The economy and economic systems
The word “economy” is a word we hear or read almost every day. For example, we may be told that “the world economy is in the doldrums”, or “the European economy is making little progress”, or “the Russian economy is beginning to recover”. But what is meant by the economy? What is an economy? How does an economy work? The economy is a social mechanism which answers these three questions.
The economy means a system for the management, use and control of the money, goods and other resources of a country, community or household. In other words an economic system is the method society uses to allocate its resources (land, labour, capital and entrepreneurship) to satisfy its needs. The degree of economic development of the country is determined by the level and character of production forces and production relations. Due to public labour division the economy of a society is subdivided into separate branches, industrial complexes, economic regions and production infrastructure. What distinguishes one economic system from another is the control of the factor of production and the interaction of business, government and consumers.
In the modern world there are three main types of economic system: capitalism (or pure capitalism), mixed capitalism and communism (socialism). Capitalism (of pure capitalism, or a market economy), as it was originally described by Adam Smith in his eighteenth century book “Wealth of Nations“, is an economic system where the factors of production are in private hands and economic decision are made freely according to the market forces of supply and demand. In this system the economic questions of
- What is to be produced?
- How much will be produced? Who will produce it?
- How much will it cost? Who will get it?
are determined by the consumers in the marketplace. In pure capitalism industry and individuals use resources as they choose. The government takes a hands-off approach and does not interfere in the economic system. Producers and consumers pursue their own self-interests. Producers make as much as they can sell and consumers buy as much as they can afford.
In this system each person behaves in the best interests of society, as if guided by an invisible hand. The marketplace is regulated by the interaction of the buyers and producers. If a company produces a defective product or charges too much for the product it is rejected by consumers. As a result, the producer has to improve the quality of the product or reduce the price to make any sales. The market place, in essence the invisible hand, regulates economic conduct. Government does not have to do any regulating.
McConnell C.R., Brae S.L. Economics
Words to Remember
doldrums to recover means goods resource community to allocate entrepreneurship branch to distinguish interaction private hands according to supply demand marketplace hands-off approach to interfere to pursue to afford to be guided by to reject to reduce in essence |
спад в экономике восстанавливаться средства товары ресурс общество распределять предпринимательство отрасль, отделение различать взаимодействие в частной собственности в соответствии с, согласно предложение спрос рынок пассивный подход, невмешательство вмешиваться преследовать быть в состоянии, позволить себе быть управляемым кем-либо отклонять, отказываться сокращать, снижать по существу |
Exercise 15. Answer the following questions.
What is an economic system?
What distinguishes an economic system from another one?
What types of economic system do you know?
In whose hands are the factors of production in capitalism?
Who makes economic decisions under capitalism? Does the marketplace have influence on them?
Whose interests do producers and consumers pursue in the market?
If a company produces a defective product, will it be sold or rejected by consumers? What do you think of it?
Are you for or against the government’s regulating of economic conduct in Russia?
Exercise 16. Give English equivalents to the following words and phrases from the text.
Экономическая система, труд, преследовать собственные интересы, снижать цены, распределять ресурсы, удовлетворять общественные потребности, чистый капитализм, факторы производства, взаимодействие производителей и покупателей, отвергнуть товар, регулировать предпринимательство.
Exercise 17. Translate into English.
Рынок регулируется взаимодействием покупателей и производителей.
Экономическая система - метод, который используется обществом для распределения своих ресурсов.
Нам говорят каждый день, что экономика России выздоравливает.
Степень экономического развития страны определяется уровнем и характером производительных сил и производственных отношений.
При капитализме экономические решения принимаются в соответствии с рыночными законами спроса и предложения.
Экономическая обстановка регулируется рынком.
Товар отвергается покупателями, если он бракованный или стоит слишком дорого.
Большое количество новых товаров производится промышленными предприятиями ежегодно.
Exercise 18. Match synonyms in columns A and B.
-
A
B
doldrums
to get better
progress
to distribute
country
to require
to distinguish
advance
to allocate
to define
to demand
State
to recover
depression
to produce
to purchase
to buy
to manufacture
defective
to lower
to reduce
conduct
behaviour
faulty
Exercise 19. Listening
Before you listen, look at the chart of Supply and Demand and fill in the blank spaces with the words from the table. Then listen and check if you were right.
Exercise 20. Match the terms with the definitions.
-
Capitalism
deals with the functioning of individual industries and the behaviour of individual economic decision making units: single business firms and households.
Economy
explores the decisions that individual businesses and consumers make
Microeconomics
is an economic system where the factors of production are in private hands and economic decision are made freely according to the market forces of supply and demand.
Macroeconomics
is a system for the management, use and control of the money, goods and other resources of a country, community or household
Exercise 21. Translate the words in brackets into English.
The most important economic questions (затронуты) in the Financial Times and the Economist.
Adam Smith (по праву считается) the founder of political economics.
A lot of questions (задают и отвечают) at the lectures on economics.
The United Kingdom is considered one of the world’s (мировой лидер производства товаров).
About two per cent of the population of the UK (вовлечены/заняты) in agriculture.
Today gold is mostly (добывается) by mining.
Every country is interested in (экспорте) its manufactured goods.
What questions (обсуждаются) during business talks?
The Leipzig Fair, which is (проводится) twice a year, is very popular with businessmen of different countries.
Foreign firms are interested in (внедрение) their goods to new markets.
Exercise 22. Discuss.
The significance of economics nowadays.
The reasons why some people are rich while some are poor.
The main types of economic systems.
Future of Russian economics.