Text 16 what is economics?

Unlike history, mathematics, English and chemistry, eco­nomics is a subject that most students encounter only briefly some­times not at all, before they begin college. Economics is a basic discipline, like those just listed, not an applied subject like ac­counting or drafting in which specific skills are taught.

Economics has some similarities to mathematics because logical reasoning and mathematical tools are used in it exten­sively. It also has some similarities to history because economics studies people as they interact in social groups.

Like chemistry, economics employs the scientific method, although some of economics has a descriptive rather than an an­alytical flavour. Finally, like English grammar, economics has a few simple rules and principles, but from these principles eco­nomics can derive many conclusions.

Economics is the science of making choices. Individuals must decide whether to study another hour or to go for a walk, whether to buy a six-pack of Pepsi or a 0,5 gallon of milk at the grocery, whether to choose fire fighting or teaching as an occupa­tion and whether to play golf or to watch television for an after­noon of recreation. As a group, people must also choose through their governments whether to build a dam or to repair highways with their taxes, whether to invest money to business or to ex­pand national parks.

The common element in all these decisions is that every choice involves a cost. (Reading this text means that you are not enjoying a bike ride).

In fact, economics is the study of the choice that people make and the actions that they take in order to make the best use of scarce resources in meeting their wants.

Economics is about the everyday life. How do we get our living? Why do we sometimes get more and sometimes less? Are we producing as efficiently as we could? Are we producing the «right things»? What are the «right things»? Who ought to decide this and why? The study of economics helps us to answer this sort of questions.

Text 17 economic systems

An economic system is the way in which a country uses its available resources (land, workers, natural resources, machinery) to satisfy the demands of its inhabitants for goods and services. There are three main economic systems: planned economics, market economics, mixed economics.

Planned economics are economics with large amount of central planning and direction, when the government takes all the decisions, the government decides production and consump­tion, the government owns all the major productive resources. Changes in demand are difficult to predict, that's why some prod­ucts are overproduced, the other ones are underproduced. Delays and queues are typical features of planned economics. The former USSR and some other eastern bloc countries are examples of countries where government decision were dominant.

In a true market economy the government plays no role in the management of the economy. The system is based on private enterprise with private ownership of the means of production and private supplies of capital. Workers are paid wages by employers according to how skilled they are and how many firms wish to employ them. Consumers spend more on products and services which they like. In a market economy it is consumer who decides what is to be produced. Consumers pay high prices for products they like. The economy adjusts automatically to meet changing demands.

A mixed economy contains elements of both market and planned economies. It lies between the two extremes of com­mand and market economies. In mixed economies some resourc­es are controlled by the government while others are used in re­sponse to the demands of consumers. Practically, all the econo­mies of the world are mixed. For example, Hong Kong has some state-controlled industry, while Cuba has some privately owned and controlled firms. In a mixed economy the government and the private sector interact in solving economic problems. The U.K. is a mixed economy: some services are provided by the state (health care and defence) while a number of privately owned en­terprises offer other goods and services.