Text 2. The traditional economy

Unit 1

WHAT IS ECONOMICS ALL ABOUT?

Before you read discuss questions with your partner:

1. Do you know much about economics?

2. Is economics only the study about money?

3. What other problems does economics study?

Text 1. What is Economics?

What do you think of when you hear the word economics? Money? Certainly, and perhaps more complicated things like business, inflation and unemployment. Knowledge of economics will help you run a business or manage your personal finances. Very simply, economics studies the decisions people make every day. Every decision we make is a trade-off. If you spend more time working, you earn more money. However, you will have less time to relax. Economists study the trade-offs people make, the reasons for their decisions. They look at the effects these decisions have on our lives and society.

Economics is a social science that seeks to analyze and describe the production, distribution, and consumption of wealth. It is characteristic of any society that while wants of people are growing constantly, the economic resources required to satisfy these wants are limited and scarce. Scarcity of resources makes it necessary to save them. As a result any economic system is trying to find most effective and efficient ways of utilizing resources for the production of goods and services. The rational solution of the problem brings about the maximum economic growth, full employment, stable prices, equitable distribution of revenues, and social security of the needy.

There are different economic systems in the world today. Many economists argue that free enterprise, or the market economy is the most effective system, because businesses are free to choose whom to buy from and sell to and on what terms, and free to choose whom to compete with. It is done through a market, which is a set of arrangements through which buyers and sellers make contact and do business. In the market individual consumers and producers act on their own behalf.

The market functions as a rationing device with the price mechanism as its principal instrument. In free markets, prices direct allocations of inputs of firms that make the most profitable use of them. The market mechanism brings about an allocation of resources that reflect two basic factors: consumer preferences and production costs. The prices which play the coordinating role of the market mechanism are determined through the interaction of demand and supply.

All businesses produce goods and services and seek profits. They all compete with other businesses for inputs of labour, capital and natural resources.

Freedom of enterprise is not total in the market economy. Businesses are subject to laws and government regulations.

Economic machines do not always run smoothly. They are subject to a business cycle that alternates between periods of rapid expansion and periods of recession in which outputs fall and unemployment rises.

Economic environment is determined by the economic policies of the government, fiscal and monetary policies being the major factors. So, if an economic system is to perform well it must deal with many economic challenges.

Task 1. Find in the text English equivalents for the Russian phrases:

Вести бизнес; управлять личными средствами; принимать компромиссные решения; оказывать влияние на нашу жизнь и общество; производство, распределение и потребление материальных благ; ресурсы, необходимые для удовлетворения потребностей людей, ограниченны; нехватка ресурсов делает необходимой их экономию; использовать ресурсы наиболее эффективным образом; производство товаров и услуг; вызывать максимальный экономический рост; справедливое распределение доходов; социальное обеспечение нуждающихся; свободное предпринимательство – наиболее эффективная экономическая система; устанавливать контакты; действовать от своего имени; распределение ресурсов; взаимодействие спроса и предложения; подчиняться законам.

Task 2. Match the verbs from (a) with the nouns from (b) below:

1. to satisfy b) wants

to distribute factors of production

to save goods

to produce services

to utilize policy

to perform enterprise

to run allocation of inputs

to conduct functions

to choose resources

to pursue needs

Task 3. Make sentences putting the words in the correct order:

1. are, different, today, in, world, there, systems, economic, the

2. demand, if, price, exceeds, tends, rise, to, the, supply

3. wants, constantly, people, are, of, growing

4. is, competition, force, the, market, of, an, important

5. producers, must, scarce, economically, and, suppliers, utilize, resources

6. figures, dropped, according, production, to, official, oil, of

7. service, of, consists, the, transport, banking, sector, insurance, and

8. smoothly, run, always, machines, not, economic, do

9. between, rapid, business, and, periods, alternates, recession, cycle, periods, of, expansion, of

10. to, businesses, regulations, government, subject, laws, are, and

Task 4. Complete each sentence with the correct form of the word in italics. In some cases you will have to make a negative:

1. Economy

1. What sort of … system do you have in your country?

2. Strict financial controls ensure that an organization’s resources are used ….

3. Some countries have a mixed … while others have a high degree of state control.

2. engage

1) The line is … so I’ll have to try again later.

2) Cancel all my … for the rest of the day, please.

3. finance

1) Her … adviser says the project will be a success.

2) If the company is … sound we might consider taking it over.

4. grow

1) There is a …awareness of the need to improve productivity.

2) The government is worried about the … in public expenditure.

5. legal

1) It’s … to sell such goods without a proper permit.

2) They questioned the … of the company’s action.

6. possess

1) I had in my … a portion of money.

2) I am a proud …of two kiosks in Plekhanov Street.

3) A small business is one which … at least two characteristics.

7. own

1) The … is held by an individual or a small group.

2) Julie’s father … a business that deals with bulk orders.

3) The … of the bookstore was sitting at his desk.

8. distribute

1) British Leyland … their cars throughout the world.

2) His job is to organize the … of money to students.

9. know

1) We need somebody with a good working … of French.

2) Our company is well-… abroad.

10. establish

1) The … of legal minimum pay is one of the objectives.

2) There he had set out to … his own business.

Task 5. Match the words with their definitions:

1) budget A the people who control a country and make laws

2) business B information

3) convenience C company that sells goods or services

4) data D easiness

5) demand E the amount of money you have for something

6) government F how much people want something

7) inflation G the number of people without work

8) resources H something such as money, workers or minerals

belonging to an organization, country, etc which can be

used to function properly

9) trade-off I rising prices

10) unemployment J giving away something in exchange for something

Can you think of any examples supporting or disagreeing with this idea?

Text 2. The traditional economy.

Before you read discuss questions with your partner:

1) Imagine the world without money. How do you think society would be run?

2) Would there be an economy as we understand it?

3) Can you think of any examples of situations where people don’t use money, either from the past or now?

4) Do you know what a traditional economy is?

It’s hard to imagine our lives without coins, banknotes and credit cards. Yet for most of human history people lived without money. For thousands of years human societies had very simple economies. There were no shops, markets or traders. There were no employers, paid workers or salaries. Today, we call this kind of economy the traditional economy, and in some parts of Asia, South America and Africa this system still exists.

People who live in a traditional economy don’t have money because they don’t need it. They live lives of subsistence. That means they hunt, gather or grow only enough food to live. There is almost no surplus in the traditional economy, and there is almost no property. Families may own simple accommodation, but land is shared by all the tribe. Economic decisions are taken according to the customs of the tribe. For example, every family may need to give some of the crops they grow to the tribal leader, but keep the rest for themselves. They don’t do this because it makes economic sense. They do it because the tribe has always done it. It’s simply a custom.

Custom, also, decides what jobs people do in the traditional economy. People generally do the jobs that their parents and grandparents did before them. Anyway, there aren’t many jobs to choose from in the traditional economy. Men are hunters, farmers or both. The woman’s place is at home looking after children, cooking and home-making. This division of labour between men and women is characteristic of the traditional economy. Whatever the work is, and whoever does it, you can be sure it’s hard work. This is because traditional economies have almost no technology. Physical strength and knowledge of the environment are the tools for survival.

Like any other economic system, the traditional economy has its benefits and drawbacks. Probably the biggest benefit is that these are peaceful societies. People consume almost everything they produce and own practically nothing. They are equally poor. For all these reasons, war is almost unknown in these societies.

However, people who live in traditional societies are among the poorest people in the world. Because custom decides what people do, nothing in these societies ever changes. Because there is no technology, people depend on nature to survive. They have no protection from environmental disasters like droughts and floods. They are always in danger of hunger and disease.

But the traditional economy is in danger itself. There only a few examples left on the planet. In 100 years from now, it may have disappeared forever.

Task 1. Read the text again and match each paragraph with the correct heading:

PARAGRAPH 1 ------------------------------

PARAGRAPH 2--------------------------------

PARAGRAPH 3-------------------------------

PARAGRAPH 4-------------------------------

PARAGRAPH 5-------------------------------

PARAGRAPH 6—---------------------------

A Life without money

B The advantages of the traditional economy

C The future of the traditional economy

D The disadvantages of the traditional economy

E The importance of tradition

F Work in the traditional economy