Unit 1.The Economy

Active Vocabulary

economy factors of production scarce opportunity costs abundant economic production possibilities law of increasing opportunity costs economic growth market mechanism

господарство чинники виробництва обмеженість, дефіцит оптимальні витрати достатньо економіка виробничі можливості закон зростання оптимальних витрат економічне зростання ринковий механізм

«The economy» is simply an abstraction that refers to the sum of all our individual production and consumption activities. In order to produce anything, we need resources, or factors of production. Factors of production are the inputs — land, labor, and capital (buildings and machinery) we use to produce final goods and services (output).

Unfortunately, the quantity of available resources is limited. We cannot produce everything we want in the quantities we desire. Resources are scarce relative to our desires. This fact forces us to make difficult choices.

Opportunity costs exist in all situations where available resources are not abundant enough to satisfy all our desires.

Indeed, economic is often defined as the study of how to allocate scarce resources. The study of economicfocuses on «getting the most from what we've got», on making the best use of our scarce resources.

Production possibilities are the alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology.

According to the law of increasing opportunity costs we must give up everincreasing quantities of other goods and services in order to get more of a particular good.

Economic growth is an increase in output; an expansion of production possibilities.

Over time the quantity of resources available for production has also increased. Each year our population grows a bit, thereby enlarging the number of potential workers. Our stock of capital equipment has increased even faster. In addition the quality of our labor and capital resources has improved, as a result of more education (labor) and better machinery (capital).

Market mechanism is the use of market prices and sales to signal desired outputs (or resource allocations).

Thus the essential feature of the market mechanism is the price signal. If you want something and have sufficient income, you buy it. If enough people do the same thing, the total sales of that product will rise, and perhaps its price will as well. Producers, seeing sales and prices rise, will be inclined to increase production.

Exercise 1. Give the English equivalents:

згідно з законом зростання оптимальних витрат, важлива особливість ринкового механізму, кількість наявних ресурсів обмежена, відмовлятися від можливості, бути змушеним робити вибір, випускати кінцевий товар, задовольняти бажання, розподіляти ресурси.

Exercise 2. Сomplete an appropriate word-combination:

available recourses, inputs, final goods, market prices, production, output.

1. Factors of production are the...land, labor and capital we use to produce final goods and services (...).

2. Unfortunately the quantity of... is limited.

3. Production possibilities are the alter­native combinations of... and ser­vices.

4. Over time the quantity of resources available for …has also increased.

5. Market mechanism is the use of... and sales to signal desired outputs.

Exercise 3. Translate the following sentences:

1. Економічна наука вивчає виробництво та споживання.

2. Чинники виробництва — це земля, трудові ресурси, ос­новний капітал (обладнання та будівлі), якими ми користуємося для виробництва товарів і послуг.

3. Ми не можемо виготовляти все, що ми бажаємо, і в кількостях, які нам потрібні, оскільки ресурси завжди обмежені.

4. Обме­женість ресурсів ставить нас перед вибором.

5. Економічна наука займається питаннями розміщення ресурсів, яких не­ має в достатній кількості, та тим, як їх краще використову­вати.

6. Нам доводиться відмовлятися від випуску певного виду товару, щоб забезпечити випуск іншого.

7. Головним у ринковому механізмі є чинник цін, який впливає на розши­рення або скорочення виробництва.

8. Якщо товаровироб­ники бачитимуть, що продаж певного виду товару і ціни на нього зростають, вони збільшуватимуть випуск цього товару.

Exercise 4. Answer the following sentences:

1. What is «the economy»?

2. Why are we compelled to choose among goods?

3 How is economics often defined?

4. What do we call the law according to which we must give up everincreasing

quantities of other goods and services in order to get more of a particular

good?

5. What are the essentials of the market mechanism?

Exercise 5. Read and translate the following dialog:

A.:	People worry about love, the weather, and the economy. But not necessarily in that order. According to public-opinion polls, the economy is always one of our foremost concerns.
B.:	Yes, people worry about such questions as: - what forces shape the economy; - what determines how many jobs will be available; - how much income people will receive; - what goods will be produced; - how much pollution will be created.
A.:	And I was always wondering what, if anything, we can do to improve the economy's performance?
В.:	I see. And when asked what the country's most important problem was, three out of four Americans pointed to the drug problem. However four out of ten cited economic concerns, including unemployment, government spending, budget deficits and inflation.
A.:	But for many people, of course, concern for the economy goes no further than the price of tuition or the fear of losing a job.
В.:	I can't agree with you, because many others, however, are becoming increasingly aware that their job prospects and the prices they pay are somehow related to national trends in prices, unemployment, and economic growth.
A.:	So you think that most of us now recognize the importance of major economic events.
В.:	Yes, and that is why so many people worry about such abstractions as unemployment rates, inflation, economic growth, trade deficits, and budget deficits.
A.:	But despite the widespread concern for the economy, few people really understand how it works. And you can hardly blame them.
В.:	Certainly. The significance of billion dollar changes in output is easily lost on people who are trying to figure out how to pay this month's rent or next semester's tuition.

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