Increase, taxpayers’ money, employed, limit your selection, unlimited, reducing

1. You will have__ ____ ____ ____ to one or two.

2. In order to have money you have to _______ the production.

3. Human wants are ______ .

4. Human resources Outsourcing provides cost ______ solutions.

5. Nation’s resources are fully ______ .

1.6 Answer the questions

1. What is the main goal of studying economics?

2. What kind of questions do the most important political debates concern every year?

3. Can individual or societies have all the things they would like?

4. What is economics?

5. When does the modern economics development begin?

6. What are the main two problems that economics deals with?

1.7 Agree or disagree with the following statements

1. The development of modern economics began in the 19^th century.

2. Economics is only a theoretical science.

3. Economics deals with the problems of income, employment, and interest rates.

4. Economics deals with weather forecasting, psychology and fantasy writing.

5. Economics is the study of scarcity and choice.

2 Basic economic problems

2.1 Do you know…

1. What are the factors of production?

2. What is the fuel that drives the economy?

3. What are the natural resources?

4. What is called «the price paid for the use of labor*?

5. What is the capital?

6. What is the role of entrepreneurship in production?

The central problem of economics is to determine the most efficient ways to allocate the factors of production and solve the problem of scarcity created by society's unlimited wants and limited resources. In doing so, every society must provide answers to the following three questions:

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

2. How are those goods and services to be produced?

3. Who will receive and consume (get to use) those goods and services?

The solution of these questions depends on the economic system of each particular society.

Factors Of Production

The resources that go into the creation of goods and services are called the factors of production. The factors of production include natural resources, human resources, capital and entrepreneurship. Each factor of production has a place in economic system, and each has a particular function. People who own or use a factor of production are expecting a «return or reward.» This generates income which, as it is spent, becomes a kind of fuel that drives the economy.

Natural Resources or «Land»

Natural resources are the things provided by nature that go into the creation of goods and services. They include such things as minerals, wildlife and timber resources. Economists also use the term «dand» when they speak of natural resources as a factor of production. The price paid for the use of land is called rent. Rent becomes income to the owner of the land.

Human Resources or «Labor»

Economists call the physical and mental effort that people put into the creation of goods and services labor. The price paid for the use of labor is called wages. Wages represent income to workers, who own their labor.

Capital

To the economist, physical capital (or «capital» as it is commonly called) is something created by people to produce other goods and services. A factory, tools and machines are capital resources because they can be used to produce other goods and services. The term capital is often used by business people to refer to money they can use to buy factories, machinery and other similar productive resources. Payment for the use of someone else's money, or capital, is called interest.

Entrepreneurship

Closely associated with labor is the concept of entrepreneurship, the managerial or organizational skills needed by most firms to produce goods and services. The entrepreneur brings together the other three factors of production. When they are successful, entrepreneurs earn profits. When they are not successful, they suffer losses. The reward to entrepreneurs for the risks, innovative ideas and efforts that they have put into the business, they obtain the money that remains after the owners of land, labor and capital have received their payments.

2.2 Study new vocabulary

cause-and-effect relation­ships - причинно-след­ственные связи

production and consumption — производство и потреб­ление

factors of production - фак­торы производства

natural resources — природ­ные ресурсы

human resources — челове­ческие ресурсы

capital and entrepreneur-ship - капитал и пред­принимательство

return or reward — доход или вознаграждение

wildlife and timber resources — живая природа и ресур­сы древесины

to allocate the factors of production - размещать факторы производства

to postpone — откладывать

2.3 Match these words as they occur in the text

1 determine a) the problem of scarcity

2 allocate b) the economy

3 solve c) the most efficient ways

4 use d) a factor of production

5 generate e) the use

6 drive f) the factors of production

7 depend on g) money

8 paid for h) income

9 refer to i) the economic system

2.4 Match these terms with their definitions

1. interest	a) the physical and mental effort that people put into the creation of goods and services
2. capital	b) the price paid for the use of labor
3. wages	c) natural resources as a factor of production
4. labor	d) something created by people to produce other goods and services
5. rent	e) payment for the use of someone else's money
6.factors of production	f) the price paid for the use of land
7.dand	g) the resources that go into the creation of goods and services

2.5 Mark these statements T or F according to the information in the texts

1. Payment for the use of someone else's money, or capital, is called interest.

2. The factors of production include natural resources, human resources, capital and entrepreneurship.

3. The term capital is often used by labor to refer to factories, machinery and other similar productive resources.

4. People who own or use a factor of production are not expecting a «return or reward. » This generates income which, as it is spent, becomes a kind of fuel that drives the economy.

5. The price paid for the use of labor is called rent.

6. Natural resource include such things as minerals, wildlife and timber resources.

2.6 Complete the text using the words from the box

Provide, goods and services questions, answers, rely upon, receive, produced, market prices.

What? How? Who?

Every society must provide______ to the same three questions:

• What goods and services will be____?

• How will those___ _ ___ be produced?

• Who will____ them?

Societies and nations have created different economic systems to____ answers to these fundamental____. Traditional economies look to customs and traditions for their answers while others, known as command economies,____ governments to provide the answers. In free enterprise systems,____ ____ answer most of the What, How and Who questions

2.7 Use the words in this box to change the pronouns of these sentences

The resources, Economics, Human wants, The term capital, the problem of scarcity, Economics

1. It is often used by business people to refer to money they can use to buy factories, machinery and other similar productive resources.

2. They that go into the creation of goods and services are called the factors of production.

3. Every society is faced with it.

4. They are unlimited , the resources necessary to satisfy those wants are limited.

5. It deals with the problems of scarcity and choice.

6. They have developed methods for studying and explaining how individuals, businesses and nations use their available economic resources.