Column A Column B. 1.economic system a. An economic system that allocates scarce

1. economic system a. An economic system that allocates scarce

resources according to custom.

2. traditional economy b. An economic system in which major decisions

concerning the allocation of resources are

made by agencies of the government.

3. command economy c. The approach a country uses to deal with

scarcity and achieve its economic goals.

4. business d. The production, distribution, and sale of

goods and services for a profit.

5. consumer e. The rivalry among buyers and sellers in

the purchase and sale of resources and products.

6. competition f. A person who buys and uses goods or services.

7. market g. The difference between revenues and operation

costs incurred by a business.

8. profit h. Place where buyers and sellers come together to

conduct transactions.

VI. Answer the following questions:

1. What does the survival of any society depend on?

2. What are all societies faced with?

3. What have all societies in common?

4. What determines the type of economic system?

5. What are the major kinds of economic systems?

6. What prescribes most social behaviour?

7. What is the role of individuals in a traditional economy?

8. What did polar еskimo teach their children?

9. What is the main advantage/disadvantage of the traditional economy?

TOPIC 2: MARKETS and MARKET STRUCTURE

TEXT

Economists classify markets according to conditions that prevail in them. They ask questions like the following: How many supplies are there? How large are they? Do they have any influence over price? How much competition is there between firms? What kind of economic product is involved? Are all firms in the market selling exactly the same product, or simply similar one? Is it easy or difficult for new firms to enter the market? The answer to these questions helps to determine market structure, or the nature and degree of competition among firms operating in the same market. For example, one market may be highly competitive because a large number of firms produce similar products. Another may be less competitive because of fewer firms, or because the products made by each are different or unique.

In short, markets can be classified according to certain structural characteristics that are shared by most firms in the market. Economists have names for these different market structures: pure competition, monopolistic competition², oligopoly, and monopoly.

An important category of economic, markets is pure competition. This is a market situation in which there are many independent and well-informed buyers and sellers of exactly the same economic products. Each buyer and seller acts independently. They depend on forces in the market to determine price. If they are not willing to accept this price, they do not have to do business.

To monopolize means to keep something for oneself. A person who monopolized a conversation, for example, generally is trying to stand out from everyone else and thus attract attention.

A situation much like this often exists in economic markets. For example, all the conditions of pure competition may be met except that the products for sale are not exactly the same. By making its product a little different, a firm may try to attract more customers and take over the economic market. When this happens, the market situation is called monopolistic competition.

The one thing that separates monopolistic competition from pure competition is product differentiation. The differences among the products may be real, or imaginary. If the seller can differentiate a product, the price may be raised a little above the market price, but not too much.