Chapter 5

ECONOMICS AND MANAGEMENT IN

PETROLEUM ENGINEERING

L.М. Bolsunovskaya, I.V. Shenderova, I.М. Vershkova,

D.S. Malukova

UNIT 1

INTRODUCTION TO ECONOMICS AND MANAGEMENT

Lead-in

Fill in the spidergram with the words associated with Economics and Management.

Economics and

Management

Explain your associations.

Discuss the following questions.

1.Why did you decide to be an economist?

2.In your opinion, what does an economist do?

3.Do you know any world famous economists?

4.Do you agree that all human activity is connected with economy?

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Exercise 1. Read and learn the pronunciation.

[i:] discipline, principles, briefly, division, decision, deal [a:] charge, market

[o:] explore [ou] scope

[ə:] determine, turn, pursue

[ju:] consumer, produce [ai] decide, micro-, divide [æ] macro-

[aiə] tie

[k] knit, mechanism

Exercise 2. Pay attention to the stress in the following words.

Exercise 3. Before reading the text tick what statement do you think is true.

1. Economics is only the study of money

2. Economics is something government takes care of

3. An economist basically decides how money is spent

Exercise 4. Read the text, do the exercises.

WHAT DOES ECONOMICS STUDY?

Economics is a social science studying economy. Like the natural sciences and other social sciences, economics attempts to find laws and principles of economic functioning of society. Most students who take economics for the first time hardly can imagine the range of questions which this science studies. Some think that economics will teach them about the stock market, or what to do with their money. Others think that economics deals exclusively with problems like inflation and unemployment. In fact, it deals with all these subjects but they are parts of a much larger system.

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Economics has deep roots in and close ties to, social philosophy. An issue of great importance to philosophers, for example, is distributional justice. Why are some people rich and others poor, and whatever the answer, is this fair? A number of nineteenth century social philosophers were trying to solve these questions and out of their speculations a separate discipline was born, namely economics. If you want to get quick idea of what economics studies, you should explore briefly the way economics is organized.

First of all, there are two major divisions of economics: microeconomics and macroeconomics. Microeconomics deals with the functioning of individual industries and the behaviour of individual economic decision making units: single business firms and households. Macroeconomics explores the decisions that individual businesses and consumers make. The choices of firms about what to produce and how much to charge and the choices of households about what to buy and how much of it to buy help to explain why the economy produces the things it does.

Another big question that microeconomics addresses is who gets the things that are produced. Wealthy households get more output then do poor households, and the forces that determine this distribution of output are outside the scope of microeconomics. Why do we have poverty? Who is poor? Why do some jobs pay more than others? Why do teachers or plumbers get paid for what they do? Think about all the things we consume in a day on the scale of a town, a whole country. Somebody decided to build the factories. Somebody decided to construct roads, build the housing, produce the cars, knit the shirts, and smoke the bacon. Why? What is going on in all those buildings? It is easy to see that understanding individual micro decisions is very important to any understanding of your society. Macroeconomics, in its turn, deals with the functioning of national economic complex and the behaviour of the main classes and social groups.

(McConnell C.R., Brae S.L. Economics)

Exercise 5. Answer the following questions.

1.To what branch of science does economics belong to?

2.Does economics have deep roots in social philosophy?

3.What problems does economics deal with?

4.Why, do you think, some people are poor and others are rich?

5.Which two main divisions of economics do you know?

6.What do microand macroeconomics deal with?

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7.Which issue of economics is of great importance to philosophers and why?

8.What would you do to cope with inequality?

Exercise 6. Complete the sentences.

1.Economics studies a wide _________ questions.

2.Economics is closely tied with ________.

3.Many social philosophers were trying to solve a questions of _______.

4.Economics is subdivided into ________.

5.Microeconomics deals with ________ industries.

6.A household can be considered as an _______.

7.The firm must make a ________ what to produce.

8.Microeconomics doesn’t ______ with the questions of output distribution.

9.The functioning of national economic complex is the sphere of

________.

Exercise 7. Give English equivalents to the following words and phrases from the text.

Изучать экономику, иметь глубокие корни в, национальная экономика, отдельная самостоятельная экономическая единица, изучать проблему, домашнее хозяйство, отдельная предпринимательская фирма, получить представление, функционирование отдельных отраслей промышленности, социальная философия.

Exercise 8. Match synonyms in columns A and B.

Exercise 9. Translate the following chains of words. Determine the part of speech and the way of word – building.

economy – economics – economist economic – economical – economically economize – economizer

science – scientist – scientific

employ – employment – unemployment – employer – employee organize – organizer – organization – organizational

produce – producer – production – productive – productivity

Exercise 10. Translate the following sentences into Russian using the dictionary.

1.Russia tries to base its relations with other countries on the peaceful principles.

2.There is an objective need for all states of the world to live in peace with each other and to cooperate on a basis of equality and mutual benefit.

3.An efficient economy is one that produces what people want and does so at the least possible cost.

4.Britain needs raw materials for its industries.

5.The country depends on foreign trade to supply raw materials for factories.

6.Imports exceed exports in many developing countries.

7.Invisible trade compensates the unfavorable balance of trade.

Exercise 11. Translate the following definitions into English.

Экономика – это наука, включающая две дисциплины: микроэкономику и макроэкономику.

Микроэкономика – это отрасль, которая изучает индивидуальных производителей, потребителей или рынки. Она также изучает, как деятельность правительства (регулирование и налоги) влияет на отдельные рынки. Микроэкономика пытается понять, какие факторы воздействуют на цены, заработную плату и прибыль.

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Макроэкономика – это отрасль, которая изучает экономику в целом. В частности, она занимается общими цифрами производительности, безработицы и инфляции.

Exercise 12.  Before you listen discuss the following questions with your partner.

o If you live in a modern economy, life is quite easy. o Before the industrial revolution life was much harder. o In what ways was life more difficult?

Listen to someone talking about industrial revolution and do the tasks.

1.Do you sometimes listen to the economy news on TV or on the radio?

2.What do you think of the state of economy in Russia?

3.What do your parents (grandparents) think of economic reforms in Russia? Did they live better or worse before?

4.What type of economy does Russia build?

5.Do you think you have more opportunities to be well off than your grandparents?

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Exercise 14. Read the text, do the exercises.

THE ECONOMY AND ECONOMIC SYSTEMS

The word “economy” is a word we hear or read almost every day. For example, we may be told that “the world economy is in the doldrums”, or “the European economy is making little progress”, or “the Russian economy is beginning to recover”. But what is meant by the economy? What is an economy? How does an economy work? The economy is a social mechanism which answers these three questions.

The economy means a system for the management, use and control of the money, goods and other resources of a country, community or household. In other words an economic system is the method society uses to allocate its resources (land, labour, capital and entrepreneurship) to satisfy its needs. The degree of economic development of the country is determined by the level and character of production forces and production relations. Due to public labour division the economy of a society is subdivided into separate branches, industrial complexes, economic regions and production infrastructure. What distinguishes one economic system from another is the control of the factor of production and the interaction of business, government and consumers.

In the modern world there are three main types of economic system: capitalism (or pure capitalism), mixed capitalism and communism (socialism). Capitalism (of pure capitalism, or a market economy), as it was originally described by Adam Smith in his eighteenth century book “Wealth of Nations“, is an economic system where the factors of production are in private hands and economic decision are made freely according to the market forces of supply and demand. In this system the economic questions of

–What is to be produced?

–How much will be produced? Who will produce it?

–How much will it cost? Who will get it?

are determined by the consumers in the marketplace. In pure capitalism industry and individuals use resources as they choose. The government takes a hands-off approach and does not interfere in the economic system.

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Producers and consumers pursue their own self-interests. Producers make as much as they can sell and consumers buy as much as they can afford.

In this system each person behaves in the best interests of society, as if guided by an invisible hand. The marketplace is regulated by the interaction of the buyers and producers. If a company produces a defective product or charges too much for the product it is rejected by consumers. As a result, the producer has to improve the quality of the product or reduce the price to make any sales. The market place, in essence the invisible hand, regulates economic conduct. Government does not have to do any regulating.

Exercise 15. Answer the following questions.

1.What is an economic system?

2.What distinguishes an economic system from another one?

3.What types of economic system do you know?

4.In whose hands are the factors of production in capitalism?

5.Who makes economic decisions under capitalism? Does the marketplace have influence on them?

6.Whose interests do producers and consumers pursue in the market?

7.If a company produces a defective product, will it be sold or rejected by consumers? What do you think of it?

8.Are you for or against the government’s regulation of economic conduct in Russia?

Exercise 16. Give English equivalents to the following words and phrases from the text.

Экономическая система, труд, преследовать собственные интересы, снижать цены, распределять ресурсы, удовлетворять общественные потребности, чистый капитализм, факторы производства, взаимодействие производителей и покупателей, отвергнуть товар, регулировать предпринимательство.

Exercise 17. Translate into English.

1.Рынок регулируется взаимодействием покупателей и производителей.

2.Экономическая система – метод, который используется обществом для распределения своих ресурсов.

3.Нам говорят каждый день, что экономика России выздоравливает.

4.Степень экономического развития страны определяется уровнем и характером производительных сил и производственных отношений.

5.При капитализме экономические решения принимаются в соответствии с рыночными законами спроса и предложения.

6.Экономическая обстановка регулируется рынком.

7.Товар отвергается покупателями, если он бракованный или стоит слишком дорого.

8.Ежегодно промышленными предприятиями производится большое количество новых товаров.

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Exercise 18. Match synonyms in columns A and B.

Exercise 19.  Before listening, look at the chart of Supply and Demand and fill in the blank spaces with the words from the table. Then listen and check if you were right.

■ Amount bought and sold

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Exercise 20. Match the terms with the definitions.

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Exercise 21. Translate the words in brackets into English.

1.The most important economic questions (затронуты) in the Financial Times and the Economist.

2.Adam Smith (по праву считается) the founder of political economics.

3.A lot of questions (задают и отвечают) at the lectures on economics.

4.The United Kingdom is considered one of the world’s (мировой лидер производства товаров).

5.About two per cent of the population of the UK (вовлечены/заняты) in agriculture.

6.Today gold is mostly (добывается) by mining.

7.Every country is interested in (экспорте) its manufactured goods.

8.What questions (обсуждаются) during business talks?

9.The Leipzig Fair, which is (проводится) twice a year, is very popular with businessmen of different countries.

10.Foreign firms are interested in (внедрение) their goods to new

markets.

Exercise 22. Discuss the following points.

1.The significance of economics nowadays.

2.The reasons why some people are rich while some are poor.

3.The main types of economic systems.

4.Future of Russian economics.

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