Лекция: Basics of Market Economy

Economics has always been described as study of scarcity and choice Scarcity exists because human wants are virtually unlimited. Whereas the resources necessary to satisfy those wants are limited. The resources, or factors of production as they are called, are: land, labour, capital and entrepreneurship. Owners of these resources are paid rent, wages, interest, or profits for their use.

Since there is a limit to the amount of resources available at any point in time, there is also a limit to the amount of goods and services that can be produced. For that reason individuals, business firms, and governments must pick and choose from among the things that they would like to have in order to get the most from their resources.

In exercising the choice imposed upon them by (heir unlimited wants and limited resources, every society must come to grips with the fundamental economic questions. These are:

— What goods and services arc to bo produced?

— How are they to be produced?

— Who will receive them?

The way in which a society goes about answering these fundamental questions is known as its economic system. Economic systems may be classified as traditional, command, or market system. As the names suggest, resources are allocated (i.e., the fundamental questions are answered) m a traditional economy in accordance with tradition and m a command economy by government planners. Resources in a market economy are allocated in accordance with the laws of supply and demand.

Market economies is directed by prices. As the price of an item rises, sellers are encouraged to increase production, and consumers are discouraged from purchasing the item. When the price falls, the opposite is true. In this way prices send out «signal» to buyers and sellers, thereby keeping the economy responsive to the forces of supply and demand.

In a free market economy, prices are determined by the interaction of the forces of supply and demand. Perfectly competitive markets are those, in which many buyers and sellers, with full knowledge of market conditions, buy and sell product that, are identical to one another.

Supply, which is the quantity of goods or services that-sellers would offer for sale at all possible prices at a particular time and place, varies directly with price. In other words, at a higher price more goods and services will be offered for sale than at lower one and vice versa.

Demand is the quantity of goods and services that buyers would take at all possible prices. Demand varies inversely with price. That is, at a higher price fewer items would be bought than at a lower one. The degree to which price changes affect demand will depend upon the elasticity of demand for a particular item.

The price at which goods and services actually change hands is known as the equilibrium, or market price. It occurs at that point at which the quantity demanded exactly equals line quantity supplied. Market price can be represented graphically at the point of intersection of the supply and demand curves. Shifts in demand or supply will affect market price. When everything else is held constant, an increase in demand will result in an increase in market price, and vice versa. Similarly, an increase in supply will result in a decrease in price, and vice versa.

II. Объясните значения следующих слов:

Образец: Shop is the place where selling and buying goods take place,

— wages; capital; government; firm;

— rent; price; profit; entrepreneur.

III. Дайте столько вариантов фразы, сколько сможете изменяя подчеркнутые элементы.

In exercising the choice imposed upon them by their unlimited wants and limited resources every society must come to grips with the fundamental economic questions.

IV, Найдите в тексте английские эквиваленты следующих слов и словосочетаний.

командная экономика физическое лицо процентная ставка поддерживать постоянным точка пересечения кривых повышение цены взаимодействие единица товара конкурентоспособный закон спроса и предложения

V. Выпишите из текста семь случаен употребления глаголов в страдательном залоге и переведите выбранные предложения на русский язык, укажите время.

VI. Определите, соответствуют ли следующие утверждения содержанию текста.

1. An increase in demand causes & decrease a price.

2Consumers are discouraged from purchasing the item if its price rises.

3. Resources are allocated by government planners in a command economy.

4. Flexibility of supply and demand is a necessary condition of a traditional command economy.

5. There is never scarcity of goods in a command economy.

6. Interaction of the forces of supply and demand is the law of a market economy.

VII. Составьте 10 вопросов к тексту.

VIII. Найдите синонимы к следующим словам:

— to occur; to vary; goods; to purchase; virtually;

— shifts; identical; scarcity; to affect; elasticity; to allocate; firm.