UNIT TWO

SCARCITY AND CHOICE: THE ECONOMIC PROBLEM

ESSENTIAL VOCABULARY

1. Ability n – the state of being able to do something – здатність, спроможність. Ability to borrow – спроможність брати в борг/кредитоспроможність.

2. Afford v (usually can/could afford) – to be able to spare or give up – дозволяти собі.

3. As to prep – having relation to something – щодо, відносно, стосовно. Syn. as for, about, concerning.

4. Available adj – being able to be used or can easily be bought or found – наявний, що є в наявності, доступний.

5. Benefit n – something that promotes welfare – користь, вигода. Syn. an advantage.

6. Business n – an organization that produces or sells goods or provides a service – компанія, підприємство. Business enterprise – торгівельно-промислове підприємство, business firm – комерційна компанія, business unit – господарська/ організаційна одиниця. Syn. an enterprise, a firm.

7. Cost n – the price paid or required for buying, producing, or doing something, usually measured in money, time, or energy – вартість; ціна. Syn. value. Аt no cost - безкоштовно, money cost – грошова вартість, opportunity cost – альтернативна вартість, cost of living/ living costs – прожитковий мінімум, cost of tuition – вартість навчання.

8. Costs n – an amount that has to be paid or spent to buy or obtain something – витрати, затрати. Syn. spending(s), expenditure(s).

9. Face v – to come face to face with a difficult situation or problem one has to deal with – стикатися, поставати перед. Syn. to be faced with.

10. Forgo v – omit or decline to take (something pleasant or valuable); go without – відмовлятися, утримуватись від чогось. Syn. to refuse, to give up.

11. Increase v – to make or become greater in size, number, amount, value, degree, price, etc. – збільшувати, зростати. Syn. to go up, to rise. Ant. to decrease, to lower, to reduce.

12. Individual n – a person, considered separately from the rest of the group or society that they live in – особа, людина. Syn. a person. Individuals – окремі особи, люди. Syn. people.

13. Limit (to) n – a point that may not or cannot be passed – межа. To set a/the limit to – встановлювати межу.

14. Limit (to) v – to stop something going beyond a particular point – обмежувати.

15. Opportunity n – a favourable, appropriate, or advantageous chance or prospect – слушна нагода, сприятлива можливість. Syn. a chance, a possibility.

16. Option n – a choice one can make in a particular situation – вибір; право вибору. Syn. an alternative, a choice.

17. Power n – the right to do something – право, повноваження. Borrowing power – кредитоспроможність, taxing power/power to tax – право оподаткування. Syn. authority.

18. Satisfy v – to cause someone to be happy from some desire or need by supplying what he desires, or needs – задовольняти. Syn. to meet.

19. Scarce adj – being insufficient or in limited supply to meet the demand – рідкісний; що рідко зустрічається; дефіцитний; недостатній. To be scarce – бути в недостатній кількості. Syn. limited.

20. Value n – the importance placed on something by an individual – цінність; вартість. Forgone value – вартість, від якої відмовляються. To have value – мати цінність/вартість. Syn. cost.

Text

The older we become, the better we understand that we can’t have everything. If we spend more on lunch we have less to spend on dinner. If we live in the country, we enjoy the beauties of nature but we spend more time to get to university or work. If a business produces advertising materials, it can’t publish scientific journals with the same resources. If a government spends more on modern medical facilities, it has to limit costs on improvements of roads. So, it means that everyone through their lives has to make choices from among the things they would like to have.

Most of the things we want or need are goods and services. Economists call them economic goods since they are scarce and have value to people. Other goods are not scarce – air, seawater, and sunshine – and called free goods. They are useful to people and available at no cost.

Since most of the things are scarce all economic units, namely, individuals, families, businesses and governments, have to choose as to how to allocate and use them. Choices made by individuals and families depend on the size of their personal income, savings, wealth and ability to borrow. Business enterprises and firms, in turn*, are limited by their profits, savings and borrowing power, and governments by their taxing and borrowing power.

The necessity to make a choice results from the problem of scarcity of available resources. For most people, scarcity is a fact of life. Scarcity means that individuals as well as societies want more than is available. If people desired nothing, there would be no scarcity. If resources were great enough to produce more than anyone desired, there would also be no scarcity. Economists say that there is no limit to the amount and kinds of things that people want but there is a limit to the resources, available to satisfy unlimited human wants. Thus, the problem of scarcity faces all people, businesses, governments.

Having limited financial resources school leavers can choose a full-time or part-time job as they can’t afford to get a university degree*. Business owners cannot hire all the workers and buy all the equipment and raw materials they require. Governments face some scarcity of finances despite their power to tax. Therefore, scarcity forces all levels of decision makers*, from individuals to society, to do their best to get the most from what they have.

The essential sense of scarcity is that everything we do has value. When you are doing one thing, you are using time and resources that cannot be used for the next most valuable thing you could have been doing*. The cost of doing more of one thing, then, is the value that is sacrificed by doing less of something else.

Economists refer (посилаються) to the value that is forgone every time we do something as opportunity cost. In fact, all costs are opportunity costs. We commonly (звичайно,банально)think of cost as the money we spend to obtain something. But spending money on one thing is giving up the opportunity to spend it on something else.

For example, you have been dreaming of buying a windsurfing and at last you have accumulated enough savings to purchase it. But hydro cycle has become a thing of your dream, too. But you cannot afford to purchase both desired things as you simply don't have enough resources, namely, money. To the economist the choice you will make is a trade-off. Trade-off means that the decision to have one thing is, at the same time, the decision not to have something else.

Let's consider (розглянемо) the cost of acquiring (здобуття) university education. Many school leavers think about going to university for four or five years. Obviously, the cost of tuition, the cost of books and different supplies, and the cost of living in a hostel represent the money cost of going to university.

If a person does not go to college, then he or she will probably find a job instead. Economists describe the money that those who choose university might have earned (заробити)during their years of study as forgone earnings, but not the money spent on tuition and books. Thus, the opportunity cost of going to university is the goods and services represented by the money cost of the education, plus the value of the forgone earnings.

The cost of doing something often has nothing to do with spending money. For example, if you gave up the option of playing a computer game to read this text, the cost of reading this text is the enjoyment you would have received playing the game. Most of economics is based on the simple idea that people make choices by comparing(порівнюючи) the benefits of options and choosing the one with the highest benefit.

But there are two sides of the coin of opportunity cost. One is forgone value resulting from scarcity, and the other is opportunity. There would be no opportunity costs without opportunity. If there were only one thing you could do with your time and talents, there would be no cost of doing it. The larger the number and the more valuable the opportunities you have, the better this increases the cost of the choices you make.

So, the problems of scarcity, trade offs and opportunity costs are the main economic issues that any economic unit faces.

We as individuals and as a society are faced with scarcity (of raw materials and financial resources, of goods and services, of time, and so on) in relation to our ever-growing* needs and wants. It is economics that helps make our choices (a new car or tuition fees, more hospitals or more highways, more free time or more income from work) and gives a way of understanding how to make the best use of available resources to achieve our aims.

Comments

In turn – в свою чергу;

a university degree – університетський диплом;

decision makers – особи, які приймають рішення;

you could have been doing – ви могли б робити;

ever-growing – постійно зростаючий.

Exercise 1. Read, translate into Ukrainian in written form and memorize the definitions of the following economic terms and concepts.

Economic goods: Any good or service that is scarce in relation to demand for them.	_______________________________________________________________________________________________________________
Free goods: “gifts of nature” that are useful but are not scarce and have no value to people.	_______________________________________________________________________________________________________________
Goods: all tangible items of value that can be touched or felt.	__________________________________________________________________________
Income: money of all kinds received by a person or organization in a year from work, investment, rent, etc.	____________________________________________________________________________________________________________________________________________________
Need: what someone needs to have in order to live a full healthy comfortable life.	_______________________________________________________________________________________________________________
Opportunity cost(s): benefit, profit, or value of something that must be given up to obtain or achieve something else.	____________________________________________________________________________________________________________________________________________________
Profit: money that an entrepreneur gains by selling something, or from doing business in a particular period of time after the production costs have been met.	_________________________________________________________________________________________________________________________________________________________________________________________
Resources: something that a country, person, or organization has and can use to achieve its/their goals.	_______________________________________________________________________________________________________________
Savings: the sums of money saved, not spent but put aside for future use.	__________________________________________________________________________
Scarcity: a situation in which there is not enough of something to go around.	_______________________________________________________________________________________________________________
Services: intangible items of value in the form of labor, advice, managerial skills, etc.	_______________________________________________________________________________________________________________
Trade-off: giving up one benefit, advantage, etc. in order to receive another that is more desirable.	_______________________________________________________________________________________________________________
Wants: a specific feeling of needing something that is absent or unavailable.	_______________________________________________________________________________________________________________
Wealth: a large amount of money, property etc that a person or nation owns.	_______________________________________________________________________________________________________________

Exercise 2. Give the Ukrainian equivalents for the following.

to enjoy the beauties of nature
improvements of roads
to have value to people
to result from the problem of scarcity	___________________________________ __________________________________
for most people
to satisfy unlimited human wants
all the equipment and raw materials
the essential sense of scarcity
the value that is sacrificed
to purchase both desired things
she will probably find a job
the value of the forgone earnings
by comparing the benefits of options
in relation to our ever-growing needs	__________________________________ ____________________________________
the best use of available resources

Exercise 3. Find the English equivalents for the following.

медичне обладнання
впродовж свого життя
господарські одиниці
як розміщувати та використовувати їх	_______________________________________ _______________________________________
дійсність життя
кількість та види речей
робота з повним та неповним робочим днем	_______________________________________ _______________________________________
робити все від себе залежне, щоб отримати найбільше з	______________________________________________________________________________
наступна найважливіша річ
ми звичайно розглядаємо вартість як	______________________________________________________________________________
отримання університетської освіти	______________________________________________________________________________
на думку економістів
різне приладдя
не мати нічого спільного з
дві сторони медалі
плата за навчання

Exercise 4. Match the verbs/verbal phrases, prepositions/adverbs and nouns/noun phrases as they occur together in the text. Translate the expressions they make into Ukrainian.

to be faced		all people
to be limited		a job
to depend		the cost
to do	up	what they have
to face	from among	some scarcity of finances
to face	from	their profits, savings and borrowing power
to find	with	the option of playing a computer game
to get the most	by	the problem of scarcity
to give	on	the size
to increase		the things
to make choices		scarcity
to result		your time and talents

Exercise 5. Copy out from the texts the sentences containing the following words and word-combinations and translate these sentences into Ukrainian.

1. a business produces _____________________________________________________

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

2. all economic units _____________________________________________________

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

3. there is a limit to _______________________________________________________

_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

_______________________________________________________________________

4. scarcity forces ________________________________________________________

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

5. by doing less _________________________________________________________

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

6. to have one thing ______________________________________________________

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

7. the money cost of the education __________________________________________

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

8. with the highest benefit _________________________________________________

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

9. the choices you make __________________________________________________

__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Exercise 6. What economic terms given in the text do the following definitions refer to?

	B
	Anything provided by nature or people that can be used in the creation of goods and services to satisfy human wants.
	What remains after the costs of doing business have been met.
	Things purchased by consumers that do not have physical characteristics.
	A limit to the supply of production resources or consumer goods in relation to producers’ or consumers’ demand for them.
	Money or its equivalent received in exchange for labour.
	Useful and scarce things desired by buyers.
	The amount of goods and services that must be given up in order to obtain other goods and services.
	The study of how human beings and societies choose from among scarce resources to satisfy consumers’ demand.
	The total accumulated amount of income that is not spent on consumption.