to interfere – вмешиваться
private enterprise – частное предпринимательство
private ownership – частная собственность
means of production – средства производства
employer – работодатель
favoured - привлекательны
profitable goods – прибыльный товар
tax –налог
to compete - конкурировать
boom – бум; быстрый подъём (деловой активности)
recession – спад
In a true market economy the government plays no role in the management of the economy, the government does not interfere in it. The system is based on private enterprise with private ownership of the means of production. Although markets exist in traditional and command economies, all major means of production (companies, farms, factories, etc) are usually publicly owned. That is, they are owned by groups of people or by the government. In a market economy the means of production are owned by private individuals. There is no government control over land, capital and labour. No government ministry decides how many shirts or shoes to manufacture, or what style or colours. Business produce goods to make a profit.
Workers are paid wages by employers according how skilled they are and how many firms wish to employ them. They spend their wages on the products and services they need. Consumers are willing to spend more on products and services, which are favoured. Firms make more of the more profitable goods – those demanded by consumers. They make fewer of the less profitable goods – those least demanded by the consumers. This leads to direct competition between different firms making and selling these products, and that competition is one of the basic reasons why there are generally so many different styles, fabrics and brands of clothing for consumers to choose from in market economies.
Market economies are directed by prices. As the price of an item rises, sellers are encouraged to increase production, and consumers are discouraged from purchasing them. When the price falls, the opposite is true. In this way prices send out “signals” to buyers and sellers, and are influenced by the demand for and supply of the goods.
Thus, we can see that in a market economy consumers decide what is to be produced.
There are certain advantages and disadvantages of a free market economy.
Advantages:
- Consumers are free to choose what they want to buy.
- Workers are encouraged to work hard as they can keep most of their income because of low taxes.
- Business compete with each other and this could keep prices low.
Disadvantages:
- There are no government-provided goods or services such as health or education, available for everybody.
- As there is no government control over the economy there could be many uncontrolled booms and recessions in the economy.
- Businesses might be encouraged to create monopolies in order to increase prices. Consumers will have limited choice.
In fact, there is no country in the world with a completely free market economy. In all countries governments are involved in making important economic decisions. The United States is the country with an economy most like a free market system. But even there, the USA government has a lot of control over the economy.
Ex. 19. Translate into Russian. (“That / Those”)
1. These rates are higher than those in most Western European countries.
2. The selling cost of the larger firm will be much greater than those of the smaller firm.
3. Unofficial strikes are those which do not have full support of the trade union.
4. The rate of savings in rich countries is much higher than that in poor country.
5. Although there are more male births than female births, the number of females in the total
population exceeds that of males.
6. The aims of monetary policy are the same as those of economic policy in general.
7. That he refused to help his partner is very strange.
8. Dividends and interest on risk capital need not be paid in those years when the company has
not prospered.
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