Types of economic systems Topical vocabulary
to allocate – размещать, распределять
blend – смесь, сочетание
collection – совокупность
command – команда, командный
to consume – потреблять
to determine – определять
to earn – зарабатывать
efficient – эффективный, рациональный, целесообразный
entire – полный
framework – структура
free enterprise – частное предпринимательство
to govern – править, управлять, определять, обусловливать
to implement –обеспечивать выполнение
incentive – побуждение, стимул
to interact – взаимодействовать
law – закон
market – рынок
means of production – средства производства
mixed – смешанный
to own – владеть; иметь, обладать, располагать
private – частный
profit – прибыль, доход
property – собственность
to provide – обеспечивать, предоставлять
quantity – количество
remote – отдаленный; уединенный
to respond – отвечать, реагировать
Exercise 4. Read and translate the text.
Types of Economic Systems
The central problem of economics is to determine the most efficient ways to allocate the factors of production and to solve the problem of questions:
What goods and services are to be produced and in what quantities are they to be produced?
How are those goods and services to be produced?
Who will receive and consume those goods and services?
Every society has worked out its own way to respond to questions of “what”, “how” and “who”. These economic systems, as they are called, can be described as the collection of institutions, laws, incentives, activities that govern economic relationships among people in a society and provide a framework for answering the basic economic questions.
Most economic systems use one or more of three basic methods to make economic decisions: tradition, command and markets. So economic systems are classified into four categories according to how most economic decisions are made. These are traditional, command, market and mixed economies.
The traditional economy. The answers to the “what”, “how” and “who” questions are decided by tradition in these economies. Traditional economic systems are usually found in the more remote areas of the world. People in such a system generally repeat the decisions made at an earlier time or by an earlier generation. The goods and services in such a system tend to be those that have been produced for many years or even generations in a way they have always been. The questions of “what”, “how” and “who” the traditional society produces are determined by very slowly changing traditions.
The command economy. Groups of high-level technicians, made up of engineers, economists, computer experts and industry specialists known as “planners” advise political leaders who develop and implement a plan for the entire economy. It is the planners who decide what goods and services are to be produced. The planners decide which products will be made, how they will be produced, who will receive the goods and services.
The market economy. A market or free enterprise economy is one in which the decisions of many individual buyers and sellers interact to determine the answers to “what”, “how” and “who” questions. In addition to buyers and sellers there are several other essential elements in a market economy. One of these is private property, that is the right of individuals and business firms to own the means of production. The desire to earn profit is a second ingredient in a market economy. Government plays a relatively minor part in this model. Individuals make economic decisions in response to market signals and on the basis of their own preferences.
There are, however, no “pure” economies in the world today. The economic systems used in most countries lies between the two extremes of command and market economies. Mixed economies answer the basic economic questions partly through the market and partly through government, with some decisions based on tradition as well.