5. Fill in the blanks with the correct forms of the verbs given in brackets

1. Adjustments in prices …… society to reallocate resources to reflect the increased scarcity of cattle ( encourage).

2. If the wage ….. much lower it … hardly …… working at all ( to be, will be worth).

3. The price of steak …. high enough to……. that society…… the 'for whom' question about lunchtime steaks in favour of someone else ( be, ensure, answer).

4. Much of economics….. to the study of how markets and prices …… society …….. the problems of what, how, and for whom to produce ( be devoted , to enable, to solve).

6. Answer the questions

1. What is a market?

2. How do markets and prices enable the society to solve the problem of production?

3. Whose decisions are guided by prices?

4. What is a mechanism of price system?

5. What thing would encourage society to reallocate resources?

Speaking

1. Work in pairs or small groups. Think of the example of any seller and prove that it is profitable for him to be in the business

2. Making a report. When you make a repot you have to make it as easy as possible for your audience. At the end of your report your listeners should be able to repeat it back to you because what you said was so clear. Make a report on the role of the market. Use simple language.

Section 2. The Command Economy, the Free Market Economy and the mixed economy

Key vocabulary

1. Read and translate the following words

to highlight – выдвигать на первый план

to exist – существовать

government – зд. государство

complicated – сложный

immensity – необъятность, огромный масштаб

coherent - согласованный

consume – потреблять

housing - жилье

pursue – гнаться, преследовать

insight – проникновение в суть, понимание, проницательность

interference – вмешательство, помеха, препятствие

at length - детально, обстоятельно, подробно

2. Translate and remember the following word combinations

play around with new ideas, invent a new good, make society better off, moved society's production possibility frontier outwards, a coherent society

3. Find the English equivalents to the following word expressions

удивительная сущность, подробно, ограничения, выпуск продукции, преследовать, масштаб, напротив, существенный уровень.

Text

1. Listen, read and translate the text the command economy, the free market economy, the mixed economy

The Command Economy

To highlight the role of markets and prices, we now ask how resources might be allocated if markets did not exist. One example is a command economy.

A command economy is a society where the government makes all decisions about pro­duction and consumption. A government planning office decides what will be pro­duced, how it will be produced, and for whom it will be produced. Detailed instruc­tions are then issued to households, firms, and workers.

Such planning is a very complicated task, and there is no complete command economy where all allocation decisions are undertaken in this way. However, in many countries there was a large measure of central direction and planning. The state owned factories and land, and made most important decisions about what people should consume, how goods should be pro­duced, and how much people should work.

To appreciate the immensity of this task, imagine that you had to run by command the city in which you live. Think of the food, clothing, and housing allocation decisions you would have to make. How would you decide who should get what and the process by which these goods and services would be produced? Of course these decisions are being made every day in your own city, but chiefly through the allocative mechanism of markets and prices.

The Invisible Hand or Free Market Economy

Markets in which governments do not intervene are called free markets.

Individuals in free markets pursue their own interests, trying to do as well for themselves as they can without any government assistance or interference. The idea that such a system could solve the what, how, and for whom problems is one of the oldest themes in economics, dating back to Adam Smith, the famous Scottish philosopher-economist whose book The Wealth of Nations (1776) remains a classic. Smith argued that individuals pursuing their self-interest would be led 'as by an invisible hand' to do things that are in the interests of society as a whole.

Suppose you wish to become a millionaire. You play around with new ideas and invent a new good, perhaps the television, the motor car or the hand calculator. Although motivated by our own self-interest, you make society better off by creating new jobs and opportunities. You have moved society's production possibility frontier outwards — the same resources now make more or better goods - and become a millionaire in the process. Smith argued that the pursuit of self-interest, without any central direction, could produce a coherent society making sensible allocative decisions.

This remarkable insight has been studied at length by modern economists.

The Mixed Economy

The free market allows individuals to pursue their self-interest without any government restrictions. The command economy allows little scope for individual economic freedom since most decisions are taken centrally by the government. Between these two extremes lies the mixed economy.

In a mixed economy the government and private sector interact in solving

economic problems. The government controls a signifi­cant share of output through taxation, transfer payments, and the provision of goods and services such as defence and the police force. It also regulates the extent to which individuals may pursue their own self-interest.

In a mixed economy the government may also be a producer of private goods such as steel or motor cars. Examples of this in the UK include the nationalized industries such as railways and coal.

Most countries are mixed economies, though some are close to command economies and others are much nearer the free market economy. Even the Soviet Union allows consumers some choice over the goods they buy. Private agricultural markets co-exist with centrally organized 'col­lectives'. Conversely, even countries such as the United States which espouse more enthusiastic­ally the free market approach, still have substantial levels of government activity in the provision of public goods and services, the redistribution of income through taxes and transfer payments, and the regulation of markets.

Language practice