PREREADING
Task 1. Answer the questions.
1. Why do people have to make choices very often?
2. What does every choice involve?
READING
Task 2. Read the text, find out key-words and make up their definitions.
Economics is the social science that analyses the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία (oikonomia, "management of a household, administration") from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)". Political economy was the earlier name for the subject, but economists in the latter 19th century suggested 'economics' as a shorter term for 'economic science' that also avoided a narrow political-interest connotation and as similar in form to 'mathematics', 'ethics', and so forth.
A focus of the subject is how economic agents behave or interact and how economies work. Consistent with this, a primary textbook distinction is between microeconomics and macroeconomics. Microeconomics examines the behavior of basic elements in the economy, including individual agents (such as households and firms or as buyers and sellers) and markets, and their interactions. Macroeconomics analyzes the entire economy and issues affecting it, including unemployment, inflation, economic growth, and monetary and fiscal policy.
Other broad distinctions include those between positive economics (describing "what is") and normative economics (advocating "what ought to be"); between economic theory and applied economics; between rational and behavioral economics; and between mainstream economics (more "orthodox" and dealing with the "rationality-individualism-equilibrium nexus") and heterodox economics (more "radical" and dealing with the "institutions-history-social structure nexus").
Economic analysis may be applied throughout society, as in business, finance, health care, and government, but also to such diverse subjects as crime, education, the family, law, politics, religion, social institutions, war, and science. At the turn of the 21st century, the expanding domain of economics in the social sciences has been described as economic imperialism.
An increasing number of economists have called for increased emphasis on environmental sustainability; this area of research is known as Ecological economics.
Model: Economics (a defined or key-word) is the social science that analyses the production, distribution, and consumption of goods and services (a definition).
Microeconomics
TEXT B. International economics
Task 2. What are the statements: a) true, b) false or c) no information?
International trade studies determinants of goods-and-services flows across international boundaries. It also concerns the size and distribution of gains from trade. Policy applications include estimating the effects of changing tariff rates and trade quotas. International finance is a macroeconomic field which examines the flow of capital across international borders, and the effects of these movements on exchange rates. Increased trade in goods, services and capital between countries is a major effect of contemporary globalization.
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The distinct field of development economics examines economic aspects of the development process in relatively low-income countries focusing on structural change, poverty, and economic growth. Approaches in development economics frequently incorporate social and political factors.
Economic systems is the branch of economics that studies the methods and institutions by which societies determine the ownership, direction, and allocation of economic resources. An economic system of a society is the unit of analysis.
Among contemporary systems at different ends of the organizational spectrum are socialist systems and capitalist systems, in which most production occurs in respectively state-run and private enterprises. In between are mixed economies. A common element is the interaction of economic and political influences, broadly described as political economy. Comparative economic systems studies the relative performance and behavior of different economies or systems.
1. International trade is the exchange of capital, goods, and services across international borders or territories.
2. International finance is a microeconomic field which examines the flow of capital across international borders, and the effects of these movements on exchange rates.
3. The main result of contemporary globalization is increasing goods, services and capital.
4. The main problem in economics is the question of allocating scarce resources.
5. When the price of some commodity increases, consumers will try to use less of it.
6. Social and political factors are frequently incorporated into general aspect.
7. Economic systems is an absolute synonym of economics that studies the methods and institutions by which societies determine the ownership, direction, and allocation of economic resources.
8. Socialist systems and capitalist systems are different kinds of economics as a science.
9. Oil is an important commodity in modem economies.
10. Mixed economy is an economic system in which both the state and private sector direct the economy.
TEXT C. Three economic issues
Task 3. Read and translate the text.
Economics is the study of how people choose to allocate scarce resources to satisfy their unlimited wants. The main problem in economics is the question of allocating scarce resources between competing uses. In this section three economic issues are discussed to show how society allocates its scarce resources between competing uses. In this connection the question what, how and for whom to produce is of great significance.
The oil price shocks
Oil is an important commodity in modem economies. Oil and its derivatives provide fuel for heating, transport, and machinery, and arc basic inputs for the manufacture of industrial petrochemicals and many household products ranging from plastic utensils to polyester clothing. From the beginning of this century until 1973 the use of oil increased steadily. Over much of this period the price of oil fell in comparison with the prices of other products. Economic activity was organized on the assumption of cheap and abundant oil.
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In 1973 74 there was an abrupt change. The main oil-producing nations, mostly located in the Middle East but including also Venezuela and Nigeria, belong to OPEC the Organisation of Petroleum Exporting Countries. Recognizing that together they produced most of the world's oil, OPEC decided in 1973 to raise the price at which this oil was sold. Although higher prices encourage consumers of oil to try to economize on its use, OPEC countries correctly forecast that cutbacks in the quantity demanded would be small since most other nations were very dependent on oil and had few commodities available as potential substitutes for oil. Thus OPEC countries correctly anticipated that a substantial price increase would lead to only a small reduction in sales. It would be very profitable for OPEC members.
Oil prices are traditionally quoted in US dollars per barrel. Fig. 1 shows the price of oil from 1970 to 1986. Between 1973 and 1974 the price of oil tripled, from $2,90 to $9 per barrel. After a more gradual rise between 1974 and 1978 there was another sharp increase between 1978 and 1980, from $12 to $30 per barrel. The dramatic price increases of 1973 79 and 1980 82 have become known as the OPEC oil price shocks, not only because they took the rest of the world by surprise but also because of the upheaval they inflicted on the world economy, which had previously been organized on the assumption of cheap oil prices.
People usually respond to prices in this or that way. When the price of some commodity increases, consumers will try to use less of it but producers will want to sell more of it. These responses, guided by prices, are part of the process by which most Western societies determine what, how and for whom to produce.Consider first how the economy produces goods and services. When, as in the 1970s, the price of oil increases six-fold, every firm will try to reduce its use of oil-based products. Chemical firms will develop artificial substitutes for petroleum inputs to their production processes; airlines will look for more fuel-efficient aircraft; electricity will be produced from more coal-fired generators. In general, higher oil prices make the economy produce in a way that uses less oil.
Oil price ($ per barrel)
How does the oil price increase affect what is being produced? Firms and households reduce their use of oil-intensive products, which are now more expensive. Households switch to gas-fired central heating and buy smaller cars. Commuters form car-pools or move closer to the city. High prices not only choke off the demand for oil-related commodities; they also encourage consumers to purchase substitute commodities. Higher demand for these commodities bids up their price and encourages their production. Designers produce smaller cars, architects contemplate solar energy, and research laboratories develop alternatives to petroleum in chemical production. Throughout the economy, what is being produced reflects a shift away from expensive oil-using products towards less oil-intensive substitutes. The "for whom" question in this example has a clear answer. OPEC revenues from oil sales increased from $35 billion in 1973 to nearly $300 billion in 1980. Much of this increased revenue was spent on goods produced in the industrialized Western nations. In contrast, oil-importing nations had to give up more of their own production in exchange for the oil imports that they required. In terms of goods as a whole, the rise in oil prices raised the buying power of OPEC and reduced the buying power of oil-importing countries such as Germany and Japan. The world economy was producing more for OPEC and less for Germany and Japan. Although it is the most important single answer to the 'for whom' question, the economy is an intricate, interconnected system and a disturbance anywhere ripples throughout the entire economy.
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In answering the 'what' and 'how' questions, we have seen that some activities expanded and others contracted following the oil price shocks. Expanding industries may have to pay higher wages to attract the extra labour that they require. For example, in the British economy coal miners were able to use the renewed demand for coal to secure large wage increases. The opposite effects may have been expected if the 1986 oil price slump had persisted.
The OPEC oil price shocks example illustrates how society allocates scarce resources between competing uses.
A scarce resource is one for which the demand at a zero price would exceed the available supply. We can think of oil as having become more scarce in economic terms when its price rose.
VOCABULARY NOTES
| to allocate resources scarce resources , scarcity to satisfy unlimited wants competing uses to be of great significance commodity (syn. good) , modern economy oil and its derivatives to provide fuel for heating and transport basic inputs to range from... to... ... ... plastic utensils polyester clothing to increase [-z], v. steadily increase [-s], n. over much of this period in comparison with (syn. as compared with) on the assumption of () abundant oil , , an abrupt change oil-producing nations , to be located in to belong to OPEC (the Organization of Petroleum Exporting Countries) ( ) to raise the price to encourage consumers , commuters , car-pools , to bid up the price to encourage production to contemplate solar energy () to reflect a shift away from... towards (to)... (, ) ... ... OPEC revenues nearly $300 billion 300 industrialized Western nations () in contrast oil-importing nations , to give up the production () in exchange for to require the buying (syn. purchasing, spending) power | to economize on its use to forecast correctly cutbacks in quantity demanded to be dependent on oil to be available (syn. to be in stock; ant. to be out of stock) potential substitutes () to anticipate , , substantial price increase [-s] , to lead (led, led) to (syn. to cause, to entail, to result in) reduction in sales to be profitable for , OPEC members . to quote prices in US dollars per barrel , to triple ['tripl] , a gradual rise sharp, dramatic increase to take by surprise upheaval [i:] to inflict upheaval on the world economy ( ) to respond to prices a producer to determine what, how and for whom to produce , to increase six-fold oil-based products artificial substitutes for petroleum production processes fuel-efficient aircraft oil-intensive products switch to to choke off the demand substitute commodities - an intricate interconnected system a disturbance , , to ripple throughout the entire economy some activities expanded/contracted / to pay higher wages to attract the extra labour to renew , demand for to secure wage increases price slump to persist , to exceed the available supply to become more scarce in economic terms , |
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Assignments
I. Suggest the Russian equivalents
to increase steadily; try to economize on the use of...; to choke off the demand; to encourage consumers to purchase smth; to encourage the production of...
II. Replace the parts in italics by synonyms
three economic questions; to give a share of resources; to have scarce supplies of raw materials; a sudden change; realising that; potential replacements; to encourage people who use oil; price increases six times; try to cut down on the use of oil
III. Find in the text antonyms for the following words:
rare, scarce; outputs; expensive; exports; straightforward; get, acquire; not to need; getting smaller
IV. Fill in the gaps with the words and expressions from the text
1. Economics is the study of how people choose ______________ scarce resources to satisfy their ______________.
2. Economic activity was organized on the assumption of________________ oil.
3. In 1973 74 there was an ______________ change in oil prices.
4. _________________ countries correctly forecast that __________________ in the quantity demanded would be small.
5. Most nations are very dependent on oil and have few commodities available as ________________ for oil.
6. Oil prices are traditionally ________________ in US dollars per barrel.
7. The price of oil ________________, from $2.90 to $9 per barrel.
8. There was another _________________ between 1978 and 1980, from $12 to $30 per barrel.
9. The dramatic price increases inflicted __________________ on the world economy.
10. These responses, ________________ prices, are part of the process by which most Western societies __________________ what, how and for whom to produce.
11. Chemical firms will develop ___________________ for petroleum inputs to their production processes; airlines will look for more _______________ aircraft.
12. Firms and _______________ reduce their use of______________ products.
13. Commuters form ___________________ or move closer to the city.
14. High prices not only ________________ for oil-related commodities; they also encourage consumers to purchase ___________________.
15. OPEC _________________ from oil sales increased from $35 billion in 1973 to nearly $300 billion in 1980.
16. The rise in oil prices raised ________________ of OPEC.
17. The economy is an _________________, interconnected system and a _________________ anywhere ripples throughout the entire economy.
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18. _______________ industries may have to pay higher wages to attract the _______________ labour that they require.
19. A scarce resource is one for which the demand at a zero price would ______________ the available supply.
V. Find in the text English equivalents for the following
; ; ; ; ; ; ; / ;
VI. Explain in English
prices are quoted; a gradual rise; a sharp increase; household; commuters; commodities
VII. Check your grammar
Present Tenses
Use the following verbs to complete the paragraph below:
concern, base, discuss, be, show, take up, hope for, say, offer, wish, live, suggest, provide, govern
Students _________________ economics for different reasons. Some ______________ a career in business, some _______________ for a deeper understanding of government policy, and some _______________ about the poor or the unemployed. This book __________________ an introduction, which______________ that economics_________________ a live subject. It_______________ real insights into the world in which we _________________. The material that we__________________ in this book ________________ by two ideas. The first _________________ that there _________________ a body of economics, which has to be learned in any introductory course. The second _________________ on the belief that moderm economics is more readily applicable to the real world than traditional approaches ___________________.
Past Tenses
Write the following sentences out in full, like this:
Keynes/famous/ his/ day/ economist/ own/ a/in... (be)
Keynes was a famous economist in his own day.
1915/ Treasury/ London/ in/ he/ in/ the/... (join)
best-known/ 1935/ his/ book/ in... (publish)
public/ war/ during/ he/ service/ the/ to... (recall)
5th/ in/ Cambridge/ June/ Keynes/ 1883/ on... (bear)
student/ he/ distinguished/ a... (be)
instrumental/ the IMF/ in/ the/ 1944/ World Bank/ he/ in/ and/ starting... (be)
Cambridge University/ to/ 1902/ he/ in... (go)
a/ he/ as/ Cambridge/ teacher/ to... (return)
time/ he/ a/ economist/ by/ as/ this/ brilliant... (accept)
also/ heavy/ his/ he/ by/ workload... (exhaust)
The General Theory of Employment, Interest and Money/ it... (call)
1919/ in/ he/ with/ Treaty of Versailles/ he/ because/ the... (resign, disillusion)
April/ on/ 21st/ he/ 1946... (die)
book/ conventional/ this/ thinking/ enemies/ many/ and/ him... (go against, make)
Arrange the sentences you have made into a single paragraph.
VIII. Answer the questions
1. What are the three main questions of the economy?
2. What do you need in order to understand economics?
3. What happened to the price of oil from 1900 to 1973?
4. What did OPEC decide in 1973?
5. Why was there only a small reduction in oil sales?
6. What is an oil price shock? What did the oil price shocks lead to?
7. How do people respond to a higher price for a commodity?
8. What effect do higher oil prices have on the economy?
9. What happens throughout the economy when there are high oil prices?
10 What 2 effects did high prices have on oil-importing countries?
11. When did oil become scarce?
12. What is a scarce resource?
IX. Translate using all the active possible
1. () , , .
2. , ,
3. 70- . .
4. .
5. .
6. . .
