Look through the following vocabulary notes which will help you understand the text and discuss the topic.

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U N I T 1 MARKET ECONOMY

Getting started

An economy consists of the economic system of a country or other area, the labor, capital and land resources, and the economic agents that socially participate in the production, exchange and distribution and consumption of goods and services of that area. A given economy is the end result of a process that involves its technological evolution, history and social organization, as well as its geography, natural resource endowment, and ecology, as main factors. These factors give context, content, and set the conditions and parameters in which an economy functions.

Discuss the following points.

1. What do you think determines the way in which a government can organise its economy?

2. Why do you think the type of system chosen is critical in shaping the environment in which businesses operate?

Look through the following vocabulary notes which will help you understand the text and discuss the topic.

an economy	экономическая система хозяйствования, экономика
economic	экономический
Economics	экономическая наука
an economist	экономист
economical	экономный
resource endowment	ресурсное обеспечение
a business	фирма, предприятие
business	бизнес (торговля)
environment	окружающая среда
drawbacks and benefits	недостатки и преимущества
an assumption	представление, допущение
demand and supply	спрос и предложение
goods and services	товары и услуги
to purchase	покупать
a purchase	покупка
a purchaser	покупатель
to consume	потреблять
a consumer	потребитель
consumer	потребительский
consumption	потребление
needs and wants	нужды и потребности
(un)limited, syn. (in)finite	(не)ограниченный
scarcity	дефицит, нехватка
scarce	дефицитный
to choose	выбирать
a choice	выбор
to make/exercise a choice	делать выбор
a commodity	товар
to reduce, syn.: to decrease ant.: to raise, to increase	уменьшать, сокращать(ся) увеличивать, повышать(ся)
to eliminate	устранить, убрать
to compete	конкурировать
competition	конкуренция
a competitor	конкурент
competitive	конкурентоспособный
sales	продажи
a profit	прибыль
(un)employment	(безработица) занятость
to employ	нанимать, брать на работу
an employer	работодатель
an employee	работник
government intervention	вмешательство правительства
to cut back (financing)	снижать финансирование
a recession	рецессия, затяжной период спада в экономике
flexible	гибкий
flexibility	гибкость
to allocate	распределять
allocation	распределение
to fluctuate	колебаться, часто меняться
fluctuation	колебание (цен, ставок)
fluctuating	колеблющийся, неустойчивый
to advertise	рекламировать
advertising	рекламирование, рекламный
an advertiser	рекламодатель
an advertisement	рекламное объявление
cohesive	единый, целый
an entity	самостоятельная хозяйственная единица, предприятие, организация
a legal entity	юридическое лицо

Reading

Economic Systems

There are three major types of economic systems, each with their own drawbacks and benefits: the Market Economy, the Planned Economy and the Mixed Economy. An economic system is loosely defined as a country’s plan for its services, goods produced, and the exact way in which its economic plan is carried out.

Market Economy In a market economy, national and state governments play a minor role. Instead, consumers and their buying decisions drive the economy. In this type of economic system, the assumptions of the market play a major role in deciding the right path for a country’s economic development.

A market can be defined as any economic activity designed to satisfy the needs of society. On one hand we have consumers who demand goods. On the other hand we have sellers who aim to satisfy demand by providing the required goods and services while at the same time, making a profit. In other words, the market can be viewed as the area where individual decisions about buying and selling interact. On one side we have purchasers or consumers who wish to buy single consumer goods, consumer durables and consumer services. On the other side we have producers willing to supply these commodities who therefore must buy factors of production and produce services.

The needs or wants of consumers are unlimited but resources to satisfy them are finite. Because of this dilemma, economic goods are considered to be scarce in relation to the demand for them. In other words, consumers must choose between the alternative goods available. The collective action of all consumers determines the market demand. Sellers, too, are faced with the problem of scarce resources and must exercise choice. Their collective action determines the market supply. The interaction of the two market forces of supply and demand determines the market price for each commodity or service.

Market economies aim to reduce or eliminate entirely subsidies for a particular industry, the pre-determination of prices for different commodities, and the amount of regulation controlling different industrial sectors.

The absence of central planning is one of the major features of this economic system. Market decisions are mainly dominated by supply and demand. The role of the government in a market economy is to simply make sure that the market is stable enough to carry out its economic activities properly.

Such a system is very efficient. The economy adjusts automatically to meet the changing demand. No planners have to be employed, firms tend to be highly competitive, new advanced products and low prices are good ways to increase sales and profits.

Not surprisingly there are also problems. Some goods would be under purchased if the government did not provide free or subsidized supplies. Healthcare, education, defense and policing are impossible to supply individually in response to consumer spending. Production alters swiftly to meet the changing demand, which can result in higher unemployment rates and cause social problems. Furthermore, safety standards concerning products, services and working conditions require large-scale government intervention to pass laws to protect consumers and workers. Finally, at certain times firms tend to cut back on production and the development of new ideas, which can lead to a recession.

Planned Economy A planned economy is also sometimes called a command economy. The most important aspect of this type of economy is that all major decisions related to the production, distribution, commodity and service prices, are all made by the government.

The planned economy is government directed, and market forces have very little say in such an economy. This type of economy lacks the kind of flexibility that is present in a market economy, and because of this, the planned economy reacts slower to changes in consumer needs and fluctuating patterns of supply and demand.

On the other hand, a planned economy aims at using all available resources for developing production instead of allocating the resources for advertising or marketing.

Mixed Economy A mixed economy combines elements of both planned and market economies in one cohesive system. This means that certain features from both economic systems are taken to form this type of economy. This system prevails in many countries where neither the government nor the business entities control the economic activities of that country - both sectors play an important role in the economic decision-making of the country. In a mixed economy there is flexibility in some areas and government control in others. Mixed economies include both capitalist and socialist economic policies and often arise in societies that seek to balance a wide range of political and economic views.

Comprehension

1.4.1 Answer the questions using the active vocabulary.

1. What is the main topic of the text?

2. What kinds of economies are described in the text?

3. How can you define the concept of “economic system”?

4. What are the main features of a market economy?

5. What are the two sides of a market economy?

6. Demand is the sellers’ side of the market economy, isn’t it?

7. Supply is the sellers’ side of the market economy, isn’t it?

8. What is the difference between the producer and the consumer?

9. What are the advantages of a market economy?

10. What are the disadvantages of a market economy?

11. Why is government intervention required in a market economy?

12. What is the main difference between the market economy and the planned economy?

13. Market forces are as important in the market economy as they are in the planned economy, aren’t they?

14. Why does the planned economy react slower to changes in consumer needs and fluctuating patterns of supply and demand than the market economy?

15. What two major sectors can be identified in the mixed economy?

16. What are the main features of the miхеd economy?

1.4.2 Mark these statements T(true) or F(false) according to the information in the text. If they are false say why.

1. In general terms an economic system can be defined as a country’s plan for its services, goods produced, and the exact way in which its economic plan is carried out.

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