Text a: What is Economics? Active Vocabulary

Key terms: economics, social science, management of a household, free market, productive resources, information resources, rational human behaviour, needs and wants, surplus, market, incentives, scarcity, factors of production, economic activity, opportunity cost, minimizing costs, inflation, individual consumers, microeconomics, macroeconomics, unemployment, gross domestic product, taxation, government expenditures, trade-offs, "invisible hand", competing uses, variety of goods and services,production, distribution and consumption of goods and services, satisfy wants, needs and desires, expenditures. Other words and expressions: to browse, to constitute, complicated, endeavour, to abandon, action, activity, available, to satisfy, benefit, to allocate, to determine, a wide range, required, demanded, to interact, phenomena. Linking words and phrases: hence,more specifically,such as, except for, thus, therefore, though, in this connection, in order to.

There's no one universally accepted answer to the question "What is economics?" Browsing different information resources, you will find various answers to that question. Economics may appear to be the study of complicated tables and charts, statistics and numbers, but, more specifically, it is the study of what constitutes rational human behaviour in the endeavour to fulfil needs and wants.

The term economics comes from the Ancient Greek oikonomia, the word composed of oikos (“house”) and nomos ( “custom” or “law”), hence, “rules of the house(hold)”.Modern economics began in 1776, with the publication of Adam Smith's “Wealth of Nations”. This was the first comprehensive defence of the free market, and continues to be an influential work to this day. Central to the work was the concept of the “invisible hand”, the idea that the market, while appearing chaotic, is actually guided to produce the right amount and variety of goods and services. If there are insufficient goods, there will be great economic incentives to produce more; if there are surplus goods, there will be an economic incentive to produce less or different types of goods. Smith's work was so influential that previous tentative schools of economics were abandoned after its publication.

Modern definition of economics interprets it as a social science, which analyses the production, distribution, and consumption of goods and services, studies human behaviour and explains how individuals and groups make decisions with limited resources as to best satisfy their wants, needs and desires.

Wants and needs refer to people’s desires to consume certain goods and services. In economic terms, a good is a physical object that can be purchased. A service is an action or activity done for others for a fee. The term product is often used to refer to both goods and services.

Economics often uses such categories as factors of production, which are basic elements used to produce goods and services. In essence, land, labour, capital and entrepreneurship are main productive resources. Land represents all natural resources, such as timber and gold used in the production of a good. Labour is all of the work that labourers and workers perform at all levels of an organisation, except for the entrepreneur. The entrepreneur is an individual who takes an idea and attempts to make an economic profit from it by combining all other factors of production. The entrepreneur also takes on all of the risks and rewards of the business. The capital is all of the tools and machinery used to produce a good or service.

The need for making choices arises from the problem of scarcity. Scarcity exists because people’s wants and needs are greater than the resources available to satisfy them. From here it can be easily understood that scarcity is the fundamental economic problem of having seemingly unlimited human needs and wants in the world of limited resources. Scarcity means that people want more than is available. Thus, people must choose how best to use their available resources to satisfy the greatest number of wants and needs. Scarcity limits us both as individuals and as a society. As individuals, limited income (time or ability) keeps us from doing and having all that we might like. As a society, limited resources (such as manpower, machinery, and natural resources) fix a maximum on the amount of goods and services that can be produced. Economics is sometimes called the study of scarcity because economic activity would not exist if scarcity did not force people to make choices. People must choose which of their desires they will satisfy and which they will leave unsatisfied.

When there is scarcity and choice, there are costs. The cost of any choice is the option or options that a person gives up. Most of economics is based on the simple idea that people make choices by comparing the benefits of options of different goods and choosing the one with the highest benefit. The opportunity cost of a particular choice is the satisfaction that would have been derivedfrom the next best alternative foregone. It is the cost of any activity measured in terms of the value of the best alternative that is not chosen.

Economics is the study of how people choose toallocate scarce resourcesto satisfy their unlimited wants. In the situation of scarce resources and unlimited human needs, economics has a very important task of minimizing costs while producing different goods and services. The main problem in economics is the question of allocating scarce resources between competing uses. In this connection very significantdecisions must be made about three basic economic questions: What to produce? For whom to produce? and How to produce?

What products and services should be produced? In order to answer this question we need to determine the needs of individual consumers as well as the economy in general. A wide range of goods and services needs to be produced in order to cater for many and varied needs of consumers. The demand from consumers and available resources will normally determine what products and services to produce.

How much of each product and service should be produced? The amount of each product to produce will be determined by the demand for the various products as well as the availability of the resources required to produce those goods and services.

For whom should goods and services be produced? The demand for goods and services will largely determine for whom they will be produced. Goods are therefore produced for those consumers who demand the goods, and have the ability to pay for the goods demanded.

Two main branches of economics are: microeconomics and macroeconomics. Microeconomics examines the actions of individuals and firms, and how they interact. Macroeconomics studies the economy at large, examining such phenomena as inflation, unemployment and gross domestic product.

No aspect of life is untouched by economics - though it can be hard to convey its central importance in human lives. Economics has things to say, and to teach, about the importance of education, about taxation and government expenditures; about why some companies succeed and others go bust. It teaches why some countries grow rapidly and others struggle to grow at all.

  Language notes:

great economic incentives – великі економічні стимули;

surplus goods – надлишкові товари;

tentative schools of economics – експериментальні економічні школи;

opportunity cost – альтернативний вибір;

economic activity would not exist if scarcity did not force people to make choices – не існувало б господарської діяльності, якби дефіцит не змушував людей робити вибір;

to take risks and rewards – йти на ризик і заробляти винагороди;

to go bust – збанкрутувати, розоритися;

rational judgments – обґрунтовані судження;

trade-off –альтернатива, компроміс.