What does economics study?

We face with economic realities everywhere: in newspapers, TV programmes, magazines. We discuss prices, quantity of money, goods and services with our relatives and friends. Economics affects our daily lives. We know local, national and international economic problems and make our own decisions on them. Can we answer what is economics about? Many people think that economics is about money. Yes, economics studies how much people are paid, how much they spend. But the economics is more than just the study of money. Economics studies production and consumption. Human wants are unlimited, but the means of fulfilling them are limited. The world can produce a limited amount of goods and services, because the world has limited amount of resources. They are called factors of production and they are human resources, natural resources, and manufactured resources. The excess of human wants over what can be produced to fulfill these wants causes scarcity.

Economics is divided into two branches: macroeconomics and microeconomics. Macroeconomics studies the economy as a whole. Microeconomics focuses on individual markets.

Answer the questions:

• Where can we face with various economic realities?

• What economic notions do we discuss almost every day?

• What is economics about?

• What influences production and consumption?

• Can we name human wants the driving force of progress?

• Why can the world produce only a limited amount of goods and services?

• What is unlimited?

• Is it possible to balance unlimited human wants and limited resources for producing goods and services?

Reveal the meaning of the following economic concepts as you understand them:

Money price human wants scarcity

Let’s ponder!

You are the beginners only, but nevertheless, do teachers produce anything? What do students consume? Do they consume goods or services or both? What do you think about it?

The following text is, mainly, the same as the previous. But it’s longer, more difficult for understanding and rendering. What makes it so?

Read the text and find out words and word combinations which make the text alive, more interesting and not so academic as the first one.

What does economics study?

In our everyday life we face with economic realities almost everywhere: in newspapers, in television programmes, in all kinds of magazines not only the business ones. Even if we meet with our friends we discuss prices of this or that product or whether we have got enough money to afford definite goods or services ourselves.

The fact is that economics affects our daily lives. Continually we are being made aware of local, national and international economic problems, and continually we face with economic problems and decisions of our own. So what is economics about? Many people think that economics is about money. To some extent this is true. Economics has a lot to do with money: with how much money people are paid; how much they spend; what it costs to buy various items; how much money firms earn; how much money there is in total in the economy. But despite the large number of areas in which our lives are concerned with money, economics is more than just the study of money.

Economics is concerned with:

• the production of goods and services: how much the economy produces in total; what particular combination of goods and services can be; how much each firm produces; what technique of production they use; how many people they employ. So, in other words, we may say that production is the transformation of inputs into outputs by firms in order to earn profit or meet some other objective.

• the consumption of goods and services: how much the population as a whole spends and saves; what pattern of consumption is in economy; how much people buy of particular items; what particular individuals choose to buy; how people’s consumption is affected by prices, advertising, fashion and other factors.

So, consumption is the act of using goods and services to satisfy wants.

But what can influence production and consumption? Human wants, and they are virtually unlimited, yet the means of fulfilling human wants are limited. At any one time the world can only produce a limited amount of goods and services. They are called factors of production and they are as follows: human resources – labour; natural resources – raw materials and land; manufactured recourses – capital. So, here is the reason for scarcity: the excess of human wants over what can actually be produced to fulfill wants.

Economics is traditionally divided into two main branches – macroeconomics and microeconomics, where macro means “big” and micro means “small”. Macroeconomics is concerned with the economy as a whole. It studies aggregate demand and aggregate supply. Microeconomics is concerned with the demand and supply of particular goods and services and resources: cars, butter, clothes and haircuts, computers and coal.

COMPREHENSION CHECK

Exercise 1. Are these statements true or false?

1. We never face with economic realities because it is top secret information.

2. We often discuss prices, goods and services, our ability to buy definite good or service with friends and in families.

3. We have to solve some economic problems and make decisions of our own very often, if not daily.

4. Economics is a science which studies production and consumption.

5. Production is the transformation of one kind of production into another for satisfying people’s needs and wants.

6. Consumption depends on many factors and price is the least important one.

7. It’s easy to satisfy human wants, because the means of fulfilling them are unlimited.

8. Macroeconomics studies grand totals. Microeconomics studies individual units.

Exercise 2. Answer the questions.

1. What concepts may be included into economic realities of our everyday life?

2. Is economics about money only?

3. What does economics study?

4. What is production?

5. What may influence consumption? Do the enumerated aspects influence your individual consumption? How?

6. Why are human wants unlimited? Is it possible to limit them? Why and how?

7. What does macroeconomics study?

8. What does microeconomics study?

GRAMMAR Verbs be, have. Pronous.

Simple Tenses
be, have
Present	Past	Future
I am	I, he, she, it was	I, we shall be
he, she, it is
we, you, they are	we, you, they were	you, they, he, she, it will be
I, we, you, they have	had	I, we shall have
		you, they, she, he, it will have