What Economists Do

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The government collects money from citizens through taxes. Income tax is the tax collected on wages and salaries. Inheritance tax is collected on what people inherit from others. Customs or excise duties have to be paid on goods imported from other countries. VAT or value added tax is a tax paid on most goods and services when they are bought or purchased. Companies pay corporation tax on their profits. If you pay too much tax, you should be given some money back, a tax rebate.

The government also sometimes pays out money to people in need, e.g. unemployment benefit, disability allowances and student grants (to help to pay for studying).Recipients draw a pensionoran unemployment benefit or areon socialsecurity.

Every country may sellshares to members of the public who are then said to have invested in that company. They should be paid a regulardividend on their investment, depending on theprofit or loss made by the company.

What is economics?

Unlike history, mathematics, English and chemistry, economics is a subject that most students encounter only briefly sometimes not at all, before they begin college. Economics is a basic discipline, like those just listed, not an applied subject like accounting or drafting in which specific skills are taught.

Economics has some similarities to mathematics because logical reasoning and mathematical tools are used in it extensively. It also has some similarities to history because economics studies people as they interact in social groups.

Like chemistry, economics employs scientific method, although some of economics has a descriptive rather than an analytical flavour. Finally, like English grammar, economics has a few simple rules and principles, but from these principles economics can derive many conclusions.

Economics is the science of making choices. Individuals must decide whether to study another hour or to go for a walk, whether to buy a six-pack of Pepsi or a 0,5 gallon of milk at the grocery, whether to choose fire fighting or teaching as an occupation and whether to play golf or to watch television for an afternoon of recreation. As a group, people must also choose through their governments whether to build a dam or to repair highways with their taxes, whether to invest money to business or to expand national parks.

The common element in all these decisions is that every choice involves a cost. (Reading this text means that you are not enjoying a bike ride).

In fact economics is the study of the choice that people make and the actions that they take in order to make the best use of scarce resources in meeting their wants.

Economics is about the everyday life. How do we get our living? Why do we sometimes get more and sometimes less? Are we producing as efficiently as we could? Are we producing the “right things”? What are the “right things”? Who ought to decide this and why? The study of economics helps us to answer this sort of questions.

(1650 t.un.)

Usually a person is not qualified to use the name “economist” without a graduate degree in economics, either a master’s degree or a Ph. D.* By this definition, there are about 100 000 economists in the US.

About half of them are academic economists, who engage in teaching, writing and doing research in colleges and universities. They also write textbooks and journal articles, develop and test new theoretical models, provide consulting services to governments and businesses, and engage in a variety of other professional activities.

The other half of the profession works for business or government. Business economists forecast sales and costs, help firms anticipate (or try to influence) government policy. Some business economists work for private lobbying organizations, helping them prepare their arguments to try to affect tax laws, regulations, etc. Which are important to particular kinds of industries.

Government economists also perform a variety of useful tasks. Often the government economist wears a second hat** as a policy analyst. Economists forecast tax revenues and interest rates, analyze who gains and who loses from particular changes, monitor prices, compute total output and perform other useful tasks in the public sector.

In the broader sense, economists study the ways in which people deal with the problems of scarcity. (1143 t.un.)

NOTES: * Ph. D. – Doctor of Philosophy; ** to wear a second hat – выполнять две или более обязанностей

Scarcity And Choice

You have already learned that economics is the study of how people make choices in the world of scarcity. At all times and in all societies, everyone faces the scarcity problem in some form.

Scarcity is a condition that results from the imbalance between relatively unlimited wants and the relatively limited resources available for satisfying those wants. No society has ever had enough resources to produce the full amount and variety of goods and services its members wanted. Everything of vale is scarce – money, goods, time, even human skill – while the desire for goods and services is almost infinite.

Scarcity necessitates choice. If we can’t have everything we would like, we must choose which things we want most. Thus, both individuals and societies must continuously make choices about how to use the scarce resources available to them.

At the level of economy as a whole, the choices to be made are what to produce, how and for whom. How a society answers these questions depends on the type of economic system a particular society uses.

Actually, in every economy societies and individuals have to make these three key choices in the face of scarcity. (1000 t.un.)

Trade-Offs And Opportunity Costs

Let’s suppose that you recently managed to save enough to buy the CD player you always wanted. While you were building up your savings, you discovered the fun of basketball and would now love a pair of pump sneakers. You can afford to buy either a CD player or sneakers, but not both. It’s a trade-off.

Economists describe these kinds of trade-offs as opportunity costs. The opportunity cost of something is its cost measured in terms of what you have to give up to get it. Thus, the opportunity cost of the CD player in the example above would be new sneakers.

Business is also faced with the problem of choices and opportunity costs. In planning an advertising programme, for example, a local store might have to choose between a newspaper ad or a direct-mail campaign. If it puts its efforts into newspaper advertising, the opportunity cost is the benefits of a direct-mail campaign.

Like individuals and business firms, government also pays opportunity costs. If, for example, the federal government chooses to increase its spending for roads by reducing the number of warships to be build, the opportunity costs of the improved road network would be a more powerful navy. (1 000 t.un.)

NOTES: a trade-off – альтернатива, выбор; an opportunity cost – альтернативные издержки, издержки неиспользованных возможностей

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