2020-09-24
115UNIT FIVE
| The Basic Economic Problem Types of Economic Systems |
ESSENTIAL VOCABULARY
1. At one’s disposal –available for someone to use– у розпорядженні. Syn. available.
2. Benefit v. – to be advantageous or helpful to somebody or something; to do good to somebody or something – приносити/отримувати/мати користь/вигоду,допомагати.
3. Combination n. – two or more different things that exist together or are used or put together – комбінація, поєднання. Factor combination – поєднання факторів. Syn. a blend.
4. Consumer n. – anyone who uses goods and/or services – споживач, клієнт. Consumer choice – вибір споживача/споживчий вибір, consumer goods/ commodities – споживчі товари, the consumer(’s) preferences –перевага/ уподобання споживачів. Syn. a customer.
5. Distribute v. – to share things among a group of people – розподіляти, розташовувати. Syn. to allocate.
6. Distribution n. – the act of distributing something – розподіл. Distribution of wealth – розподіл (національного) доходу/ багатства, income distribution – розподіл доходу. Syn. allocation.
9. Encourage v. – to give support, confirmation, or approval to process or action and to rouse a person to greater effort or interest – заохочувати, підтримувати, сприяти, спонукати, стимулювати, надихати.Syn. to favour, to stimulate.
11. Incentive n. – something that serves as a stimulus to action by appealing to self-interest – спонукальний мотив, стимул, заохочення. Incentive to use one’s property – стимул використовувати чиюсь власність. Syn. an encouragement, a motive.
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12. Institution n. – a large organization that has a particular kind of work or purpose – установа, організація. Government institution – урядова організація. Syn. an organization.
13. Ownership n. –a right to hold a thing entirely as one’s own – право власності, власність. Private ownership – приватна власність.
14. Perform v. – to do something difficult or useful – виконувати, здійснювати, робити. To perform work – виконувати роботу.
15. Property n. – something that is owned or possessed – власність, майно. private property – приватна власність, public property/ownership – державна/ громадська власність. Syn. possessions.
16. Willing adj. – ready to do something without hesitation – готовий. To be willing to do something –бути готовим, робити щось охоче. Syn. ready.
Text
Whenever people gather in a community, they deal with a few universal economic problems. These fundamental questions are as crucial today as they were at the dawn of human civilization. Every human society – whether it is an advanced industrial nation, a centrally planned economy, or an isolated tribal society – must solve three fundamental and interdependent economic questions.
· What goods and services are to be produced, and in what quantities are they to be produced?
· How are these goods and services to be produced?
· Who will receive and consume these goods and services?
The first basic choice refers to what goods a society should produce and in what quantities. Every economy has limited resources at its disposal but the goods and services wanted by its people are numerous. With the limited resources society can produce all the things its people want. So an economy faces the problem what combination of goods and services should be produced? The nature of the combination depends on the consumers’ choices andpreferences reflected in market prices or in government policies.
A second basic choice relates to how to produce goods and services. Most goods can be produced in more than one way by using resources in different quantities and combinations. It is often possible to vary the factor combinationin manufacturing. Any society decides how it will organize its scarce resources in order to use them efficiently. As the economy has to economize its limited resources it has to make a choice between various production methods to produce different goods.
No one can get all he wants. Whatever is produced in an economy it cannot be sufficient to meet everybody’s wants. So a problem arises who will get and how much. This is the problem of distribution of a nation’s wealth among different groups.
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Production of goods and services is the result of the joint efforts of the owners of the four factors of production: land, labour, capital and entrepreneurship. So the total national income is distributed among the owners of these factors of production. There is no system by which goods and services may directly be distributed among the factor owners. What they get is the money income in the form of rent, wages, interest and profits. With this income they buy the goods and services. How much wage earners and profit earners can buy, land or capital owners can buy depend upon their income. So it is a problem of national income distribution.
The way that a country uses to solve three basic questions is based on its economic system. An economic system is a mechanism that deals with the production, distribution and consumption of goods and services in a particular society.
There are four main types of economic systems present in the world: the traditional economy, the command economy, the market economy, and the mixed economy.
Ø The traditional economy is an economic system in which decisions about what, how, and for whom questions are made on the basis of customs, beliefs, religion, habit, and tradition.
People’s economic roles are the same as those of their parents and grandparents. The ways they produce clothing and shelter are almost exactly the same as those used in the past. Traditions decide what these people work for a living, how their work is performed and who gets what is produced in such an economy.
It has an advantage over other systems, in that there is little disagreement among members because relatively little is disputed. However, it restricts individual initiative and has a lack of advanced goods, new technology, and economic growth.
Ø The command economy is a society where the government institutionsmake all decisions concerning what will be produced, how it will be produced, and for whom it will be produced.
In a command economy, a central authority or agency draws up plans that establish what will be produced and when, sets production goals, and makes rules for distribution. The government owns a considerable portion of the means of production, thus they are publicly owned; it also owns and directs the operations of enterprises in most industries; it is the employer of most workers and tells them how to perform their work.
A hard working citizen has no chance to benefit from his extra work because he cannot increase his standard of living any greater than it currently is and he will earn just as much as a person who makes little or no effort.
Ø The market economy (or free enterprise economy) is an economic system in which the decisions of many individual buyers and sellers interact to determine theanswers to the questions of What, How andWho.
In a market economy the fundamental economic questions are answered in the marketplace by the interaction of buyers and sellers. The question of what to produce may be based on what trend is popular right now. The producers create a product that they think they will sell well to the consumers in hope to make a profit. The question of how to produce is usually based on the producer's choice. They might decide to produce a product with more workers or with machines and computers to save on labour costs *. The question involving for whom to produce is based on the consumers who decide what they want or need and what price they are willing to pay for it.
There are several essential elements in a market economy. One of these is private property –the right of individuals and businesses to own the means of production. Unlike command economy with its public property, in a free market economy the major factors of production are privately owned. Private ownership gives people the incentive to use their property to produce things they will sell and make profits.
This desire to earn profits or the profit motive is a second ingredient in a market economy. The profit motive encourages sellers to produce commodities at the lowest possible cost.
Ø The mixed economy is an economic system that answers the three economic questions both in the marketplace and in the government*.
A mixed economy contains both privately and publicly owned enterprises and relies on the market but with a large dose of government intervention. A mixed economy usually involves producers working closer with the government to achieve economic goals.
Since no country in the world have either type of economic system in its pure form, all major economies are mixed ones because markets as well as government decisions* play a role in answering the basic economic questions. The blend of market and government participation is different in different countries with mixed economies. The optimal level of government interference remains a problem which is of interest to economists.
COMMENTS:
labour costs – витрати на робочу силу;
both in the marketplace and in the government – як на ринку, так і в уряді;
market forces as well as government decisions – як ринки, так і урядові рішення.
Exercise 1. Read, translate into Ukrainian in written form and memorize the definitions of the following economic terms and concepts.
| 1. Command economy:an economic system in which major decisions concerning the resources allocation are made by agencies of the government. | _______________________________________________________________________________________________________________________________________________________________________________ |
| 2. Economic system:the approach a country uses to deal with the scarcity and achieve its economic goals. | _________________________________________________________________________________________________________ |
| 3. Free enterprise system:an economic system based on the private ownership of property, competition, and the profit motive. | ____________________________________________________________________________________________________________________________________________ |
| 4. Market economy: an economic system in which national economic decisions are the result of decisions of individual buyers and sellers in the market place. | _______________________________________________________________________________________________________________________________________________________________________________ |
| 5. Mixed economy: an economic system that combines elements of public ownership of the means of production with private ownership. | ____________________________________________________________________________________________________________________________________________ |
| 6. Private property:the basic right of the free enterprise system that guarantees the individual’s right to own, use, and dispose of things of value. | _______________________________________________________________________________________________________________________________________________________________________________ |
| 7. Profit motive: the desire to benefit from the investment of time and money in a business enterprise. | _________________________________________________________________________________________________________ |
| 8. Traditional economy: an economic system that allocates scarce resources according to custom; change and growth are very slow; people do what their parents did before them; most goods are produced and consumed locally. | _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ |
Exercise 2. Give the Ukrainian equivalents for the following.
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1. to be at the dawn ___________________________________________________
2. wage earners ______________________________________________________
3. to solve three basic questions _________________________________________
4. on the basis of _____________________________________________________
5. there is little disagreement ____________________________________________
6. a lack of advanced goods _____________________________________________
7. to set production goals ________________________________________________
8. to be publicly owned _________________________________________________
9. to interact to determine the answers to __________________________________
10. to be based on the producer's choice ____________________________________
11. to give people the incentive ___________________________________________
12. a second ingredient _________________________________________________
13. both privately and publicly owned enterprises ____________________________ ____________________________________________________________________
14. the blend of market and government participation _________________________
____________________________________________________________________
Exercise 3. Find the English equivalents for the following.
1. повинне розв’язувати ______________________________________________
2. його не може бути у достатній кількості ______________________________
3. спільні зусилля власників ___________________________________________
4. власники факторів виробництва _____________________________________
5. заробляти на хліб __________________________________________________
6. центральна влада __________________________________________________
7. стільки ж скільки __________________________________________________
8. мати хороший збут ________________________________________________
9. бути готовим заплатити ____________________________________________
10. знаходитися/бути у приватній власності ______________________________
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11. це бажання отримати/заробити прибутки _____________________________
12. за найменшими можливими витратами _______________________________
13. значна доля урядового втручання ____________________________________
Exercise 4. Match the verbs/verbal phrases, prepositions (if necessary) and nouns/noun phrases as they occur together in the text: translate the expressions they make into Ukrainian.
| 1. | to depend | from on among for up | labour costs |
| 2. | to be distributed | the owners | |
| 3. | to be based | economic goals | |
| 4. | to work | the consumer’s choices and preferences | |
| 5. | to direct | its economic system | |
| 6. | to benefit | his extra work | |
| 7. | to save | the operations | |
| 8. | to achieve |
Exercise 5. Match these nouns/noun phrases, prepositions (if necessary) and nouns/noun phrases as they occur together in the text: translate the expressions they make into Ukrainian.
| 1. | the factor | of with among | earners |
| 2. | disagreement | living | |
| 3. | standard | capital | |
| 4. | owners | mixed economies | |
| 5. | the profit | intervention | |
| 6. | countries | members | |
| 7. | government | owners |
Exercise 6. Copy out of the text the sentences containing the words and word-combinations listed below and translate these sentences into Ukrainian.
Every human society: __________________________________________________
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the consumer’s choices: _________________________________________________
____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
the factor owners: _____________________________________________________
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
is based on: __________________________________________________________
____________________________________________________________________________________________________________________________________________________________________________________________________________
work for a living: ______________________________________________________
____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
to perform their work: __________________________________________________
____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
makes little or no effort: ________________________________________________ ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
will sell well: _________________________________________________________
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
private ownership: _____________________________________________________
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
relies on the market: ___________________________________________________
____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
markets as well as government decisions: ___________________________________
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Exercise 7. Choose from the box the words and word-combinations having the same or similar meaning to the words listed below. More than one is possible.
| 1. бути готовим робити (2) | |
| 2. бути у розпорядженні (2) | |
| 3. власність (3) | |
| 4. втручання (3) | |
| 5. державна власність (2) | |
| 6. дуже важливий (3) | |
| 7. нестача (3) | |
| 8. поєднання (2) | |
| 9. приватна власність (2) | |
| 10. розподіл (2) | |
| 11. розподіляти (2) | |
| 12. споживач (2) | |
| 13. сприяти (3) | |
| 14. стимул (3) | |
| 15. технологія виробництва (2) | |
| 16. установа (2) | |
| 17. частина (2) |
| public ownership | key | a customer | an institution | a participation |
| a technology | a dose | property | to encourage | a combination |
| private ownership | allocation | a share | an incentive | an organization |
| to be at one’s disposal | to favour | a blend | to distribute | a consumer |
| an encouragement | essential | possessions | a shortage | private property |
| a production method | a lack | a motive | distribution | to be willing |
| an interference | crucial | a deficit | to be ready | to be available |
| to stimulate | ownership | to allocate | state property | an intervention |
Exercise 8. Translate the words in brackets into Ukrainian.
Every economy has limited resources (у своєму розпорядженні) to meet (необмежені людські бажання). So the (проблема вибору) arising out of (нестачу ресурсів) faces every economy. All societies have to decide what they (готові відмовитися) to get the things they want. It is the task of an economic system to (ефективно поєднати свої ресурси), wants and (технології виробництва). To do so, it must answer (три основні та взаємозалежні економічні питання): What to produce, How to produce, and For Whom to produce with its limited resources.
Not all societies choose to answer these questions in the same way, however, (кожне суспільство намагається) to answer them (ефективно). The economic system a country has (ґрунтується на) what is best for the country. The way each question is answered identifies (тип економічної системи) that exists (у певному суспільстві). (Загалом існує) three kinds of economic systems (у світі). They are traditional, command, and market economies.
(У традиційній економіці), the custom or tradition of the society (надає відповіді на) the What, How, and Who questions.
(У суспільстві з командною економікою) it is (урядові установи) that (приймають рішення) which products will be made, they decide where (розташувати новий завод) and what factory to modernize. By setting wage rates for everyone, (центральна влада вирішує) who will receive (вироблені товари та послуга).
The most widely accepted economic system today is (ринкова економіка). In this type of economy it is (діяльність та рішення) of the buyers and sellers of goods, services and resources that (керують економічною системою).
Since there are no (як чистих командних, так і чистих ринкових економік), it is perhaps better to describe (більшість сучасних економік) as (змішані економіки), in which (як уряд, так і приватні особи) have their economic (вплив на ринок).
Exercise 9. Pair the halves of the sentences. Write your own list of the completed sentences and translate them into Ukrainian.
| 1. Since there will not be enough produced to meet everybody’s wants, | a. as its economic system. |
| 2. The central problem of economics is | b. in accordance with the laws of supply and demand. |
| 3. The market system and the ownership of wealth are | c. to make the most productive use of their means of production |
| 4. In command economies the major means of production are | d. some way will have to be chosen to determine how the output is distributed. |
| 5. Private property provides people with the incentive | e. to obtain the greatest profits at the lowest possible cost. |
| 6. The way in which a society provides answers to the What, How and Who questions is known | f. to determine the most efficient ways of allocating the factors of production and solving the problem of scarcity. |
| 7. Private property and the profit motive are | g. privately owned. |
| 8. The profit motive encourages people | h. the key elements in determining who will be rich, middle or poor. |
| 9. In market economies the major means of production are | i. one in which the decisions of many individual buyers and sellers interact to determine the answers to the questions of What, How and Who. |
| 10. A market, or free enterprise system, as it is sometimes called, is | j. essential elements in a market economy. |
| 11. Resources in a market economy are allocated | k. usually publicly owned. |
| Completed sentences | Translation |
| ____________________________________________________________________________________________________________________________________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ ______________________________________________________________________________ _______________________________________ _______________________________________ ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ | _______________________________________ _________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ |
Exercise 10. What economic terms given in the text do the following definitions refer to?
| 1. | a. An organized way of providing answers to the fundamental economic questions of What, How and Who. |
| 2. | b. The natural desire of every entrepreneur to make as much profit as possible. |
| 3. | c. A type of economic system in which the activities of firms and the allocation of productive resources are determined by government direction rather than the market forces. |
| 4. | d. An economic system in which the decisions concerning the productive resources allocation are based on tradition and custom. |
| 5. | e. A form of organization of the economy in which decisions on resources allocation are left to the independent decisions of individual buyers and sellers acting in their own best interest without central direction. |
| 6. | f. A form of organization of the economy in which some goods and services are produced by the government and some by private enterprises. |
| 7. | g. One of the essential elements in a market economy that gives each individual the right to own, use and dispose of things of value. |
| 8. | h. An economic system characterized by private ownership of property and productive resources, the profit motive to stimulate production, competition to ensure efficiency, and the forces of supply and demand to direct the production and distribution of goods and services. |
1. and economy
Exercise 11. Translate the sentences into English using the active vocabulary.
| 1. Проблема нестачі ресурсів стосується проблеми розподілу ресурсів. 2. Кожне суспільство вибирає свій особистий шлях надання відповіді на основні економічні питання Що, Як і для Кого виробляти. 3. У суспільстві з традиційною економікою більшість людей не вільні приймати рішення, які ґрунтуються на тому, що вони хочуть або що хотіли б мати. 4. У деяких сучасних суспільствах уряд відіграє значу роль у відповідях на основні питання що, як і хто. 5. Командна економіка – це така, в якій уряд приймає усі рішення щодо виробництва та розподілу багатства країни 6. У ринковій економіці основні засоби виробництва знаходяться у приватній власності. 7. Не існує ринкових економік без втручання уряду в деякі економічні проблеми. 8. Ринкова система надає окремим людям та торгівельно-промисловим підприємствам стимул виробляти речі, які хочуть покупці, та за ціною, яку вони готові заплатити. 9. Велика кількість незалежних покупців і продавців, приватна власність та мотив прибутковості – найважливіші складові ринкової економіки. 10. Усі сучасні суспільства – це суспільства зі змішаними еконо-міками, що поєднують елементи ринкової та командної економік. 11. У змішаних економіках рішення що виробляти, як його виробляти, і для кого, приймаються як ринком, так і урядом. | ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ |
Exercise 12. Answer the following questions.
1. What are the three basic economic questions that every society must answers?
2. What makes each society look for the answers to the basic economic questions?
3. Why must individuals and societies provide answers to the basic economic questions?
4. How does each society make its decisions to solve the problem of scarcity?
5. What does the What question refer to?
6. What are the ways of providing answer to the How question?
7. What does the Who question mean?
8. What is an economic system?
9. What determines the type of an economic system?
10. What categories do economic systems fall into?
11. What is a traditional economy?
12. How are the answers to What, How and Who questions decided in a society with a traditional economy?
13. Why are there few social changes within a traditional economy?
14. What is a command economy?
15. Who makes decisions on the fundamental economic questions in a society with a command economy?
16. Who owns the major means of production in a command economy?
17. Why do the individuals have very little say as to how the basic economic questions are answered?
18. What is a market economy?
19. How is sometimes a market economy called?
20. What is a free enterprise system?
21. What is a free enterprise system based on?
22. Who owns the means of production in a society with a market economy?
23. How are the basic questions decided in a market economy?
24. What role do buyers and sellers play in a market economy?
25. What is private property?
26. What role does private property play in a market economy?
27. What is the profit motive?
28. What is the main incentive of a free enterprise, or market, economy?
29. How do the individuals benefit from a market economy?
30. What is a mixed economy?
31. Why are there neither pure market economies nor pure command economies?
32. Why are economic systems of most democratic countries called mixed economies?
Questions for economic reasoning and discussion
1. The “profit motive” is sometimes said to be the most fundamental feature of a market system. What do you suppose is meant by the “profit motive”?
2. If no pure market economy exists and no pure command economy exists, why does economics deal with these concepts?
3. Choose the right variant. In some tasks more than one is possible.
1. Which of the following best describes the three fundamental economic questions?
a. What to produce, when to produce, and for whom to produce.
b. What to produce, when to produce, and where to produce.
c. What time to produce, what place to produce, and how to produce.
d. What to produce, how to produce, and for whom to produce.
e. What do corporations want, how can corporations control government, and for whom is the land despoiled.
2. Choose the main characteristics of a traditional economy.
a. The government controls the means of production and distribution.
b. Economic decisions are made according to age-old customs.
c. People meet basic needs by hunting, gathering (уборка врожаю) and farming.
d. There is little technology.
e. There is a competition for business.
3. In a command economy, the use of resources is determined by
a. public ownership and private sector decision making.
b. private ownership and government decision making.
c. private ownership and private sector decision making.
d. public ownership and government decision making.
4. Choose the main characteristics of a command economy.
a. There is little technology.
b. Businesses are not run for profit.
c. Individual profit is the primary motivator.
d. There is little or no competition.
e. The government controls the means of production and distribution.
f. The government makes all economic decisions.
5. To a supporter of a free enterprise economic system, the factors of production are put to best use when controlled by:
a. private individuals
b. labour unions
c. public officials
d. foreign investors.
6. Choose the main characteristics of a market economy.
a. There is a competition for business.
b. Making money is the primary motivator.
c. People can own their own property and go into business for themselves.
d. There is little technology.
e. The government makes all economic decisions.
f. Businesses are privately owned.
7. A market exists
a. where consumers express their needs and wants.
b. when products are advertised.
c. where merchants build shops.
d. where buyers and sellers exchange goods and services.
8. Which of the following statements is incorrect regarding the free market systems?
a. Private property does not exist.
b. Innovation and entrepreneurship are central to free market systems.
c. Some economic activity is not determined by the price mechanism and is provided by the government in the form of public goods.
9. The special role of the profit motive in a market economy is that it
a. drives sellers to produce what buyers want.
b. results in high prices.
c. discourages people from taking risks.
d. keeps people from going into business.
10. In a mixed economy, economic decisions regarding scarcity and factors of production are made by the
a. corporations and labour sector.
b. private sector.
c. public sector.
d. public and private sectors.
11. A mixed economy is best described by the statement:
a. In a mixed economy, society answers the “what”, “how”, and “or whom' questions through a market system.
b. In a mixed economy, government policies determine the “what”, “how”, and “for whom” questions.
c. In a mixed economy, the government and the private sectors interact in solving the basic economic questions.
d. In a mixed economy, the invisible hand solves the basic economic questions.
