VOCABULARY. recession – спад labour - труд natural resources – природные ресурсы activity - деятельность society - общество deal with – иметь дело с

recession – спад labour - труд natural resources – природные ресурсы activity - деятельность society - общество deal with – иметь дело с чем -либо issue– вопрос, проблема derive from – происходить от чего-либо household management – управление (домашним) хозяйством to make contribution – вносить вклад to produce – производить enterprise– предприятие to consume – потреблять manufacture - производство skill– умение scarcity- нехватка, дефицит opportunity cost –альтернативные издержки, стоимость; “цена выбора” imbalance – несоответствие

to distribute – распределять wealthy– богатый to stagnate – находиться в состоянии застоя to go bankrupt –разоряться, становиться банкротом to face restraints – сталкиваться c ограничениями scarce resources –ограниченные, скудные (дефицитные) ресурсы to satisfy wants and needs - удовлетворять желания и потребности poverty– бедность shortage– нехватка, дефицит luxury- предмет роскоши to solve the problem – решать проблему standard of living – уровень жизни to increase – повышать goods and services – товары и услуги cause– причина to provide – обеспечивать, давать

The word “the economy” is the word we hear or read almost every day. For example, we may be told that “the European economy is making little progress out of recession ”, or “the UK economy is beginning to recover”.

But what is meant by the economy? What is an economy? What happens in one? How does an economy work?

The economy is a social, constantly changing mechanism. The economy means a system for the management, use and control of labour, land, natural resources, money, goods and other resources of a country, community or household.

The rules, institutions and traditions used to coordinate economic activity differ considerably among nations, but all societies must deal with similar economic issues.

And what is economics?

Economics is a social science studying economy.

The word “economics” derives from the Greek word “oikonomika” that means household management. As a scholarly discipline, economics is two hundred years old. The first scientist who made extraordinary contributions to economics was Adam Smith. He devoted 10 years to writing his work “The Wealth of Nations” which founded economic science. It was published in 1776. Major economic thinkers include David Ricardo, Thomas Maltus, John Mills and others.

In other words Economics is the study of how human beings and societies choose to use the scarce resources that nature and previous generations have provided.

Everyone goes through life having to make choices. One of the things that young people discover as they grow older is that you can’t have everything. Although there are a lot of goods on sale you have to limit your choice to one or two. Neither individuals, nor societies can have all the things they would like to have. In making any choice, we need to consider what we are giving up, to make sure it is not worth more to us than the option we are choosing. This is called considering OPPORTUNITY COST of a decision – the lost opportunity resulting from the choice of something else.

Why are there so many wants and needs that we cannot satisfy? Most people will answer these questions by saying, “Because there is not enough money”.

Is this the real ECONOMIC PROBLEM – shortage of money? An example may help to show you why more money is not the answer to the problems of being unable to satisfy all people’s wants and needs.

The government of a small country is worried about the large numbers of people who cannot afford enough of the basic needs of life. Even those citizens with more money are always complaining that the country is not producing enough of the luxuries that they want to buy. The government decides to print more bank notes and to double all of the incomes of everybody in the country.

Has the government solved the economic problem of the country? Are there now more goods for the people to buy? Are there more houses for them to live in? Will the standard of living of the population increase?

The answer to all these questions is “No”. Printing more money does not produce more goods and services or satisfy more wants or needs, because prices will rise. What is the point of having more money to spend, if the prices of everything you want to buy have gone up by the same amount?

The real cause of the shortage of goods and services in a country is not having too little money. It is too few FACTORS OF PRODUCTION (also called resources of production). There are four factors of production.

Land This term is used to cover all the natural resources provided by nature and includes fields and forests, oil, gas, metals and other mineral resources.

Labour This is the physical and mental efforts of people needed to make products.

Capital This is the finance, factories, machinery and tools needed for the manufacture of goods.

Enterprise This is the skill and risk-taking ability of the person who brings the other resources together to produce a good or service. For example, the owner of a business. These people are called entrepreneurs

In any one country, and in the world as a whole, these factors of production are limited in supply. As there is never enough land, labour, capital or enterprise to produce all of the needs and satisfy unlimited wants of a whole population, there is an economic problem of scarcity.

Scarcity is the imbalance between our wants and the means to satisfy those wants. The problem of scarcity is faced by rich as well as poor societies. That is why it is fundamental economic problem.