The economic environment

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ECONOMIC PROBLEMS, POLICIES, AND DECISIONS

Economics promotes a better understanding of the nature and organization of different societies, the arguments underlying many of the great public issues of the day, and the operation and behaviour of business firms and other decision-making units. Economics relates to many problems in the real world. Every human society — whether it is an advanced industrial nation, a centrally planned economy, or an isolated tribal society — must confront and resolvethree fundamental and interdependent economic problems.

They are:

1. What commodities are to be produced and in what quantities?

2. How will goods be produced? By whom and with what resources and in what technological manner are they to be produced?

3. For whom will goods be produced?

These three basic problems are common to all economies. But different societies take different approaches in solving them. The three economic tasks of every society are really about choices among economy's resources.

A resource is a material or service that is used to make goods or services. Not all resources are scarce. Free resources, such as air, are so abundant that they can be obtained without charge. Scarce resources are called economic resources.

CONTROL WORK 1.

Variant 5

1.Заполните пропуски соответствующей формой глагола to be.

1 … it cold yesterday? 2. What subject … your favourite when you studied at school? 3. Who … your best friend? 4. I … hardworking and sociable. 5. … you ready for the lesson or not? 6. It … dark when we returned home yesterday. 7. … you … at home tomorrow? 8. Where … my pen, I wonder? 9. They … not polite to each other when they met yesterday. 10. New districts in our city … beautiful.

2. Употребите глаголы, данные в скобках, в Present, Past или Future Indefinite.

1. I usually (to grow) a lot of fruit and vegetables in our garden. 2. He always (to read) at breakfast. 3. What time you (to come) home after work? 4. I think we (to spend) our next holidays at the seaside. 5. He hopes he (not/to come) late tomorrow. 6. What you (to do) if you meet a stranger? 7. He (to drive) to work yesterday. 8. My friend (not/to meet) me at the station yesterday as she was too busy. 9. What films you (to see) last week? 10. How many cups of strong coffee a day he usually (to drink)?

The economy comprises millions of people and thousands of firms as well as the government and local authorities, all taking decisions about prices and wages, what to buy, sell, produce, export, import and many other matters. All these organizations and the decisions they take play a prominent part in shaping the business environment in which firms exist and operate.

The economy is complicated and difficult to control and predict, but it is certainly important to all businesses. You should be aware that there are times when businesses and individuals have plenty of funds to spend and there are times when they have to cut back on their spending. This can have enormous implications for business as a whole.

When the economy is enjoying a boom, firms experience high sales and general prosperity. At such times, unemployment is low and many firms will be investing funds to enable them to produce more. They do this because consumers have plenty of money to spend and firms expect high sales. It naturally follows that the state of the economy is a major factor in the success of firms.

However, during periods when people have less to spend many firms face hard times as their sales fall. Thus, the economic environment alters as the economy moves into a recession. At that time, total spending declines as income falls and unemployment rises. Consumers will purchase cheaper items and cut expenditure on luxury items such as televisions and cars.

Changes in the state of the economy affect all types of business, though the extent to which they are effected varies. In the recession of the early 1990s the high street banks suffered badly. Profits declined and, in some cases, losses were incurred. This was because fewer people borrowed money from banks, thus denying them the opportunity to earn interest on loans, and a rising propotion of those who did borrow defaulted on repayment. These so called "bad debts" cut profit margins substantially. Various forecasters reckoned that the National Westminster Bank's losses in the case of Robert Maxwell's collapsing business empire amounted to over $100 million.

No individual firm has the ability to control this aspect of its environment. Rather, it is the outcome of the actions of all the groups which make up society as well as being infuenced by the actions of foreigners with whom the nation has dealings.

GRAMMAR REFERENCE

ГРАММАТИЧЕСКИЙ СПРАВОЧНИК

НОРМАТИВНЫЕ ПРЕДМЕТНЫЕ СРЕДСТВА

Appendix1

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