II. Теми для співбесіди:

а)What is economics?

b) Types of economic systems.

c) The functions of every economic system.

Перекладіть тексти рідною мовою та готуйтесь переказувати їх англійською.

What is economics?

"Economy is the art of making the most out of life. "

George Bernard Shaw

Economy is as old as hills. It is probably the first art which man acquired. When in ancient times some people went out to hunt while others stayed to defend the fire and still others traded (exchange) some things for other ones, in all these cases we had

economy.

But Economics as an academic discipline is new. The first important book on Economics was published in 1776. It was "The Wealth of Nations" written by Adam Smith (1723 - 1790). The author of this book was a Scottish economist. When he

published the book Adam Smith was 53 years old. In the book he described the new world of industry and commerce. The fact is that his book founded classical economics modem for that time.

Since that time the subject developed rapidly. Now there are many branches of the subject. They are microeconomics, international economics, econometrics and so on.

There is an economic aspect to almost any topic we mention - education, health care, religion, employment, housing, transport, defence, etc.

Economics is a theory of how society works. It seems to be clear. However, it is difficult to define economics. There are many definitions.

The great classical economist Alfred Marshall defined: "Economics is the study of man in everyday business of life". J. Beardshaw, a British economist, gave more modern definition. It is: "The human science which studies the relationship between resources and the various users which compete for these resources."

The functions of every economic system

There are many economic problems - poverty, inflation, unemployment, etc. People in different modern societies solve these problems in different ways.

The great American economist Paul Samuelson said that every economic society has to answer three main questions:

1. What to produce?

2. How to produce?

3. Who gets the product?

These questions are universal. They are true for any economic system. So,it has the three functions.

The first function is to make a right decision what goods we are going to produce with the given resources - clothes, food, cars, television sets, books, etc.?

The second function is to decide how we are going to produce goods and services with the basic resources of labour, land, etc. What methods are the best and the most effective is an important question here.

The third function. Once we have produced goods and services we now have to decide how these will be divided, distributed among the people in the economy.

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 behavior. 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 still 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.

Command Economy

Another method of solving the economic problems is also one which has a long history. This is the method of economic command where the Solutions to the economic problems are worked out by some all-powerful authority which imposes its solutions on the population.

It is more usual to refer to the present-day command economies as gunned economies although, strictly speaking, leaving the economy to run itself (i.e. laissez-faire) may be described as a kind of economic «plan». Nevertheless, in time with general usage, we shall use the term «planned economy» to refer to an economy which is subject to a high degree of direct centralized control.

It is important to note that no modern economy is without some elements of command. In all developed and most undeveloped countries, even those described as capitalist, there is a large measure of government control. In the UK, for example, the government is the biggest business in the country.

Countries such as Cuba, North Korea and China are examples of command economies. Groups of high-level technicians, made up of engineers, economists, computer experts and industry specialists known as «planners», advice political leaders who develop implement a plan for the entire economy.

Essentially, it is the planners who decide what goods and services; produced. If they want ship production expanded and mining ions cut back, they issue the orders to do so. If more food is I, the planners might direct tractor production to be increased or fertilizers to be imported from the West. Those same plans might also encourage labor to remain on the farms and direct that transportation and storage facilities be made available to move and hold farm products.

How are goods produced in a command economy? The planners decide which products will be made. They decide where to locate a new truck assembly plant and whether the factory will use more labor or more modern machinery.

It is the planners, too, with guidance from the country's political leadership, who decide who will receive the goods and services produced by setting wage rates for everyone, as well as interest rates, profits and rents.

Although economic planning may be employed in societies where property is privately owned, it seems realistic to assume that a fully planned economy means one in which all the important means of production are publicly owned. In socialist societies all land, housing, factories, power stations, transport systems and so on are usually owned by the state.

The logic of public ownership in these societies is based upon the desire for a more equitable distribution of income and wealth. Private ownership of property leads to great inequalities of wealth, and this, in turn means that the wealthier groups are able to exercise great economic power. Such a situation implies great inequalities of opportunity. The better- off members of society are able to use their greater wealth to obtain superior education, better health services, more effective train­ing, and better business opportunities.

Although land and capital may be owned collectively rather than individually, it does not follow that control of these resources must be centralized. In some planned economics the state keeps a tight control on the use of economic resources and all important economic decisions are taken by powerful central committees. This is described as bureaucratic organization, because the running of such an economy will require large numbers of planners and administrators to draw up and operate the national plan.

Alternatively, although the ultimate ownership of resources may be vested in the state, the control and day-to-day running of the farms, factories and shops may be handed over to cooperative groups of workers and consumers. These organizations are usually described as «workers» collectives, as opposed to the state enterprises which are controlled directly by the government.

The major advantage of a command system is that it can change direction drastically in a relatively short time. The major disadvantage of a command system is that it does not always meet the wants and needs of individuals.

The second disadvantage of a command system is the lack of incentives that encourage people to work hard. In most command economies today workers with different degree of responsibility receive similar wages. In addition, people seldom lose their jobs regardless of the quality of their work. As a result, there is tendency for some to work just hard enough to fill production quotas set by planners.

The command economy requires a large decision-making bureaucracy. Many clerks, planners and others are needed to operate the system. Most decisions cannot be made until a number of people are consulted, or a large amount of paper is processed. This causes production costs to increase and decision-making to slow down. Thus, a command system does not have the flexibility to deal with day-to-day problems.

Market Economy

In a market economy, the questions of What, How and Whom to produce are made by individuals and firms acting in their own best interests. In economic term a market is an arrangement that allows buyers and sellers to come together to conduct transactions.

The state plays little or no part in economic activity. Most of the people in the non-communist world earn and spend in societies which are still fundamentally market economies.

The market system of economic organization is also commonly described as a free enterprise or laissez — fair e, or capitalist system. We shall use all these terms to stand for a market economy. Strictly speaking the pure market of laissez-faire system has never existed. Whenever there has been some form of political organization, the political authority has exercised some economic functions (e.g. controlling prices or levying taxation). It is useful, however, to consider the way in which a true market system would operate because it provides us with a simplified model, and by making modifications to the model we can approach the more realistic situations step by step.

Since consumers like products with low prices and high quality, producers in market economy will try to supply such products. Those who make the best products for the lowest prices will make profits and stay in business. Other producers will either go out of business or switch to different products consumer can buy.

There are several other essential elements in a market economy. One of these is private property. By «private property» we mean the right of individuals and business firms to own the means of production.

Although markets exist in traditional and command economies, the major means of production (firms, factories, farms, mines, etc.) are usually publicly owned. That is, they are owned by groups of people or by the government. In a market economy the means of production are owned by private individuals.

Private ownership gives people the incentive to use their property to produce things that will sell and earn them the profit.

This desire to earn the profits is a second ingredient in a market economy. Often referred to as the profit motive, it provides the fuel that drives sellers to produce the things that buyers want, and at a price they are willing to pay.

A market economy has several major advantages that traditional and command economies do not have. First, a market economy is flexible and can adjust to change over time.

When gas prices in the United States began to level off in 1985 and then decline in 1986, the trend slowly began to reverse.

The second major advantage of the market economy is the freedom that exists for everyone involved. Producers are free to make whatever they think will sell. They are also free to produce their products in the most efficient manner. Consumers on the other hand are free to spend their money or buy whatever goods and services they wish to have.

The third advantage of the market economy is the lack of significant government intervention. Except for national defense, the government tries to stay out of the way. As long as there is a competition among producers, the market economy generally takes care of itself.

The final advantage of the market economy is the incredible variety of goods and services available to consumers. In fact, almost any product can and will be produced so long as there is a buyer for it.

Mixed Economy

Mixed economy is an «economy that combines capitalism and socialism». Some sources prefer the use of «command economy» over «socialism» in defining a mixed economy.

We have seen that there is some use of the market mechanism in planned economies. Likewise there is some measure of state control in free market economies. Here the term mixed economy is used; it describes most of the economies in the noncommunist world. These countries are basically market economies, but all contain elements of

state enterprise and governments in all of them intervene to modify the operation of market forces. They are mixtures of command and market economies.

In these mixed economies private property is an important institution. Supporters of the mixed system hold the view that private property provides an important incentive for people to work, save and invest. They oppose the abolition of private property and argue that it is possible to present great inequalities of wealth from arising by the appropriate government measures (e. g. heavy taxation of income and wealth).

The mixed economy has come into being as a result of increasing government intervention and control in capitalist countries. This development has been particularly extensive during the 20^th century.

The most famous mixed economy in the world is that of the UK because it was in the UK that the form first evolved.

The components of the mixed economy are:

a) A free enterprise sector, where economic decisions are take through the workings of the market.

b) Government regulation of the economy through its budgets, etc.

c) Public ownership of only some industries.

d) Welfare services, either provided by the state or supplied through state administered schemes.

Контрольна робота 2

Варіант 1

1. Поставте там, де необхідно, зворот there is, there are, there isn’t, there aren’t.

1. (any cigarettes?) ……………………………………?

2. (any books?)…………………………………………..?

3. (a man?)………………………………………….….?

4. Dunford is a very modern town. …………...... many old buildings.

5. Look! a photograph of George in the newspaper!

6. Excuse me, a restaurant near here?

7. five people in my family: my parents, my two sisters and me.

2. Перекладіть речення англійською мовою, вживаючи зворот there is, there are, there isn’t, there aren’t.

1. Офіс знаходиться в Київі.

2. В нашому філіалі не має басеїну.

3. В Бориспілі є міжнародний аеропорт.

4. В Данфорді не має університетів.

5. В Миколаїві є два кінотеатри.

6. Багато лікарень є в Америці.

7. Гарні отелі є в центрі міста.