this or that company belongs to. 3. In a market economy, decisions about what and how much to produce, where to locate economic activities, and what prices to charge for goods and services are determined by laws of supply and demand and the market and made by a single, central government agency or authority. 4. In the former USSR the civilian population constantly suffered from a low standard of living and shortages of consumer goods.

 

Exercise 11. Answer the following questions.

1. What are the main features of a command economy? 2. What are the main features of a free market? 3. What modern countries have market economy and command economy? 4. How can you describe the current type of Russian economy? Is it right to assume that this country presents an example of a purely market economy model?

 

Exercise 12. Fill in the table.

	ADVANTAGES	DISADVANTAGES
Command economy
Market economy
Mixed economy

 

Exercise 13. Read, translate and discuss the text. Study new words and find them in the text below.

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