Unit II Topic: Types of Economic Systems

Text A: Traditional Economy Text B: Command Economy Text C: Market Economy Text D: Mixed Economy

Grammar: the Articles, the Adjectives, the Pronouns, the Present Perfect

I.Practise the pronunciation of the following words:

a) Stress the first syllable:

scarcity, property, private, common, major, stagnant, drastically, final, similar, flexible, almost, rural, surplus, implement, category, sanction, mechanism, structure, argue, ancient, Asia, Africa, native, shelter, legal, balance, tribal, disadvantage;

b) Stress the second syllable:

activity, advantage, result, economy, decade, survive, survival, society, decision, ability, variety, expected, incentives, producer, sustain, rigidity, familiar, provide, appearance, instead, remote, entire, advanced, obtain, subsistence, discourage.

II.Before you read answer the following questions:

1. How would you define the economic system?

2. What economic systems do you know?

3. What are the main economic questions?

III. Read and memorize the words and word — combinations:

advantage / disadvantage — перевага / недолік

to break rules — порушувати правила

central authority — центральні керівні органи

to change direction drastically — радикально змінювати напрямок

to conduct transaction — проводити ділові операції

different degree of responsibility — різний рівень відповідальності

to discourage/encourage new ideas - розхолоджувати / схвалювати нові ідеї

economic activity — економічна діяльність

to earn profit — заробляти прибуток

incredible variety — неймовірна різноманітність

fertilizers — добрива

flexibility —гнучкість

high quality — висока якість

interest rates — процентна ставка

lack of incentives — брак стимулів

means of production — засоби виробництва

private property — приватна власність

production costs — витрати виробництва

regardless of — незважаючи на

remote areas — віддалені райони, зони

rural economy — сільське господарство

to stay out of the way — не втручатись

storage facilities — платоспроможність

subsistence level — прожитковий рівень

to sustain — підтримувати, підкріпляти

to switch to — переорієнтовуватись

to tend to be stagnant — мати схильність до застою

a surplus — надлишок

to discuss and argue — обговорювати та сперечатись

to carry out- виконувати, здійснювати

private ownership- право приватної власності

IV. Text a Traditional Economy

To an economist, economic society presents itself as a mechanism for survival. The survival of any society depends on its ability to provide food, clothing and shelter for people. Since these societies are also faced with scarcity decisions concerning What, How and Whom to produce must be made.

All societies have something else in common. They have an economic system or an organized way of providing for the wants and needs of their people. The way in which these decisions are made will determine the type of economic system they have.

In fact, in spite of the appearance of great variety, it is possible to group these different economic structures into four broad categories. These basic types of economic organization are usually described as Traditional, Market, Command and Mixed economies.

In a society with traditional economy nearly all economic activity is the result of ritual and custom. Habit and custom also prescribe most social behaviour. Individuals are not free to make decisions based on what they want or would like to have. Instead, their roles are defined. They know what goods and services will be produced, how to produce them, and how such goods and services will be distributed.

The basic economic problems do not arise as problems to be discussed and argued about. (They have all been decided long ago). One follows the path that one was born to follow; a son follows in the footsteps of his father and uses the same skills and tools. A caste system provides a good example of the rigidity of a traditional society. The production problems (i. e. What? and How?) are solved by using land as it has always been used and the worker carrying out the traditional skills according to his or her fixed place in social structure. The distribution problem (i. e. for Whom?) is solved in a similar manner. There will be time-honoured methods of sharing out the produce of the harvest and hunt. The elders, the heads of families, the women and the children will receive shares according to ancient custom.

Traditional economic systems are usually found in the more remote areas of the world. Such systems may characterize isolated tribes or groups, or even entire countries. They are less common today than they were in earlier decades.

The traditional economic system is used by African tribes and was used by Native Americans. It is also found today in some parts of South America, Asia, and Africa. There, people stil I make clothing and shelter almost exactly the same way as they did in the past.

Typically, in a traditional economy, most of the people live in rural areas and engage in agriculture or other basic activities such as fishing or hunting. The goods and services produced in such a system tend to be those that have been produced for many years or even generations. They are produced as they always have been. In short, the questions of what the traditional society produces and how it is produced are determined by very slowly changing traditions.

Who gets to keep what is produced in such an economy?

Traditional solutions to the economic problems of production and distribution are encountered in primitive agricultural and pastoral communities. But, even in advanced countries, tradition still plays some part in determining how the economy works. We are familiar with industries in which it is customary, for the son to follow his father into a trade or profession, and in Britain equal pay for women did not obtain legal sanction until the 1970-s.

Most individuals live near a subsistence level: they have enough to sustain them but little more than that. In some years, when the harvest is poor, some will not be able to subsist and will either leave the society or die. In better years, when the yield is high, they may be more than enough to allow subsistence. When such a surplus exists, it will be distributed traditionally. For example, the bulk of the produce might go to a tribal chief or large landholder, while the balance is distributed according to custom.

The main advantage of the traditional economy is that everyone has a role in it. This helps to keep economic life stable and community life continuous. The main disadvantage of the traditional economy is that it tends to discourage new ideas and even punishes people for breaking rules or doing things differently. So it tends to be stagnant or fails to grow over time.