Questions for economic reasoning and discussion

Date: 2015-10-07; view: 423.

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Whenever people gather in a community, they deal with a few universal economic problems. These fundamental questions are as crucial today as they were at the dawn of human civilization. Every human society – whether it is an advanced industrial nation, a centrally planned economy, or an isolated tribal society – must solve three fundamental and interdependent economic questions.

· What goods and services are to be produced, and in what quantities are they to be produced?

· How are these goods and services to be produced?

· Who will receive and consume these goods and services?

The first basic choice refers towhat goodsa society should produce and in what quantities. Every economy has limited resources at its disposal but the goods and services wanted by its people are numerous. With the limited resources society can produce all the things its people want. So an economy faces the problem what combination of goods and services should be produced? The nature of the combination depends on the consumers' choices andpreferences reflected in market prices or in government policies.

A second basic choice relates to how to produce goods and services. Most goods can be produced in more than one way by using resources in different quantities and combinations. It is often possible to vary the factor combinationin manufacturing. Any society decides how it will organize its scarce resources in order to use them efficiently. As the economy has to economize its limited resources it has to make a choice between various production methods to produce different goods.

No one can get all he wants. Whatever is produced in an economy it cannot be sufficient to meet everybody's wants. So a problem arises who will get and how much. This is the problem of distribution of a nation's wealth among different groups.

Production of goods and services is the result of the joint efforts of the owners of the four factors of production: land, labour, capital and entrepreneurship. So the total national income is distributed among the owners of these factors of production. There is no system by which goods and services may directly be distributed among the factor owners. What they get is the money income in the form of rent, wages, interest and profits. With this income they buy the goods and services. How much wage earners and profit earners can buy, land or capital owners can buy depend upon their income. So it is a problem of national income distribution.

The way that a country uses to solve three basic questions is based on its economic system. Aneconomic system is a mechanism that deals with the production, distribution and consumption of goods and services in a particular society.

There are four main types of economic systems present in the world: the traditional economy, the command economy, the market economy, and the mixed economy.

Ø Thetraditional economy is an economic system in which decisions about what, how, and for whom questions are made on the basis of customs, beliefs, religion, habit, and tradition.

People's economic roles are the same as those of their parents and grandparents. The ways they produce clothing and shelter are almost exactly the same as those used in the past. Traditions decide what these people work for a living, how their work is performed and who gets what is produced in such an economy.

It has an advantage over other systems, in that there is little disagreement among members because relatively little is disputed. However, it restricts individual initiative and has a lack of advanced goods, new technology, and economic growth.

Ø Thecommand economyis a society where the government institutions make all decisions concerning what will be produced, how it will be produced, and for whom it will be produced.

In a command economy, a central authority or agency draws up plans that establish what will be produced and when, sets production goals, and makes rules for distribution. The government owns a considerable portion of the means of production, thus they are publicly owned; it also owns and directs the operations of enterprises in most industries; it is the employer of most workers and tells them how to perform their work.

A hard working citizen has no chance to benefit from his extra work because he cannot increase his standard of living any greater than it currently is and he will earn just as much as a person who makes little or no effort.

Ø Themarket economy (or free enterprise economy) is an economic system in which the decisions of many individual buyers and sellers interact to determine theanswers to the questions of What, How andWho.

In a market economy the fundamental economic questions are answered in the marketplace by the interaction of buyers and sellers. The question of what to produce may be based on what trend is popular right now. The producers create a product that they think they will sell well to the consumers in hope to make a profit. The question of how to produce is usually based on the producer's choice. They might decide to produce a product with more workers or with machines and computers to save on labour costs*. The question involving for whom to produce is based on the consumers who decide what they want or need and what price they are willing to pay for it.

There are several essential elements in a market economy. One of these is private property–the right of individuals and businesses to own the means of production. Unlike command economy with its public property, in a free market economy the major factors of production are privately owned. Private ownership gives people the incentive to use their property to produce things they will sell and make profits.

This desire to earn profits or theprofit motive is a second ingredient in a market economy. The profit motive encourages sellers to produce commodities at the lowest possible cost.

Ø Themixed economyis an economic system that answers the three economic questionsboth in the marketplace and in the government*.

A mixed economy contains both privately and publicly owned enterprises and relies on the market but with a large dose of government intervention. A mixed economy usually involves producers working closer with the government to achieve economic goals.

Since no country in the world have either type of economic system in its pure form, all major economies are mixed ones because markets as well as government decisions* play a role in answering the basic economic questions. The blend of market and government participation is different in different countries with mixed economies. The optimal level of government interference remains a problem which is of interest to economists.

COMMENTS:

labour costs –витрати на робочу силу;

both in the marketplace and in the government– як на ринку, так і в уряді;

market forces as well as government decisions– як ринки, так і урядові рішення.

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

Exercise 2. Give the Ukrainian equivalents for the following.

1. to be at the dawn ___________________________________________________

2. wage earners ______________________________________________________

3. to solve three basic questions _________________________________________

4. on the basis of _____________________________________________________

5. there is little disagreement ____________________________________________

6. a lack of advanced goods _____________________________________________

7. to set production goals ________________________________________________

8. to be publicly owned _________________________________________________

9. to interact to determine the answers to __________________________________

10. to be based on the producer's choice ____________________________________

11. to give people the incentive ___________________________________________

12. a second ingredient _________________________________________________

13. both privately and publicly owned enterprises ____________________________ ____________________________________________________________________

14. the blend of market and government participation _________________________

____________________________________________________________________

Exercise 3. Find the English equivalents for the following.

1. повинне розв'язувати ______________________________________________

2. його не може бути у достатній кількості ______________________________

3. спільні зусилля власників ___________________________________________

4. власники факторів виробництва _____________________________________

5. заробляти на хліб __________________________________________________

6. центральна влада __________________________________________________

7. стільки ж скільки __________________________________________________

8. мати хороший збут ________________________________________________

9. бути готовим заплатити ____________________________________________

10. знаходитися/бути у приватній власності ______________________________

11. це бажання отримати/заробити прибутки _____________________________

12. за найменшими можливими витратами _______________________________

13. значна доля урядового втручання ____________________________________

Exercise 4. Match the verbs/verbal phrases, prepositions (if necessary) and nouns/noun phrases as they occur together in the text: translate the expressions they make into Ukrainian.

Exercise 5. Match these nouns/noun phrases, prepositions (if necessary) and nouns/noun phrases as they occur together in the text: translate the expressions they make into Ukrainian.

Exercise 6. Copy out of the text the sentences containing the words and word-combinations listed below and translate these sentences into Ukrainian.

Every human society: __________________________________________________

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the consumer's choices: _________________________________________________

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the factor owners: _____________________________________________________

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is based on: __________________________________________________________

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work for a living: ______________________________________________________

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to perform their work: __________________________________________________

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

makes little or no effort: ________________________________________________ ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

will sell well: _________________________________________________________
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

private ownership: _____________________________________________________
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

relies on the market: ___________________________________________________

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

markets as well as government decisions: ___________________________________
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Exercise 7. Choose from the box the words and word-combinations having the same or similar meaning to the words listed below. More than one is possible.

Exercise 8. Translate the words in brackets into Ukrainian.

Every economy has limited resources (у своєму розпорядженні) to meet (необмежені людські бажання). So the (проблема вибору) arising out of (нестачу ресурсів) faces every economy. All societies have to decide what they (готові відмовитися) to get the things they want. It is the task of an economic system to (ефективно поєднати свої ресурси), wants and (технології виробництва). To do so, it must answer (три основні та взаємозалежні економічні питання): What to produce, How to produce, and For Whom to produce with its limited resources.

Not all societies choose to answer these questions in the same way, however, (кожне суспільство намагається) to answer them (ефективно). The economic system a country has (ґрунтується на) what is best for the country. The way each question is answered identifies (тип економічної системи) that exists (у певному суспільстві). (Загалом існує) three kinds of economic systems (у світі). They are traditional, command, and market economies.

(У традиційній економіці), the custom or tradition of the society (надає відповіді на) the What, How, and Who questions.

(У суспільстві з командною економікою) it is (урядові установи) that (приймають рішення) which products will be made, they decide where (розташувати новий завод) and what factory to modernize. By setting wage rates for everyone, (центральна влада вирішує) who will receive (вироблені товари та послуга).

The most widely accepted economic system today is (ринкова економіка). In this type of economy it is (діяльність та рішення) of the buyers and sellers of goods, services and resources that (керують економічною системою).

Since there are no (як чистих командних, так і чистих ринкових економік), it is perhaps better to describe (більшість сучасних економік) as (змішані економіки), in which (як уряд, так і приватні особи) have their economic (вплив на ринок).

Exercise 9. Pair the halves of the sentences. Write your own list of the completed sentences and translate them into Ukrainian.

Exercise 10. What economic terms given in the text do the following definitions refer to?

1. and economy

Exercise 11. Translate the sentences into English using the active vocabulary.

Exercise 12. Answer the following questions.

1. What are the three basic economic questions that every society must answers?

2. What makes each society look for the answers to the basic economic questions?

3. Why must individuals and societies provide answers to the basic economic questions?

4. How does each society make its decisions to solve the problem of scarcity?

5. What does the What question refer to?

6. What are the ways of providing answer to the How question?

7. What does the Who question mean?

8. What is an economic system?

9. What determines the type of an economic system?

10. What categories do economic systems fall into?

11. What is a traditional economy?

12. How are the answers to What, How and Who questions decided in a society with a traditional economy?

13. Why are there few social changes within a traditional economy?

14. What is a command economy?

15. Who makes decisions on the fundamental economic questions in a society with a command economy?

16. Who owns the major means of production in a command economy?

17. Why do the individuals have very little say as to how the basic economic questions are answered?

18. What is a market economy?

19. How is sometimes a market economy called?

20. What is a free enterprise system?

21. What is a free enterprise system based on?

22. Who owns the means of production in a society with a market economy?

23. How are the basic questions decided in a market economy?

24. What role do buyers and sellers play in a market economy?

25. What is private property?

26. What role does private property play in a market economy?

27. What is the profit motive?

28. What is the main incentive of a free enterprise, or market, economy?

29. How do the individuals benefit from a market economy?

30. What is a mixed economy?

31. Why are there neither pure market economies nor pure command economies?

32. Why are economic systems of most democratic countries called mixed economies?

1. The “profit motive” is sometimes said to be the most fundamental feature of a market system. What do you suppose is meant by the “profit motive”?

2. If no pure market economy exists and no pure command economy exists, why does economics deal with these concepts?

3. Choose the right variant. In some tasks more than one is possible.

1. Which of the following best describes the three fundamental economic questions?

a. What to produce, when to produce, and for whom to produce.

b. What to produce, when to produce, and where to produce.

c. What time to produce, what place to produce, and how to produce.

d. What to produce, how to produce, and for whom to produce.

e. What do corporations want, how can corporations control government, and for whom is the land despoiled.

2. Choose the main characteristics of a traditional economy.

a. The government controls the means of production and distribution.

b. Economic decisions are made according to age-old customs.

c. People meet basic needs by hunting, gathering (уборка врожаю) and farming.

d. There is little technology.

e. There is a competition for business.

3. In a command economy, the use of resources is determined by

a. public ownership and private sector decision making.

b. private ownership and government decision making.

c. private ownership and private sector decision making.

d. public ownership and government decision making.

4. Choose the main characteristics of a command economy.

a. There is little technology.

b. Businesses are not run for profit.

c. Individual profit is the primary motivator.

d. There is little or no competition.

e. The government controls the means of production and distribution.

f. The government makes all economic decisions.

5. To a supporter of a free enterprise economic system, the factors of production are put to best use when controlled by:

a. private individuals

b. labour unions

c. public officials

d. foreign investors.

6. Choose the main characteristics of a market economy.

a. There is a competition for business.

b. Making money is the primary motivator.

c. People can own their own property and go into business for themselves.

d. There is little technology.

e. The government makes all economic decisions.

f. Businesses are privately owned.

7. A market exists

a. where consumers express their needs and wants.

b. when products are advertised.

c. where merchants build shops.

d. where buyers and sellers exchange goods and services.

8. Which of the following statements is incorrect regarding the free market systems?

a. Private property does not exist.

b. Innovation and entrepreneurship are central to free market systems.

c. Some economic activity is not determined by the price mechanism and is provided by the government in the form of public goods.

9. The special role of the profit motive in a market economy is that it

a. drives sellers to produce what buyers want.

b. results in high prices.

c. discourages people from taking risks.

d. keeps people from going into business.

10. In a mixed economy, economic decisions regarding scarcity and factors of production are made by the

a. corporations and labour sector.

b. private sector.

c. public sector.

d. public and private sectors.

11. A mixed economy is best described by the statement:

a. In a mixed economy, society answers the “what”, “how”, and “or whom' questions through a market system.

b. In a mixed economy, government policies determine the “what”, “how”, and “for whom” questions.

c. In a mixed economy, the government and the private sectors interact in solving the basic economic questions.

d. In a mixed economy, the invisible hand solves the basic economic questions.