1. List five economic issues relating to production and consumption that your national or local government has to deal with today.

The challenge of an economic system is to ensure enough production of goods and services for its people and to arrange for the distribution of this production. An economic system faces basic questions in solving these problems:

* What to produce? Should society produce ships and missiles or hospitals and homes? Fewer cars or more trains? Often there are competing goals: people want cars, but they don’t want congested downtowns, traffic deaths and air pollution. Can society provide a car for everyone and clear air at the same time?

* Who will produce? A basic problem of production is to mobilize human energy. Jobs must fit the skill of the work force, and they must be located where the workers are. When these conditions are not met, the result is unemployment.

* How much to produce? The supply of a good or service must match the demand for it. When this match does not occur, either the prices will be driven up (demand is greater than supply) or inventories on producers’ shelves will pile up and workers will be laid off (supply is greater than demand). When the supply and demand are not equal, the result is inflation or recession.

* To whom to distribute the output? What distribution is proper and fair? Should the economic pie of a society be divided evenly? The distribution of output is a very controversial issue.

If the goals are not met, there is often unrest. In a democratic society, where people can vote for change, economic issues are resolved at the polls.

2. In pairs decide on something to produce and explain according to the above criteria.

3. Supermarket Economics

Supermarkets offer valuable economic lessons. The modern supermarket illustrates in a small way how the market system operates in the economy as a whole. Each supermarket has tens of thousands of items of various sizes and brands. Store owners and managers compete for the customer’s dollars by trying to offer the best service and the greatest variety of goods possible at prices their customers are willing to pay. The modern supermarket provides everything from basic foods to gourmet items from any place in the world. Customers can shop in the supermarket’s deli or make their own lunch at a soup-and-salad bar. Supermarkets also sell cosmetics, toys, small appliances and even videos of recent movies. They attempt to maintain a bright and cheerful atmosphere that will make shopping pleasant for large numbers of customers.

Information about consumer preferences in this huge mix of products is generated by a simple procedure. Consumers take their selection to the checkout line. Checkout clerks enter information about the sale on the store’s computer by passing the product’s bar code across a scanner.

The store responds to differing consumer preferences for health, economy, convenience, and vanity by stocking the goods consumers prefer. Products that fail to satisfy are replaced by more attractive products. "Winners" are selected and the "losers" gradually lose shelf space. Ultimately producers either improve their products or pass from the scene. The customer is really king. The market registers their preferences and reconciles supply with demand.

Sum up using the following questions as a guide:

*The market generates information about wants and provides incentives to pay attention to customers’ preferences: (a) How does the market generate information about preferences? What are the “incentives” referred to in question 1?

* Why is “self-interest” significant to the operation of a market system?

* The article states that “...losers gradually lose shelf space. Ultimately producers either improve their products or pass from the scene. Who are the “losers”? Explain the meaning of the underlined sentence.

* How large is the share of supermarket economics on our market today? Account briefly and support your analysis by a few examples.