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The products that are wealth serve to create money. Without products there would be no need for money. If every family grew its own food, built its own housing, and made its own clothing, it would have no need for money—unless, of course, it had desires that it could not satisfy within the household. Money emerges as a product substitute, a means by which unlike products can be exchanged for each other. Money facilitates the movement of goods. It becomes a standard that people in a society use in exchange for what they need and want. It also helps keep production going. The person who produces shoes and sells them obtains money to buy more leather and to make more shoes. The laborer who produces wealth receives payment in return. With this payment it is possible to buy what is needed and wanted as well as to produce more goods. From where, then, does nonproductive labor receive payment? It comes from the producers of wealth, mostly in the form of taxes to support programs of government—national, state, and local. It also comes from productive laborers who willingly give it to see spectator sports, movies, theatrical events, or hear concerts of music.

№ 6

There are primarily three types of management in economies. An economy may be almost totally planned, as it is in the Soviet Union. An economy may be almost totally unplanned, as it is in the United States. Or there may be a combination of planning and freedom of operation, as is the case in Japan, South Korea, and Singapore. In a planned economy the government decides what goods are to be produced and how they are to be marketed. Government sets all the priorities, and the producers follow the directives handed to them. In a partially planned economy, such as Japan's, the government frequently takes the lead in encouraging manufactures and industry and helps with subsidies from taxation. Government can also promote investment and regulate trade policies so that they favor domestic manufactures. The United States is the foremost example of an unplanned economy. This does not mean, however, that there is no government involvement in economic functions. There is a great deal. As the economy of the United States grew, and as government and its scope of responsibility increased, it was inevitable that government policy at every level would affect economic functions.

№ 7

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A market is composed of two factors: supply and demand. Which one predominates has never been decided by economists. In reality they probably alternate like the swings of a pendulum. Sometimes a popular demand calls forth a product; at other times a supply creates a demand.An interesting case of market forces occurred in 1985. The Coca-Cola Company stopped producing and selling its decades-old formula for Coke and replaced it with a new formula. The new formula had proved sufficiently unpopular that the old formula was again being produced and marketed—now under the name “Classic Coca-Cola.” The new formula continued to be sold as well. In the late 20th century the great economic issue is the planned versus the unplanned economy. The planned one is generally called socialist or communist. The unplanned and partially planned are considered capitalist because most of the actual production of wealth takes place in the private sector. Historically, after decades of competition between planned and unplanned economies, the latter have proved themselves far more successful in creating wealth. A chief reason for this success is that unplanned economies depend on individual initiative, personal ambition, and the openness of opportunities in an arena of political freedom.

№ 8

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In modern industrial societies governments play a large role. There is a great amount of regulation, most of it meant for the protection of the public. All regulations affect the way businesses operate, often increasing their costs and reducing their profits. Lower profits, in turn, reduce the amount of money—which is known as working capital—that a company can use for expansion. Auto emission standards, for instance, have had a significant impact on the manufacture and pricing of automobiles. Other government policies—such as taxation, budget deficits, and regulation of the money supply—have an effect on how much money is available for people to spend on goods and services. International crises and other conditions also affect the working of an economy. A severe frost in Brazil can ruin a coffee crop and raise the price of that commodity. War can cut off the supply of such resources as petroleum, chromium, or copper.

№ 9

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One aspect of business life which many managers are unhappy with is the need to attend meetings. Research indicates that managers will spend between a third and a half of their working lives in meetings. Although most managers would agree that it is hard to think of an alternative to meetings, as a means of considering information and making collective decisions, their length and frequency can cause problems with the workload of even the best-organized executives. Meetings work best if they take place only when necessary and not as a matter of routine. One example of this is the discussion of personal or career matters between members of staff and their line and personnel managers. Another is during the early stages of a project when the teams managing it need to learn to understand and trust one another.

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