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Equity. Equity is the quality of being fair or impartial. As an economic goal, it
means that the economic system ought to offer all its citizens equal opportunities to
achieve their ambitions.
Efficiency is a measure of how much we get for what we use. As a national
goal, economic efficiency refers to the entire economy’s ability to get the most out of
its limited resources.
UNIT 5
MICROECONOMICS
Microeconomics studies the problem what kinds of goods and services are be-
ing produced, why they are being produced, and who is producing them.
The central points of microeconomics are supply and demand, their elasticity
and the price system. The forces of supply and demand in any given market for any
given goods are opposite. They intersect at quantity and price where they come into
equilibrium that is the price satisfies both suppliers and customers. Equilibrium in a
market exists whenever the separate plans of buyers exactly correspond to the separate plans of sellers so that the quantity demanded equals the quantity supplied at the
market price.
If the government intervenes to quote the price above the equilibrium a surplus
will develop. Supply would exceed demand. The measure of responsiveness of consumers to changes in price is called price elasticity.
Microeconomics also examines cause-and-effect relationships that influence
choice of individuals, business firms and societies. It is concerned with scarcity,
choice, opportunity costs, production and consumption. But principal emphasis is
given by microeconomics to study the prices and their relationship to units in the
economy.
Active Vocabulary
supply – предложение
demand – спрос
to intersect – пересекаться
quantity – количество
separate – отдельный
to intervene – вмешиваться
to quote a price – назначить цену
surplus – излишек
to exceed – превышать
responsiveness – степень реагирования
cause-and-effect relationships – причинно-следственные отношения
to influence – влиять
scarcity – недостаток, дефицит
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choice – выбор
opportunity costs – альтернативные издержки
Tasks
1. Translate the following combinations into Russian.
1. the central points of microeconomics
2. the forces of supply and demand
3. to intersect at quantity and price
4. to come into equilibrium
5. to satisfy both suppliers and customers
6. to correspond to the separate plans exactly
7. the quantity demanded
8. to equal the quantity supplied
9. at the market price
10. to quote the price
11. to exceed demand
12. the responsiveness of consumers
13. to examine cause-and-effect relationships
14. to influence choice of individuals
15. to be concerned with scarcity
16. study the prices
2. Translate the following combinations into English.
1. силы спроса и предложения
2. пересекаться на количестве и цене
3. приходить в равновесие
4. удовлетворять как поставщиков, так и потребителей
5. точно соответствовать отдельным планам покупателей
6. равняться предложенному количеству
7. вмешиваться, чтобы назначить цену сверх равновесия
8. превышать спрос
9. измерение степени реагирования потребителей на изменения в цене
10. исследовать причинно-следственные отношения
11. влиять на выбор потребителей
12. быть связанным с дефицитом
13. отношения с разделами экономики
3. Match the notion and its definition.
Microeconomics supply demand equilibrium surplus price elasticity
1. when supply exceeds demand
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2 the quantity of goods and services that consumers are willing to buy at different prices
3. the study of individual consumers and the business firms
4. measure of responsiveness of consumers to changes in price
5. the point at which supply and demand are equal
6. the quantity of goods and services that owners are willing to sell at differ-
ent prices
4. Define the meaning of the words highlighted in the text.
5. Fill in each blank with a suitable word.
1. The central points of …… are supply and demand.
2. The forces of supply and demand ……. at quantity and price.
3. …… means that the price satisfies both suppliers and customers.
4. The …… demanded equals the …… supplied at the market price.
5. The government …… to quote the price above the equilibrium.
6. The measure of ……. of consumers to changes in price is called price elas-
ticity.
7. …… relationships influence choice of individuals, business firms and socie-
ties.
Intersect intervenes microeconomics quantity responsiveness
cause-and-effect equilibrium
6. Questions and tasks.
1. What does microeconomics study?
2. What are the central points of microeconomics?
3. Where do the forces of supply and demand intersect?
4. When does equilibrium exist in a market?
5. What does equilibrium mean?
6. What happens when the government intervenes to quote the price above the
equilibrium?
7. Explain the meaning of price elasticity.
8. What do the cause-and-effect relationships influence?
9. What are they concerned with?
10. What is the principal emphasis given by microeconomics?
7. Prices, prices, prices. Match the words from the left with those from the
right and compose the sentences of your own using the given combinations:
1 at a price of … a. повышать цены
2 to set prices b. продаваться по высокой цене
3 to freeze prices c. резкое падение цен
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4 to pay an extra price for smth. d. диктовать цены
5 skyrocket e. договорная цена
6 to mark up the prices f. жесткие цены
7 fall g. назначить цену
8 to keep prices down h. понижать\ снижать цены
9 to be a price leader i. установить цены
10 to get a high price j. замораживать цены
11 to quote a price k. не допускать роста цен
12 bargain price l. приемлемая, справедливая цена
13 stiff prices m. по цене …
14 to bring down the price n. резкий рост цен
15 fair price o. заплатить за что-л. очень высокую
цену
What kind of prices can you name? match the English and the Russian
equivalents:
1. buying price a. рыночная цена
2 outrageous price b. цена со скидкой, цена ниже номинала
3 retail price c. договорная цена
4 fixed price d. запрашиваемая цена, цена продавца
5 reasonable price e. самая низкая цена
6 bargain price f. очень высокая, чрезмерная цена
7 wholesale price g. скользящая цена
8 market price h. действующая, действительная цена
9 asked price i. приемлемая, справедливая цена
10 reduced price j. розничная цена
11 sliding price k. оптовая цена
12 going price l. твердая цена
13 fair price m. сниженная цена
14 discount price n. покупная цена
15 upset price o. умеренная, доступная цена
DISCUSSION
Causes and effects
Daewoo and the Okpo shipyard
The South Korean company, Daewoo, was founded in 1967 and now employs
more than 100000 people. But its success hasn’t always come easily. In fact, some
parts of this giant corporation have had many ups and downs.
Kim Woo Chong, the founder of the South Korean company, Daewoo, never
really meant to get into the shipbuilding business. In fact, he only took over the
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giant shipyard at Okpo in 1978 as a result of government pressure. ‘I did not have a
chance to say no,’ he explained.
At the time, only 30% of the shipyard had been built and the company was
nearly bankrupt. Its problems got worse the following year when South Korea’s
president, Park Chung Hee was assassinated – an event which led to serious political instability in the country. On top of that, a slump in shipping in the early 80s
caused a sharp fall in the price of ships.
Things improved slightly in 1982 due to an order for 12 large ships from US
lines. To cope, the shipyard’s workforce was increased dramatically. Then, 1986,
US lines went bankrupt still owing Daewoo hundreds of millions of dollars. The
company was again plunged into crises.
In 1988, Daewoo’s losses were still rising, when Mr. Kim worked out a rescue package. Hundreds of millions of dollars were invested in the company and the
production process was completely reorganized. By 1991, things were getting
slightly better and in 1993 the company won orders for 54 ships worth $2.8 billion –
the largest number of new orders for any shipyard in the world.
1. Answer these questions.
1. What was the condition of the shipyard when Kim Woo Chong took it
over?
2. Why was 1986 a bad year?
3. Why was 1993 a great year for the company?
2. Look again at the text and match the causes and effects.
CAUSE EFFECT
1. an order for 12 ships a. a fall in the price of ships
2. government pressure b. political instability
3. the president’s assassination c. Daewoo’s takeover of the Okpo
shipyard
4. a slump in shipping d. the improvement in 1982
3. In the text, these four phrases link the above causes and effects togeth-
er. Look at the text and decide which links an effect to a cause and which a
cause to an effect.
Led to As a result of Due to Caused
For example
CAUSE – EFFECT
The assassination of the president led to political instability.
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4. Use the links to complete these sentences.
1. The shipyard’s workforce increased in the early 80s …… the order for
12 ships.
2. The bankruptcy of US lines ………. the company’s crises in 1986.
3. Mr. Kim’s investment and reorganization …… an improvement in 1991.
5. Explain the causes and effects Daewoo’s ups and downs.
SUPERSAVE
1. Read this extract from a supermarket chain’s annual report. Match
the causes and effects.
We achieved strong sales growth, with stores increasing their sales by 8.9%
on account of the boom in consumer spending. However, the market continues to be
highly competitive. Our ongoing commitment to offering customers excellent value
for money has meant we have reduced selling prices on many products. As a result
of improvements in our sales mix, better buying and more efficient sourcing, we
have been able to limit the impact of lower prices on gross margins, which fell by
only 0.2%.
We have continued our drive to improve productivity. This has helped to finance the significant improvements to checkout service and more labour-intensive
departments such as pharmacies. Consequently, wages as a percentage of sales reduced by 0.4 to 9.3% and other operating costs went down by 0.5%.
We continued to invest in supporting infrastructure. We have opened a new
automatic warehouse which had led to reduced stock levels. We have also continued
with the streamlining of our supply system which has meant that more products are
available to customers and supply costs are lower than previously.
Our capital expenditure for the year was $649 which is higher than we anticipated three years ago. However, this is partly due to our ability to negotiate planning permission for new sires and partly to investment in extensions to existing
stores.
CAUSE EFFECT
a highly competitive market higher capital expenditure than
previously
improved productivity a very small reduction in gross
margins
investment in new stores and extensions reduced price tags
boom in consumer spending sales growth of 8.9%
better supply system fewer items in stock
better buying and more efficient sourcing reduced wages and lower
overheads
an automatic warehouse more products on the shelves
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1. Underline the words in the text that signal a cause and effect.
Example: on account of
2. Complete the sentences with as a result of, led to, result in, stem from.
Change the form of the verb when necessary.
1. Advertising during the Christmas trading period usually ………. increased
sales.
2. The dispute ………. a disagreement over the interpretation of the contract.
3. The fire in the warehouse has ………. millions of pounds of damage.
4. The oil crises in the 1970s ………. economies in energy consumption in
Europe.
5. The production line was shut down for two hours ………. damaged ma-
chinery.
6. The assassination of the president ………. serious political instability in
the country.
7. Ignoring safety procedures ………. a tragic accident.
8. He turned a $ 10000 investment into more than $300 million ………. in-
vesting at the time of maximum pessimism.
9. Profits have decreased ……… a decline in sales.
BUSINESS WRITING
Memorandum
1. Compare the accident report form and the memo. Talk about these
questions.
1. What is the difference in the content of the two?
2. What is the difference in style?
ACCIDENT REPORT FORM
1/8/98
Dear Bob,
I thought you should know that we’ve had a few problems on the night shift.
I’m afraid that one of our lads was caught his arm in the machine. He went off to
hospital – but it’s nothing too serious. He’s made a mess of the machine, though,
I’m afraid. I had to shut the line down for a couple of hours, so we lost a fair
amount of production last night.
We followed all the procedures, so there’s nothing to worry about but I’ll talk
you through it when I get back to work this evening.
Alf
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MEMORANDUM
Date 1.8.98
From Bob Russell, Factory manager
To Cynthia Prather, Production manager
RE: Accident on production line
I have been informed that there was an accident at the factory last night involving a worker and one of our machines.
The man in question was taken to hospital, although I understand that he was
not seriously hurt.
However, the machine was damaged and, as a result, the production line had
to be shut down for two hours with a corresponding loss of production.
I have been assured that proper health and safety procedures were followed,
but I am, of course, investigating the incident to see if any lessons can be learned.
2. Look at these pairs of phrases from the documents.
1. a. I thought you should know …
b. I have been informed that …
2. a. I had to shut the line down for a couple of hours.
b. The production line had to be shut down for two hours.
3. a. We followed all the procedures, so there’s nothing to worry about.
b. I have been assured that proper health and safety procedures were followed.
In each case, Bob Russell has used the passive rather than the active form
of the verb. This moves the focus of the sentence from the subject to the object.
Why do you think Bob Russell has done this? Here are a few ideas:
He wants to give an ‘official’ impression.
He wants to make it less personal or more formal.
He doesn’t know who the subject of the sentence was.
3. What other examples of differences in style can you find?
4. You are Angela’s manager. How would you write to your manager to
explain this situation?
138
URGENT MESSAGE
To Mike From Angela
Date 10/8/98 No. of pages 1
Dear Mike,
I’ve done something terrible. You know the lap computer? Well, I borrowed it
from the office to do some work at home last night – and I left it on the train this
morning. I called the railway company, but they say there’s almost no chance of get-
ting it back. What am I going to do?
Angela
5. Read the informal note that John Elliott sent to his Production Director,
Martin Gilmour.
Martin,
Bob Skinner recently told me that some of the men are not following safety
procedures. He’s seen operatives not wearing hard hats or protective gloves, and
doing silly things just to keep the line moving. If we don’t do something about it very
soon, someone is bound to get hurt.
John
6. Now write the letter as a formal memo.
MEMO
To: Martin Gilmour
From: John Elliott
Date: 23 March
It has come to my attention …
READING
(for written translation)
I
Scarcity
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 day 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.
139
Every business, even sport teams, 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 is simply not enough of everything to go around. Economists note that
there is no limit to the amount and 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 that limit is reached, nothing else can be produced.
In other words, when a nation’s resources (all its workers, factories, farms,
etc.) are fully employed, the only way it will be to increase the production of one
thing will be by reducing the production of something else. This happened during
World War II. In its efforts to increase the production of tanks and other military
vehicles, our nation’s factories stopped producing automobiles. Therefore, if somebody tries to sell you a 1944 Ford or Chevrolet, run, do not walk, to the nearest exit –
none were produced that year.
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.
The Study of Scarcity and Choice
Since there is not enough of everything to go around, everyone – individuals,
business firms, and government – needs to make choices from among the things
they want. In the process they will try to economize, to get the most from what they
have. With this in mind, we can define economics as the social science that de-
scribes and analyzes how society chooses from among scarce resources to satisfy its
wants.
The need to choose is imposed on us all by our income, wealth and ability to
borrow. Individuals and families are limited by the size of their personal income,
savings and ability to borrow. Similarly, business firms are limited by their profits,
savings and borrowing power, and governments by their ability to tax and borrow.
Income, savings, profits and taxes enable people, institutions and government
to purchase goods, products you can see and touch, and services, work performed
for pay that benefits others. The problem that each must face, however, is that once
a decision has been made to choose one set of alternatives, one loses the opportunity
to choose the other.
Trade-Offs and Opportunity Costs
Let’s suppose that you recently managed to save enough to buy the CD player
you always wanted. While you were building up your savings, you discovered the
fun of basketball and would now love a pair of pump sneakers. You can afford to
buy either a CD player or sneakers, but not both. It’s a trade-off.
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