c) dissatisfy (v)
d) make worse
e) economize (v)
f) expenditure (n)
g) micro (a)
h) unlimited (a)
Ex. 4. Form the following pairs of derivatives and memorize them.
Ex. 5. Match the Russian word combinations with their English equivalents.
Ex. 1. Expand the sentences, using the text.
1. Our world is a finite place where people… .
2. Scarcity is the condition in which… .
3. Economics is the study of how… .
4. Economy is… .
5. Macroeconomics is the branch of economics that… .
6. Microeconomics is… .
7. Economists use the term “opportunity cost” to… .
8. The opportunity cost of an individual’s decision is determined by… .
9. Nations, too, are constantly faced with… .
Ex. 2. Choose the right variant.
1. The condition of scarcity:
a)cannot be eliminated;
b) prevails in poor economies;
c)prevails in rich economies;
d) all of the above;
e)none of the above.
2. The condition of scarcity can be eliminated if:
a)people satisfy needs rather than false wants;
b) sufficient new resources were discovered;
c)output of goods and services were increased;
d) all of the above;
e)none of the above.
3. The subject of economics is primarily the study of:
a)the government decision-making process;
b) how to operate a business successfully;
c)decision-making because of the problem of scarcity;
d) how to make money in the stock market.
4. Which of the following is included in the study of macroeconomics?
a) salaries of college professors;
b) computer prices;
c) unemployment in the nation;
d) silver prices.
5. Microeconomics approaches the study of economics from the viewpoint of:
a) individual or specific markets;
b) the national economy;
c) government units;
d) economy-wide markets.
Ex. 3. Choose the best answer to the following questions, using the text.
1. Why is scarcity the most basic of all economic problems?
a) because the federal government must decide how much it will spend for natural defence;
b) it gives you an opportunity to buy something else;
c) because it is the most important issue in balancing unlimited needs with limited resources.
2. What is meant by the term “opportunity cost”?
a) it is your limited income;
b) it is defined as a decision to spend money;
c) it refers to the next best alternative that is given up when a decision is made to use resources in a particular way.
3. How do opportunity costs affect both individuals and nations?
a) a state must spend less money on education;
b) an individual has to give up something that gives him pleasure;
c) an individual or a nation has to sacrifice something for the choice made.
4. What is meant by the term “value judgement”?
a) it is defined as a process of decision-making;
b) it is a personal opinion about the value of a good;
c) it is a merit a good possesses.
Ex. 4. Say if these statements are true or false.
1. Because of the problem of scarcity nations, businesses, and individuals all must make choices in an effort to satisfy unlimited wants with limited resources.
2. Economists use the term opportunity cost to refer to the value of what is foregone in order to have something else.
3. Any time you decide to use scarce resource in a particular way, you do not incur an opportunity cost – the cost of the next best alternative use of that resource.
4. Governments never have problems with defence spending.
As you read the text, focus on the following terms: 1) economic goods, 2) economic services, and 3) factors of production/productive resources, and 4) sectors in the economy.
Satisfying People’s Wants
Economics is the study of how individuals and society choose to use limited resources in an effort to satisfy people’s unlimited wants. Satisfying such wants involves the production of economic goods and services. We will first define the terms “economic goods” and “economic services”, and then turn our attention to the factors of production needed to produce them.
Economic goods are things of value that you can see, and show to the others. They are things like bicycles, books, stereos, and clothing. Economic goods also include such things as factories, stores, machines, and tools.
Economic services are intangible things that have value but often cannot be seen, touched, or shown to others. The examples of economic services are medical care, legal advice, movies and national defence.
Factors of production are also called productive resources. These are the basic resources which are needed for the production of economic goods and services. Economists divide the factors of production into four basic categories: (1) natural resources, (2) capital goods, (3) labour and (4) entrepreneurship.
Natural resources are things provided by nature. Land, air, water, forests, coal, iron ore, oil, and other minerals are examples of natural resources. They are the starting points of all production, and they represent the most basic limitations of the productive capacity of an economy. In other words, no matter how much skilled labour and technological knowledge an economy has, it cannot create goods if it lacks natural resources.
Capital goods are human-made resources that are used for the production of other goods and services. Factories, machines, tools, railroads, trucks, and business buildings are all examples of capital goods.
It is important to distinguish between capital goods and consumer goods.
Consumer goods, which are not a factor of production, are finished products sold to consumers for their own personal use. They include such things as food, clothing, TV sets, and newspapers. In contrast capital goods are things that are used in the production of consumer goods and services. A factory that manufactures TV sets is a capital good. Some things can be either consumer goods or capital goods, depending on how they are used. For example, an automobile purchased for personal use is a consumer good. However, automobiles purchased for use as taxis or for other business purposes are capital goods.
Labour, sometimes called human resources, is any form of human effort exerted in production. It includes all kinds of work. The work of a janitor, teacher, lawyer, engineer, and the governor of your state are all examples of labour. Labour is essential to production, since natural resources and capital goods are of no value unless they can be put to use.
The three factors of production described above – natural resources, capital goods and labour must be combined and organized before production can take place. This is where entrepreneurship, the fourth factor of production, enters the picture. Entrepreneurship may be defined as the function of combining and organizing natural resources, capital goods, and labour, assuming the risks of business failure, and providing the creativity and managerial skills necessary for production to take place. An entrepreneur is a person who carries out these tasks in the hope of making financial gains from the endeavour.
The economy includes several sectors (also called industries), that evolve in successive phases. They are the following:
· Primary sector. It involves the extraction and production of raw materials.
· Secondary sector. It involves the transformation of raw or intermediate materials into goods.
· Tertiary sector. It involves the provision of services to consumers and businesses.
· Quaternary sector. It involves the research and development needed to produce products from natural resources.
Ex. 1. Find the information in the text to answer the questions:
1. What is the difference between economic goods and economic services? Give examples to illustrate them.
2. What are the basic categories of the factors of production?
3. Are consumer goods considered to be factors of production too? What is the difference between consumer and capital goods?
4. How can you prove that labour is an essential factor of production?
5. Are there any other factors that influence production in modern world?
6. What are the four main sectors of economic activity in modern economies?
Ex. 2. Put down words and word combinations from the text, use them to give its short summary.
As you read the text, focus on the concept of “economic system” and its various types.