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Activating Background Knowledge

A. If you were to define the word "economics", what key-words
would you use in your definition? Choose from the list of words
those which you consider to be the guiding ideas in economics; you
can add any words of your own.

Capital, company, sales, goods and services, invest, business, produce, distribute, choice, cost, market, scarcity, industry, employ, satisfy, people, profit, GDP, needs, govern, economize, competition, money, resources, labour, agriculture, policy, land, loss.

B. In groups, work out a definition of "economics". Compare
your definitions in class and vote for the best one.

General Comprehension

Read the text and compare your definitions with those suggested by the author of the text: what do the definitions have in common and what is different?

What Is Economics

Economics is as old as the human race: it is probably the first art which man acquired. When some cavemen went out to hunt while others remained to defend the fire or when skins were traded for flint axes, we had economics. But economics as an academic discipline is relatively new: the first major book on economics Adam Smith's "The Wealth of Nations" was published in 1776. Since that time the subject has developed rapidly and there are now many branches of the subjects such as microeconomics, international economics and econometrics as well as many competing schools of thought.

To define the word "economics" we should first of all ascertain its essence, see what it is based on.

Most people want more than they can afford to buy. If a family buys one thing, they may not be able to afford something else they would like. The same is true of nations. Whether a nation is rich or poor, most of its people want more than they can afford. They seek better schools, more houses, and stronger armed forces. The field of economics studies how the things people need and want are made and brought to them. It also studies how people and nations choose the things they buy from among the many things they want.

Another aspect of the problem is people themselves: they do not just want more food or clothing, but specific items of clothing and so on.

However, the guiding idea in economics is scarcity. In all countries, the resources used to produce goods and services are scarce. That is, no nation has enough farms, factories, or workers to produce everything that everyone would like. Money is also scarce. Few people have enough money to buy everything they want when they want it. Therefore, people everywhere must choose the best possible way to use their resources and money. Children may have to choose whether to spend their allowance on a motion picture or a hamburger. Storekeepers may have to choose whether to take a summer vacation or to use their savings to buy more merchandise. A nation may have to choose whether to use tax money to build more highways or more submarines. In economic terms,,the children, the storekeepers, and the nation all must economize to satisfy their most important needs and wants. This means they must try to use the resources they have to produce the goods and services they most want.

We have now assembled the three vital ingredients in the definition of economics: people, scarcity and choice. Thus, we could define economics as the human science which studies the relationship between scarce resources and the various uses which compete for these resources.

The great American economist Paul said that every economic society has to answer three fundamental questions: What? How? and For whom?

What? What goods are to be produced with the scarce resources: clothes, food, cars, submarines, television sets?

How? How should we combine the basic resources of labour and land to produce the goods and services which we want?


For whom? Having produced goods and services, we have to decide how to distribute them among the people.

How a society answers these questions depends on the type of economic system a particular society uses. Actually, in every economy societies and individuals have to make these three key choices in the face of scarcity.

One alternative definition of economics is that it is the study of wealth. By wealth the economist means all the real physical assets which make up our standard of living: clothes, houses, food, roads, schools, hospitals, cars, oil tankers, etc. One of the primary concerns of economics is to increase the wealth of a society, i.e. to increase the stock of economic goods. However, in addition to wealth we must also consider welfare. The concept of welfare is concerned with the whole state of well-being. Thus, it is not only concerned with more economic goods but also with public health, hours of work, with law and order, and so on.


A. Underline the main stress in each word. Practise saying the

Economics, microeconomic, economize, storekeeper, merchandise, fundamental, alternative.

B. Circle the word in each line which has a different vowel sound.
Listen to the teacher and check your answers.

1) scarce wealth welfare therefore

2 ascertain trade saving allowance

3) society guiding discipline item

Word Study

A. Find international words in the text and write them out. Learn
their correct pronunciation.

B. Give Russian equivalents to the following word combinations:

as old as the human race; to trade skins for flint axes; to want more than one can afford; to seek better schools; the guiding idea in economics; to spend one's allowance on a motion picture; to assemble the three vital ingredients; to combine the basic resources of labour and land; alternative definition of economics; the concept of welfare; to be relatively new; to develop rapidly; scarce resources; to use one's

savings to buy more merchandise; to satisfy one's most important needs and wants; the relationship between scarce resources and the various uses.

C. Give English equivalents to the word combinations:

выяснить сущность; определенные предметы одежды; выбрать лучший из возможных способов использования ресурсов; матери­альные активы; составлять уровень жизни; одна из ведущих про­блем экономики; увеличивать запас экономических благ; брать во внимание благосостояние; быть связанным с благополучием в це­лом; здравоохранение; продолжительность рабочего дня; право­порядок; соперничающие теоретические школы; с точки зрения экономики.

D. Match the words from A with their opposites from B.


compete, physical, fundamental, attack, well-being, assemble, scarce, economize, wealth waste, plentiful, poverty, misery, spiritual, separate, marginal, cooperate, defend

E. Match the words from A with their synonyms from B.


economize, ingredient, guiding, assemble, vital, storekeeper, trade, item, stock, scarce, fundamental, motion picture, state, welfare, ascertain, seek, discipline, relatively subject, gather, insufficient, comparatively, significant, leading, save, exchange, well-being, condition, film, thing, clear up, component, look for, shopkeeper, primary, supply

F. Find words and expressions in the text with the following meanings:

1) a country's army, navy, and air force; 2) a situation in which the supply of something is not enough for the people who want or need it; 3) pocket money; 4) a wide road built for fast travel between towns and cities; 5) a ship that can travel both on the surface of the water and under water; 6) something such as money or property that a person or company owns; 7) something that you think is important (noun); 8) a large amount of money and other valuable things; the state of being rich; 9) the health and happiness of people (2 words); 10) an idea of something that exists.

economy. 4. We only seek ... justice, not revenge. 5. I spent most of the morning looking ... my passport. 6. We're spending a lot more ... food than we used to. 7. ... practical terms, this change is unlikely to affect many people. 8. There is a close relationship ... scarce resources and our choice. 9. The companies are competing ... international recognition. 10. Everything depends on what you mean ... the word "free". 11. This leads to one ... the most hotly debated areas in economic policy. 12. He's now running his own research company — that's in addition ... his job at the university. 13. I'd like to trade this knife ... your book.

D. Fill in the gaps with one of these words: "however", "thus" or "therefore".

1. This is a binding contract. ..., we recommend that you review it with a lawyer. 2. The president was confident of success. His advisers were not so sure, ... . 3. I'm delighted I could be here today. ..., I didn't come here to talk about myself. 4. No decision had been made, and ... the situation remained unclear. 5. This method has been widely adopted. ..., it is not yet clear that it is the best method. 6. The merchants began to import corn, ... forcing fanners to cut their prices. 7. The country was beautiful. I ... decided to return the next year. 8. I no longer have the support of the committee. I have ... decided to resign. 9. The oil producers will raise prices, ... increasing their profits. 10. The dollar has gone down against the yen, ... Japanese goods are more expensive for Americans.

Diving Deeper

A. In pairs, think of the questions students could ask a teacher
about economics, its history and guiding ideas. What would the
answers be?

B. Finish the sentences according to the text.

1. Economics is the oldest ... . 2. Although economics is as old as the human race, ... . 3. Since the first major book on economics by Adam Smith ... .4. Economics is subdivided into ... . 5. A rich nation can afford more to buy. However, ... . 6. People are choosy because they do not just want ... .7. Scarcity is one of the most ... . 8. Nations do not possess enough .... 9. The resources are scarce. Therefore, .... 10. Everybody economizes to ... . 11. People, scarcity and choice are ... . 12. Having assembled the three vital ingredients in the definition of

economics, we ... . 13. Economics is also the study of both ... . 14. The difference between wealth and welfare is that wealth ..., while welfare is concerned ... . 15. By physical assets we mean ....

7. Speaking

Tell your friend who is interested in economics but hasn't got the opportunity to read the text what you have learnt about:

• the history of economics;

• the influence of scarce resources on the choices we make;

• the three fundamental questions of the great American economist Paul;

• alternative definitions of economics.

8. Reading & Role-Playing

A. Match English economic terms with their Russian equivalents.


1) microeconomics а) кредитно-денежная политика, ва-
2) macroeconomics лютная политика  
3) inflation b) безработица  
4) unemployment с) процентная ставка  
5) balance of payments d) инфляция  
6) fiscal policy е) платежный баланс  
7) monetary policy f) макроэкономика  
8) budget deficit g) фискальная (налогово-бюджетная)
9) rate of interest политика  
10) factors of production h) микроэкономика i) факторы производства j) бюджетный дефицит  

В. Do you know the meaning of all the economic terms in point A? Read the dialogue between Ann, a first-year student, and Steve, a senior student, and make notes to explain economic terms.

Steve: Ann, you look so tired.

Ann: I've been working hard lately. I'm doing an economics test next

week, so I have to revise for it. But, still, there is so much

unclear for me. Steve: Can I help you? Ann: I would be most grateful to you if you could.

Steve: So, what don't you understand?

Ann: Let's start with the difference between micro- and macroeco­nomics...

Steve: Well, due to the work of the great economist John Maynard Keynes it has been customary to divide economic theory into micro- and macroeconomics. As its name implies, microeconomics is concerned with small parts of the economy, it deals with individual agents, such as households and businesses. And macroeconomics considers the economy as a whole Macro­economics topics come under the four headings — inflation, unemployment, the balance of payments, and growth.

Ann: And can I ask you what the balance of payment is?

Steve: Sure. It's the difference between the amount of money a country pays to foreign countries and the amount it receives from them.

Ann: I see. You mentioned macroeconomic topics, it seems to me they are connected with the objectives of economic policy.

Steve: Precisely. Whatever political party is in power three main objectives of policy are pursued: control of inflation, reduction of unemployment and promotion of economic growth. Different governments may, however, place different degrees of importance on individual objectives.

Ann: And I've read that there are two areas of action in which the government can pursue its economic policies...

Steve: I guess you mean fiscal policy and monetary policy...

Ann: Exactly. But I can't see the difference between the two...

Steve: That's not as difficult as it may seem. So, the term "fiscal policy" is used to describe the regulation of the economy through government taxes and spending.

Ann: And what if the government spends more money during a year than it collects in taxes?

Steve: Then the situation is referred to as a "budget deficit". And monetary policy is the regulation of the economy through quantity of money available and through the price of money, that's the rate of interest borrowers will have to pay.

Ann: OK, I see. And one more question. Can you explain to me what the "factors of production" are?

Steve: Well, by the "factors of production" the economists mean the sum total of the economic resources which we have in order

to provide for our economic wants. Traditionally, economists distinguish between primary and secondary factors. Labour and land are termed primary factors since they are not the result of the economic process; they are so to speak what we have to start with. The secondary factors, however, are a consequence of an economic system, and include capital and enterprise.

Ann: Thank you, Steve, you've made all the economic terms perfectly clear.

Steve: No problem. If there's anything else I can do for you, I'm at your disposal.

Ann: Thanks, I'll keep it in mind.

C. Give Russian equivalents to the word combinations:

due to the work of the great economist; to consider the economy as a whole; to come under the four headings; to place different degrees of importance on; to see the difference between; quantity of money; borrower; primary and secondary factors.

D. Give English equivalents to the word combinations:

уже в самом названии заключено...; иметь дело с отдельными хозяйственными единицами; цели экономической политики; какая бы политическая партия ни была у власти; преследовать цели по­литики; расходы; собирать налоги.

E. Write down expressions which are used in the dialogue in the
following functions:

1) to offer help (2 expressions) — a) Can I help you?; b) ... ;

2) to express gratitude (3 expressions);

3) to suggest doing sth;

4) to express agreement (3 expressions);

5) to show you understood your interlocutor (2 expressions).

F. Explain the meaning of the economic terms found in the
dialogue. Choose a student who will cope with the task best of all.

G. Act out the conversation between Ann and Steve.


A. An expert economist is giving a talk in your college this
evening. Write down five questions you want to ask him about five
things you have never really understood about economics.

B. Ask your group-mates to answer your questions, see if there's
anyone who can answer them.

7 Зак. 541 193

C. Exchange your questions with one of your group-mates. As
a home assignment get ready to give detailed answers to your group-
mate's questions.

D. Role-Playing.

Student A: You are an expert economist giving a talk to students. Be ready to answer the questions of a curious student.

Student B: You are a first-year student studying at the economics department. You have a chance of talking to an expert economist. Ask him the questions about the things you've never really understood about economics.

70. General Comprehension

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