Exercises

1.Complete each sentence with a word or phrase from the box.

■ agriculture ■ ban ■ efficiently ■ free enterprise ■ manufacturers ■monopoly ■ private sector ■ profit motivation ■ public transport ■ state sector ■ telecommunications ■ trade

1 .......................is when businesses are able to trade without control from the government.

2.......................industries belong to and are run by the government.

3.......................industries belong to and are run by independent businesses.

4 Buses, trains and planes are examples of………………..

5.......................is another word for farming.

6......................produce new goods from raw materials.

7 When a business works......................., it runs successfully without wasting resources.

8Telephone and Internet systems are part of the ..................industry.

9.................is what drives businesses in the market economy.

10 When the government puts a.......................on rommodity, people are not allowed to buy or own it.

11 If only one company controls part of the economy, the have a ........................

12 When companies......................., they do business with each other.

2.Now read the text again and answer the questions.

1 What do most economists believe about economies in the world today?

A There are a number of free markets.

B Some countries have a completely planned economy.

C A mixed economy exists in some way in all countries.

2 Why do governments choose to run some industries?

A So they can collect taxes.

B Because they need to be protected from the risks of the free market.

C To encourage a divided economy.

3 Why do governments deregulate some industries?

A To make the industries more efficient.

B To protect them.

C Because there is too much competition,

4 According to the text, what is not very popular with the public?

A Deregulation of public transport.

B Deregulation of hospitals and schools.

C Deregulation of telecommunications and banking.

5 What type of state control is not mentioned in paragraph 5?

A Controlling the way companies do business.

B Controlling what companies sell.

C Controlling the prices companies set.

Text 5. Welfare economics

Behind the numbers, charts and formulas of economies, there are people. This is sometimes easy to forget. Economies isn’t only about profits, losses and utility. It’s about society. Economic ideas and theories often seem to be issues that are far removed from people’s everyday lives. Welfare economics, however, tries to correct this. It looks at how economic policies affect society, families and the individual.

One of the big issues in welfare economics is equity. Equity means fairness, and welfare economists are interested in measuring how fair our economic systems are. One way they do this is to look at how income and wealth are distributed among the population. Welfare economists also investigate the effects of government policy on equity.

Governments’ main weapon to fight inequity (unfairness) is taxation. Welfare economists try to find out how taxation affects vertical equity and horizontal equity, which are two ideas that taxation systems can be based on. The idea behind vertical equity is that people with more income will pay more than those with less income. The idea behind horizontal equity is that people with the same income will pay the same amount of tax. Ideally, a tax system will have both vertical and horizontal equity.

However, some economists feel that any kind of taxation on people’s earnings is unjust. They believe it is unfair to peciali entrepreneurs and hard-workers. Why should people who are less able or less hard-working be supported by others? In this view of welfare economies, inequity is a natural feature of every economic system. Trying to create equity, they say, is just a waste of time. Instead, it is better to make economic systems more efficient. A more efficient economy grows faster and everyone in society benefits.

Welfare economics isn’t only about the fairness of economic systems. It’s also about the impact that economic choices have on our lives. Economic transactions often affect other people who are not directly involved in those transactions. Economists call these results externalities. Externalities are sometimes good and sometimes bad for society. For example, pollution is a negative externality of the car industry. But cars give people better mobility, which is a positive externality of the same industry.

Production is not the only cause of negative externalities for society. Many are due to our use or consumption of goods. People’s litter in parks and on beaches is one example; noisy neighbours playing their CD player loudly is another. These are both examples of externalities causing pollution. However, health problems from smoking and drinking alcohol are also externalities from economic transactions. These have a cost for individuals, but also for society as a whole.