Market and command economies

Economics is a science that analyzes what, how, and for whom society produces. The central economic problem is to reconcile the conflict be­tween people's unlimited demands with society's ability to produce goods and services.

In industrial Western countries markets are to allocate resources. The market is the process by which production and consumption are coordinated through prices.

In a command economy, a central planning office makes decisions on what, how, and for whom to produce. Economy cannot rely entirely on com­mand, but there was extensive planning in many Soviet bloc countries.

A free market economy has no government intervention. Resources are allocated entirely through markets.

Modern economies in the West are mixed and rely mainly on the market but with a large dose of government intervention. The optimal level of gov­ernment intervention remains a problem which is of interest to economists.

The degree of government restrictions differs greatly between coun­tries that have command economies and countries that have free market economies. In the former, resources are allocated by central government planning. In the latter, there is not any government regulation of the con­sumption, production, and exchange of goods. Between the two main types lies the mixed economy where market and government are both of importance.

 

Vocabulary:

economics - n 1. экономическая наука; 2. экономика

economic – а 1. экономический; 2. экономически выгодный; рентабельный

economical – а 1. экономный, бережливый; 2. экономичный

economist - n экономист

economize – v экономить; экономно расходовать или использовать

economy – n хозяйство, экономика

command economy – централизованно управляемая экономика; нерыночная экономика

free market economy – свободная рыночная экономика

mixed economy – смешанная экономика

society - n 1. общество, общественный строй; 2. общество, организация, ассоциация

produce – v производить, вырабатывать

production – n производство

demand – n спрос; требование; запрос; потребность

demand for smth – спрос на что-нибудь

to be in high / low demand – пользоваться большим / небольшим спросом

good – n товар, изделие

service – n услуга

market – n рынок

allocate v (smth to / in smth, smb) 1. размещать, распределять (что-л, куда-л, кому-л); 2. ассигновать (что-л, на что-л, кому-л)

resource(s) – n ресурс(ы), средства

consumption – n потребление

through – prep через; посредством; благодаря

price - n цена

at high/low prices – по высоким / низким ценам; при высоких / низких ценах

price for/of a good – цена товара, цена на товар

plan - v планировать

planning – n планирование

decision – n решение

to make a decision – принимать решение

rely v (on smb, smth) - полагаться (на кого-л, на что-л)

entirely – adv полностью, всецело

government – n правительство

intervention – n вмешательство

government intervention – государственное вмешательство

level – n уровень

at a certain level – на определенном уровне

restriction – n ограничение

(the) former – а первый (из двух названных)

(the) latter – а последний (из двух названных); второй

regulation – n регулирование

government regulation - государственное регулирование

both – а pron оба, обе; и тот и другой

importance - n важность, значение

to be of importance – быть важным, иметь (большое) значение

 

Exercise 1: Choose the correct word

1. (A command economy / a free market economy) is a society where the government makes all decisions about production and consump­tion.

2. (Economics / Economy) studies how markets and prices allow society to solve the problems of what, how, and for whom to produce.

3. Every economist sees (the restriction / the importance) of the question of what, how, and for whom to produce.

4. Nations have different (consumption / levels) of farm production.

5. When (the price / the importance) of some goods grows, people will try to use less of them but producers will want to produce more of them.

6. In (mixed / both) countries, Canada and the USA, structural changes in the agricultural sector of economy have become of interest to econo­mists and general public in the 80s and 90s of the 20th century.

7. After years of competition between command and market economies, (the former / the latter) gave way in many countries of the world to (the former / the latter).

Exercise 2: Translate the sentences into Russian using the Vocabulary to the Text 1 .

1. Economics is the study of how society decides what, how, and for whom to produce.

2. The central economic problem for society is how to reconcile the con­flict between people's limitless demand for goods and services and the resources which can be allocated for the production of these goods and services.

3. The market is the process by which individuals' decisions about con­sumption of goods, firms' decisions about what and how to produce, the workers' decisions about how much and for whom to work are rec­onciled by prices.

4. When resources are limited, they are allocated through the political pro­cess. In a country like Sweden with a strong government the level of production of social services may be higher than the level of production of goods for individual consumption.

5. The world economy produces mostly for the people living in the indus­trial countries.

6. In many countries there was a large dose of central regulation and plan­ning.

7. Even the countries with free market economy still have high levels of government activity in the production of public goods and services and the regulation of markets.

8. All-round planning is not an easy task, and there is not any command econ­omy that relies entirely on planning for all resources allocation decisions.

Exercise 3: Fill in the gaps with the words from the box and translate the sentences into Russian:

both, government, restrictions, the former, the latter, economics, through, to produce, services (2), goods (2), regulations, mixed economy

 

1. Every group of people must solve three main problems: what... and... to produce, how... them and for whom to produce them.

2.... is placed among the social sciences.

3. Markets in which there is no... intervention are called free markets.

4. Society allocates resources into production... the price system.

5. There are no government... and... in a free market economy.

6.... is an economy in which the government and private sector cooperate in solving economic problems.

7. Government regulations and restrictions must... work in the interests of society.

8. People produce... and …. … are produced in factories or on farms,... — at schools, hospitals, shops, banks.

 

Exercise 4: Match 2 parts of the sentences:

1. America's strong demand for au­tomobiles explains	a) may be called command econo­mies.
2. In contrast to market economies, economies with different forms of dictatorial control	b) entirely through government regu­lation.
3. Big corporations are not allowed to dominate an industry or a mar­ket	c) and resources are allocated through goods and services markets.
4. In some industries, such as radio, television, telephone services and some others, competition cannot be relied	d) why auto workers have historically been among the highest paid work­ers in the world.
5. Resources are the things or services that are used	e) which rely heavily on economic advisers in making the decisions about the future of the country.
6. Economics and economists play an important role at the highest levels of governments	f) entirely on to produce results that are good for the society.
7. Until the middle of the 18th cen­tury, industry (in contrast to agri­culture and commerce)	g) was of little importance in the economies of Europe and Amer­ica.
8. Under capitalism, economic deci­sion-making is decentralized	h) to produce goods which can satisfy (удовлетворять) people's demands.

Exercise 5: Group the following words and complete the table; translate the words into Russian

decision, recommend, regulation, consumer, produce, allocation, decide, consume, allocate, production, recommendation, consumption, regulate, producer

Action (verb)	General notion (noun)	Doer of the action (noun)

Exercise 6: a) Change the following phrases, using adjectives economic or economical

1. A practical woman.

2. Problems of economics.

3. A crisis in the field of economy.

4. To be careful in the spending of money.

5. Reforms in the field of economy.

6. A law (закон) regulating the sphere of economics.

7. A plan of the industrial development of the country.

8. A small car that doesn't use too much fuel.

9. Geography that studies the location (размещение) of industries, mar­kets, transport.

 

b) Fill in the gaps using the words from the box:

economy, economics, economist, economic, to economize, economical

1. An early definition (определение) of... was "an inquiry (изучение) into the nature and causes of the wealth of nations".

2. The national... is the system of the management and use of resources of a country.

3. You can... if you compare the prices of goods before buying them.

4. J. M. Keynes was a famous....

5. Inflation may cause a bad... state (состояние) in a country.

6. If you've got a large family, it's more... to travel by car than by train.

Exercise 7: Translate the following combinations into Russian paying special attention to the nouns in the function of attribute:

lecture hall, school year, university laboratories, command economy, mar­ket economy, government intervention, land resources, government restric­tions, Soviet bloc countries

 

Exercise 8: Say what part of speech this words belong to judging by their suffixes:

economist, production, productivity, highly, mechanism, worker, limit­less, manager, consumption, entirely, restriction, government, technical, de­cision, priceless, extensive, mainly, population

 

Exercise 9: Translate the sentences into Russian, paying attention to the construction “to be + of + noun”

1. This book on economics is of great interest.

2. Independent work at the library is of great value to every university stu­dent.

3. These new machines may be of use on farms.

4. Knowledge of foreign languages may be of great importance to every­body.

 

Exercise 10: Find the predicate in the following sentences and translate them into Russian:

1. For 40 years after 1945 countries in Eastern Europe had planned econ­omies in which market mechanisms played only a small role.

2. The government plays an important role in allocating resources in the economy.

3. Goods are produced on farms or in factories. Goods of the both groups are consumed by the people who buy them.

4. A government planning office decides what will be produced, how it will be produced, and for whom it will be produced.

5. Resource allocation decisions are being made every day in every city, mostly through the mechanisms of markets and prices.

6. When there was a bumper coffee crop (очень высокий урожай кофе) in Brazil, much coffee was bought by the Brazilian government from farmers and then burnt.

7. Grain (зерно) markets have greatly changed over the last 25 years in the United States and Europe. Both have high levels of government intervention in their agriculture.

8. The ideas of Adam Smith, the famous Scottish philosopher and econ­omist, have been studied by economists for over two hundred years.

Exercise 11: Translate the sentences into Russian:

1. Prices are to regulate production and consumption in a market econ­omy.

2. The problem with government regulation of markets is to control how government restrictions work in real life.

3. The aim of that book is to form a theory of the role of government in economic life.

4. The market is to decide how much to produce.

5. A building society is a financial organization whose purpose is to help people buy houses or flats.

6. When the authors of the textbook discussed examples, their intention (намерение) was to prepare students for future economic analyses.

7. Governments are to regulate or plan production and consumption. The former is typical of mixed economies, the latter is typical of command economies.

 

Exercise 12: Translate the sentences into Russian, paying attention to the construction “to be + of + noun”:

1. Economists' recommendations may be of high value to governments but governments do not always rely on them.

2. The study of economics is of great use even to those students who have no wish to become professional economists.

3. Basic problems of economics are of great importance to every econo­mist, while specific problems of farm economics are mostly of interest to economists who study agriculture.

4. Since economists cannot make experiments, collecting and using in­ formation from a large number of past years is of practical importance for analyzing and solving problems of today.

5. Professional marketing services are of great value to producers and sellers.

6. Economic statistics are of interest to economic policy decision-makers.

 

Exercise 13: Translate the following sentences into English:

1. Развитые страны достигают экономического успеха через специализацию.

2. В годы войны в стране всегда имеет место регулирование экономики правительством.

3. В экономиках смешанного типа имеются правительственные ограничения того, что производить и как производить.

4. Каждый менеджер принимает решения, как распределить ограниченные ресурсы наилучшим образом.

5. Мы не можем положиться на эти данные при планировании производства на следующий год.

6. При рыночной экономике регулирование производства и потребления осуществляется через цены.

Exercise 14: Read and translate the text; supply it with a title. Guess the meaning of the underlined words.

The free market allows individuals to produce goods and services without any government restrictions. The command economy allows little individual economic freedom since (так как) most decisions are made by the govern­ment. Between these two extremes lies the mixed economy.

In a mixed economy the government and private sector co-operate in solv­ing economic problems. The government controls production through taxa­tion (налогообложение) and orders for goods and services for the army, the police force, administration and other needs.

In a mixed economy the government may also be a producer of goods. An example of this is the United Kingdom where there are nationalized indus­tries such as railways and coal.

 

 

UNIT 8: DEMAND AND SUPPLY

 

Text 1: DEMAND AND SUPPLY

 

Demand is the quantity of a good that buyers wish to buy at each price. Other things equal, at low prices the demanded quantity is higher.

Supply is the quantity of a good that sellers wish to sell at each price. Oth­er things equal, when prices are high, the supplied quantity is high as well.

The market is in equilibrium when the price regulates the quantity supplied by producers and the quantity demanded by consumers. When prices are not so high as the equilibrium price, there is excess demand (shortage) raising the price. At prices above the equilibrium price, there is excess supply (surplus) reducing the price.

There are some factors influencing demand for a good, such as the prices of other goods, consumer incomes and some others.

An increase in the price of a substitute good (or a decrease in the price of a complement good) will at the same time raise the demanded quantity.

As consumer income is increased, demand for a normal good will also increase but demand for an inferior good will decrease. A normal good is a good for which demand increases when incomes rise. An inferior good is a good for which demand falls when incomes rise.

As to supply, some factors are assumed as constant. Among them are tech­nology, the input price, as well as degree of government regulation. An im­provement in technology is as important for increasing the supplied quantity of a good as a reduction in input prices.

Government regulates demand and supply, imposing ceiling prices (max­imum prices) and floor prices (minimum prices) and adding its own demand to the demand of the private sector.

 

Notes:

each price – pl. любая цена

other things equal – при прочих равных условиях

are assumed – рассматриваются, принимаются

some – какой-то, несколько

the same – тоже, также

as – так как; по мере того как; в качестве; как

as well – тоже, также

as well as – так же как и

such as – такой как

as... as – такой (же) … как

as... as possible – как можно …

not so... as – не такой … как

as to – что касается …

the same as – такой же как

Vocabulary:

quantity n - количество, размер; величина

buy (bought, bought) v – покупать, приобретать

buyer n – покупатель

demand v (smth) – требовать (что-л); нуждаться в чем-л

supply n – предложение

excess supply – избыточное, чрезмерное предложение; перенасыщенность рынка

supply v – предлагать, снабжать, поставлять

to supply smb with smth – поставлять что-либо кому-либо

to supply smth to smb – снабжать кого-либо чем-либо

sell (sold, sold) v – продавать(ся)

seller n – продавец

equilibrium n – равновесие, равновесное состояние, положение равновесия

equilibrium price – равновесная цена

producer n - производитель

consumer n - потребитель

consume v - потреблять

shortage n – дефицит, нехватка, недостаточность предложения (товаров)

raise v – повышать, увеличивать, поднимать

surplus n – избыток, излишек

reduce v – понижать, уменьшать, сокращать

reduction n (in smth) – снижение, уменьшение, сокращение (чего-л)

influence v (smth) – оказывать влияние, влиять (на что-л)

influence n – влияние, воздействие

income n – доход(ы), прибыль, поступления

increase n (in smth) – увеличение, рост, возрастание, прирост (чего-л)

increase v – увеличивать(ся), повышать(ся), расти, усиливать(ся)

substitute good – товар-заменитель (спрос на который изменяется в противоположном направлении по сравнению со спросом на другой товар, цена на который изменилась)

substitute n (for smth) – заменитель (чего-л)

decrease n (in smth) – уменьшение, понижение, снижение (чего-л)

decrease v – уменьшать(ся), снижать(ся), убывать

complement good – товар-дополнение (спрос на который изменяется в том же направлении, что и спрос на некоторые другие товары, цены на которые изменились)

normal good – товар стандартного качества

inferior good – товар низкого качества

rise (rose, risen) v – подниматься, увеличиваться, возрастать

fall (fell, fallen) v – падать, опускаться, понижаться

technology n – техника, технология

input n – вложение, вводимый ресурс, затраты, инвестиции

input price – цена ресурсов, цена основных средств производства

improvement n – улучшение, усовершенствование

improve v – улучшать(ся), усовершенствовать(ся)

impose v (on, upon) – облагать (налогом, пошлиной кого-л), налагать (обязательство, штраф), возлагать (на кого-л), навязывать (кому-л)

private a – частный, личный, собственный

Exercise 1: Translate the following sentences into Russian; use the Vocabulary to the text .

1. If the price is higher than the equilibrium one, it will be falling till the equilibrium price isreached and there is no more surplus left. If a good is sold at a price below the equilibrium one, the price will grow and reach the equilibrium price till there is no more shortage of the good left.

2. Governments buy and produce many goods and services, such as defense, education, parks, and roads for firms and individuals.

3. Firms producing computers act as buyers in the markets for the ser­ vices of computer programmers.

4. Governments, through their control of the quantity of money in the economy, can influence business activity.

5. With a reduction in input prices firms will supply more of a good at each price.

6. Inflation is a rise in the level of prices as demand is higher than supply because of an increase in the supply of money.

7. When there is a harvest failure, the producers' supply will decrease.

8. Supply restrictions imposed by cartels are as characteristic of industri­alized economies as of developing economies.

9. Private sector in a mixed economy is that part of the economy that is controlled by private firms, not by government or corporations.

10. Excess supply is a situation in which, at a certain price, the quantity of a good demanded by buyers is less than the quantity supplied by pro­ducers.

Exercise 2: Choose the correct word

1. The fashion for mini-skirt (increased / reduced) the demand for textile materials.

2. Even in (some / the same) middle-income countries many people are very poor.

3. Government regulations sometimes (decrease / impose) a change in (technology / quantity) that producers do not want to use.

4. Stabilization of prices is of great importance to industrial nations (as well as / as well) the Third World countries.

5. Freeing up (освобождение) prices leads to their (decrease / increase).

6. (Inferior / Normal) goods are usually low-quality goods for which there are higher-quality (improvements / substitutes) sold at higher prices.

7. A decrease in (complement / input) prices makes the production less expensive.

Exercise 3: Make all the possible word-combinations with the words from the left and the right columns and translate them into Russian:

price	quantity, to reduce, to rise, to impose, input, to raise, equilibrium, to fall, private, reduction, substitute
to influence	surplus, a seller, technology, input price, a good, a buyer, to raise, supply
improvement	decrease, surplus, quantity, to sell, technology, a good
to decrease	shortage, technology, input price, seller, quantity, sur­plus, reduction

Exercise 4: Translate the sentences into Russian

1. Exports are goods and services sold to other countries.

2. In free market economies changes in price are never results of regula­tions imposed by governments.

3. Imposing some restrictions on food prices, governments make it possi­ble for all the people to buy enough food.

4. The 3.8 billion (миллиард) people of the world in the early 1970s had about 20 percent more to eat than the 2.7 billion living 20 years earlier.

5. Knowing that their resources are limited, people make a decision how to allocate them in the best possible way (наилучшим образом).

6. The government can regulate monopolies controlling the prices or sup­ plying the products itself.

Exercise 5: Say what part of speech this words belong to judging by their suffixes

informa tion (noun), develop ment (noun), situa tion (noun), grow th (noun), product ive (adjective), productiv ity (noun), invest ment (noun), import ant (adjective), agricult ure (noun), import ance (noun), heal th (noun), agricult ural (adjective), indus­tr ial (adjective), weal th (noun), work er (noun), act ive (adjective), activ ity (noun).

Exercise 6: Find a noun-pair for each verb having the same root; translate the pairs into Russian

to fall – a fall (падать – падение),

to consume – consumer – consumption (потреблять – потребитель – потребление),

to stabilize - stabiliza­tion (стабилизировать – стабилизация),

to organize – organization (организовать – организация),

to demand – demand (требовать – требование, спрос),

to sell – seller (продавать – продавец),

to buy – buyer (покупать - покупатель),

to influence - in­fluence (влиять – влияние),

to invest – investment (инвестировать – инвестиция),

to improve – improvement (улучшать – улучшение),

to intervene - inter­vention (вмешиваться – вмешательство),

to increase – increase (увеличивать – увеличение),

to reduce – reduction (сокращать – сокращение).

 

Exercise 7: Fill in the gaps with the following words and translate the sentences into Russian:

to impose, the same, surplus, to buy, consumer, to rise, to increase, equilibrium price, as well as, to fall, shortage (2), inputs, normal

 

1. inputs are the factors of production (land, labour, capital, materials) that are put into a business to produce goods and services.

2. When all goods are the same, lower consumer income reduces the demanded quantity for all goods.

3. When the Beatles and Rolling Stones first became popular, the demand for haircuts (стрижка) suddenly fell.

4. When income increases, the demand for most goods increases. Typically, con­sumers buy more of everything.

5. At any time, the market price may not be the equilibrium price leading to excess supply (surplus) or excess demand (shortage).

6. If there is a national food shortage, a government may impose a ceiling price on food so that poor people can buy enough food.

7. Workers in poor countries having no resources for health and education are often less productive than workers using normal technology in rich countries. And without higher productivity it is hard to rise investment in people as well as in machinery.

8. Japanese consumers pay as much as eight world prices for beef (говядина).

Exercise 8: Fill in the gaps with the word as or word-combination with as and translate the sentences into Russian:

1. The newly industrialized countries such as Brazil, Mexico, Hong Kong, South Korea and Singapore, grew twice as quickly as the rich industrialized countries during the 1970s. As a group, their share of world exports increased from 3 percent in 1960 to 7 percent in 1987. These countries now play a larger part in the world economy than such countries as Sweden and Australia.

2. Capitalism is an economic system in which capital belongs to (принадлежит) private persons who are free to carry on business as well as they wish without any government intervention.

3. Alfred Marshall (1842-1924) is known as an economist who played an important role in the construction of theories of consumer demand and contributed to many other areas of economics as well. His Princi­ples of Economics written in 1890 was a leading economics book for many years.

 

Exercise 9: Translate the sentences into Russian:

1. In East-European countries consumers couldn't get goods, and facto­ries couldn't buy inputs at prices held low by governments.

2. Governments intervene in economies controlling the supply of money, limiting monopolies and helping private industries.

3. An improvement in technology will increase the supply of a good, in­ creasing the quantity supplied at each possible price.

4. Governments regulate economic activities imposing some restrictions.

5. The governments can influence for whom goods are produced, taking income away from some people and giving it to others.

6. The high price for a good is the market mechanism telling suppliers it is now time to increase production.

7. The developing countries hope that the industrial countries will raise imports from the less developed countries imposing tariffs on imports from other industrial countries.

8. Income is money of all kinds coming in regularly to a person, family or organization.

9. Active money is money going from man to man and used by the peo­ple in buying and selling goods and services.

10. Reducing our imports, we decrease the exports of others.

11. At prices above equilibrium we have a situation known as excess sup­ply, or surplus.

 

Exercise 10: Translate the following sentences into Russian paying attention to the words some and the same:

1. At some price, which we call the “equilibrium price”, the demanded quantity of a good equals the supplied quantity.

2. All markets have the same economic function: they form prices equaling the quantities of goods that people wish to buy or to sell.

3. There has been some rise of income in the past two decades (десятилетия) in developing countries.

4. A less developed country is the same as a country of the Third World.

5. An association is an organization formed by the people having the same interests and held together by a system of management.

6. For the next twenty years the supply of energy will be limited in some sectors of the US economy.

7. A consumer group is a small group of people living in the same place who study the prices and the quality of consumer goods sold in shops, and make the information known to the public.

8. An improvement in technology is something hat makes it possible for firms to produce more goods with the same quantity of inputs as before.

 

Exercise 11: Translate the following sentences into Russian paying attention to the word as and its combinations:

1. If the rise in prices is very large and quick, the situation is known as hyperinflation.

2. As to price ceilings, without government regulation and organization they may lead to "black market" as well as other social and economic problems.

3. Complement goods are those goods which you cannot use one without the other, such as cars and petrol. As the price for petrol rises, the de­mand for cars reduces.

4. Only when demand equals supply, people can buy or sell as much as, they want.

5. Harvest failures (неурожаи) are the most important reason for changes in agricultural product supply, but there are other reasons as well.

6. Attempts to organize supply restrictions in coffee and cocoa have not been so effective as OPEC regulation of quantities of oil sold to other countries.

7. As the supply increases with an improvement in technology, firms want to produce more at the same price level as before.

8. Every firm wants to sell as many goods as possible.

 

Exercise 12: Fill in the gaps with adjectives and adverbs in the appropriate form of comparison

high, important (2), many, large, low, effectively, much, great, clear, reliable, strong (2), quickly

1. Command economy relies more on planning than on prices.

2. Knowledge of foreign languages is of greater importance now than it was some 40 years ago.

3. The degree of government regulation in present-day Russia is lower than in the Soviet Union.

4. Government intervention in Sweden is as strong as in Denmark or, proba­bly, stronger.

5. Land quality is more important for agriculture than for other industries.

6. If we want to have a clearer picture of economic life in the country, we must have more reliable information.

7. In the 18th century the largest part of national income in most European coun­tries came from import and export tariffs. These days they play a less important role.

8. Governments can influence for whom goods are produced more quickly in econo­mies with higher levels of government regulation.

9. If other things are equal, this firm will do the work more effectively than the others.

 

Exercise 13: Translate the sentences into English:

1. По мере того как цена товара растет, требуемое количество его уменьшается.

2. Положение в странах с низким доходом улучшилось с 1965 года.

3. Задача максимальной цены состоит в том, чтобы уменьшить цену для потребителей, а задача минимальной цены заключается в том, чтобы поднять цену для производителей и поставщиков.

4. Увеличение предложения ведет к повышению равновесного количества и понижению равновесной цены.

5. Когда цены будут уменьшены до равновесной цены, не будет товарных излишков.

6. Если цена одного товара падает, а цены других товаров, требуемых потребителем, остаются теми же самыми, то потребитель будет покупать более дешевые товары вместо дорогого товара.

Exercise 14: Read and translate the text without a dictionary.