Economic Considerations

LESSON 2. The aim of the lesson is to teach you to relate the given information to your practical experience and fill in your experiential and linguistic information gaps. “Economic considerations” will help you broaden your perspective of economics and increase your communicative skills in English.

1. Consider the issues below. After you have reached some conclusions, share your ideas with the whole group.

1) The dictionary defines economics as “the study of the production of wealth and the consumption of goods and services in a society.” List five economic issues relating to production and consumption that your national or local government has to deal with today.

2) John Maynard Keynes, one of the most influential economists of the twentieth century said, “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else.” What do you think Keynes meant by this statement? Do you agree or disagree? Give reasons to support your opinion.

3) Two basic components of an economic system are business enterprise and households. Businesses produce goods and services, households consume them. Clothes, cars, stereos, books, and other material items are economic goods. They cost money - or have economic value. It takes skill and effort to create goods. People want them, and a limited number are available. Therefore, goods are scarce and have a price.

Explain the following phrases using the above passage:

1. Economics is the study of the allocation of scarce resources.

2. A person doesn’t have to give up anything to acquire free goods.

3. The challenge of an economic system is to ensure enough production of goods and services for its people and to arrange for the distribution of this production. An economic system faces basic questions in solving these problems:

* What to produce? Should society produce ships and missiles or hospitals and homes? Fewer cars or more trains? Often there are competing goals: people want cars, but they don’t want congested downtowns, traffic deaths and air pollution. Can society provide a car for everyone and clear air at the same time?

* Who will produce? A basic problem of production is to mobilize human energy. Jobs must fit the skill of the work force, and they must be located where the workers are. When these conditions are not met, the result is unemployment.

* How much to produce? The supply of a good or service must match the demand for it. When this match does not occur, either the prices will be driven up (demand is greater than supply) or inventories on producers’ shelves will pile up and workers will be laid off (supply is greater than demand). When the supply and demand are not equal, the result is inflation or recession.

* To whom to distribute the output? What distribution is proper and fair? Should the economic pie of a society be divided evenly? The distribution of output is a very controversial issue.

If the goals are not met, there is often unrest. In a democratic society, where people can vote for change, economic issues are resolved at the polls.

What is your priority list of challenging economic issues? Explain.

4. Before you read the following article, skim through it quickly and underline two sentences that convey the main idea.