Economics study

5 There is also demand for goods which are good / bad for us.

6 The market / Advertising can create demands that do not normally exist.

 

 

 

G Speaking(18)

 

Discuss these questions with your partner.

Why do you think the traditional economy has almost disappeared?

Would you like to live in a traditional economy? Why/Why not?

 

Task

 

You are the leader of a scientific expedition to the forests of Central Africa. You spend six months living with the Mbuti. Give a short presentation about your expedition. Use the space below to make your notes.

 

Talk about:

 

why you went

why the Mbuti are important people to study

what the environment is like

the Mbuti lifestyle

their economic system

what we can learn from the Mbuti

 

H Writing

Write an essay comparing the traditional economy with the market economy. Discuss the advantages and disadvantages of each economy. Decide which is best in your opinion.

Remember, you should organise your ideas logically.

These phrases will help you: firstly, secondly, furthermore, however, on the other hand

 

Discursive essay

PARAGRAPH 1

Introduce the subject by saying what a traditional economy is, and what a market economy is.

PARAGRAPH 2

Say what the advantages and disadvantages of the traditional economy are.

PARAGRAPH 3

Say what the advantages and disadvantages of the market economy are.

PARAGRAPH 4

Conclude by saying what you think the best system is.

Write 200-250 words

Notes:

Pronunciation guide

 

Surplus     

Incentive

Deafening    

Competitor

 

 

 

Before you read_

 

Discuss the following with your partner.

You learnt about the free market economy in the last unit.

Can you think of any disadvantages it may have?

With your partner, see if you can think of any ideas for these points:

advertising

prices

junk food

 

A Vocabulary

 

Match the words and phrases with the definitions.

 

1 commodity

2 standard

3 socialist

4undustry

5 el

6 indicate

7 warning system

8 shortage

9 rapidly

10 ration

11 solution      

12 hoard        

done

13operate      

14 wages

something bad is going to happen

 

A when the government sets a limit on how much people can buy of something

В when there is not enough of something

C a strong metal made from iron

D something you can buy or sell

E what is usual or typical

F all the businesses and companies involved in the production of heavy goods, food, technology, etc

G describes someone / something aiming to share wealth equally

H secretly storing and hiding goods for use later

I work

J show

К very quickly

L money paid regularly for work

M answer to a problem

N a system which tells us that

 

Reading 1

 

The planned economy(19)

 

In many ways, the planned economy is the direct opposite of the market economy. In the market economy, the forees of  supply and demand decide everything: what is produced, how much is produced, the methods of production and the price. In the planned economy, all of this is decided by the government. In every way that the market economy is free, the planned economy

is controlled.

Unfortunately, no economic system is perfect. If there was a perfect system, economists wouldn't have anything to argue about! Market economies have their strengths, but they have their problems, too. Planned economies try to provide solutions to these problems. For example, the free market supplies the things that people want. However, what people want and what they need are not always the same. Fast food is always in demand, but it's bad for us. In a planned economy, the government could decide to stop fast food restaurants operating in the market.

Л second problem with free markets is that producers always want the highest price. Often the poor can't afford things In a planned economy, the government sets prices They make sure that everyone can afford basic commodities. This is one way that planned economies try to share things equally. Another is to control how much people get paid

In a planned economy, workers' wages depend on

the service they provide to society. If people can live without their service, you get paid less This is very differen from the free market. In the free market, someone's salary mostly depends on the demand for this or her work. If people like what

you do. you get paid mote.

Before 1900, there were few examples of planned economies. During the 20th century, however, the planned economy became the standard for socialist governments like the USSR and China. These countries experienced amazing economic growth in a very short time. In a market economy, it takes a long time for big industries to grow from small companies. In a planned economy, however, huge industries can grow overnight. The government simply decides to spend money on factories and lactones appear Britain, for example, took centuries to develop her steel industry in a free market economy. China developed hers in a few decades.

Hut. as we said, no economic system is perfect, The planned economy has many drawbacks. One of these drawbacks is problems with supply. It is difficult for governments of planned economies to know exactly how much to produce to meet demand. In a market economy, when the price of a commodity rises, this indicates a rise in demand Companies then supply more to the market. This warning system doesn't work in a planned economy because price is controlled by the government. The result is shortages.

When shortages happen, governments can do two things: ration goods or raise prices. In this situation, people then start to hoard things, and the problem gets even worse As the population gets bigger, shortages like this become more common. For this reason. China - once the world's biggest planned economy - is rapidly moving towards another system: the mixed economy.

 

 

 E Comprehension

 

Now read the text again and decide whether these statements are true or false.

 

1In a planned economy, the government decides how products are made.

2 In a planned economy, suppliers can sell anything that is in demand.

3 In a planned economy, a doctor should get paid more than a footballer.

4 Planned economies grow more slowly than market economies.

5 In a market economy, greater demand for something makes it cheaper.

6 Planned economies are difficult to run in countries with large populations.

 

Before you listen(20)

 

 

Discuss this question with your partner.

What everyday problems do you think people face in a planned economy?

 

 С Listening )))

 

Rita lives in a country with a planned economy. Listen to her talk about her life and the problems she faces. Tick the problems she mentions in the list below. Then listen again and check your answers.

1 food shortages

2 low wages

3 unemployment

4 lack of career opportunities

5 lack of luxury items

6 high prices

 

 

 

Before you read(21)

 

Discuss the following with your partner.

 

Can you actually think of any examples of countries with a completely free market or a totally controlled one?

Give any examples you can think of or say why you can't come up with any true examples.

 

 D Vocabulary

 

Complete each sentence with a word or phrase from the box.

■ agriculture	■ ban	■ efficiently	■ free	■ enterprise
■ manufacturers	■ monopoly	■ private sector	■ profit motivation	■ public transport
■ state sector	■ telecommunications	■ trade

  

1.......................is when businesses are able to  trade without control from the government.

2.......................industries belong to and are run by  the government.

3.......................industries belong to and are run by  independent businesses.

4 Buses, trains and planes are examples of. 

5.......................is another word for farming.

6.......................produce new goods from  raw materials.

7 When a business works........................it runs  successfully without wasting resources.

8 Telephone and Internet systems are part of the  .......................industry.

9.......................is what drives businesses in the  market economy.

10 When the government puts a.......................a commodity, people are not allowed to buy or own it.

11 If only one company controls part of the economy, they have   a........................

12 When companies........................they do  business with each other.

 

 

The mixed economy

 

Most economists would say chat there are no examples in the world today of a completely tree market or completely controlled economy. Instead, every country operates a mixture of the two systems. Even in the freest economies, like the USA, there is some government control; even in the strictest planned economy there is sonic free enterprise.

Economics mix government control and free market values in different ways. One way is to let privately owned businesses exist alongside state run industries The economy becomes divided between the state sector and the private sector The slate sector often includes industries that the government thinks are important and need protection from the risks of the free market These could include public transport, hospitals, schools and the postal service The state sector can also include large industries that are important for a country's economic health, such as oil. steel or agriculture. These are sometimes called primary industries because they provide basic materials to manufacturer.

These state sector industries use money that the government collects in taxes. Often. they do not need to compete with other companies because

other company is allowed to provide the same product or service However, many countries have recently started a process called deregulation. Deregulation means freeing up the economy to allow private businesses to compete with state-run industries. The state sector should then run more

efficiently in order to compete in the free market

and because it now has less government protection.

Deregulation of services like telecommunications, transport and banking has happened in many countries in recent years. People have generally accepted these changes However, generally the public is less happy when governments start talking about deregulation in education and health services. Many people feel that profit motivation will harm these services rather than improve them

Another way in which economies today are mixed is that governments put limits on free enterprise. 1 or example, governments may decide to ban trade in certain goods if they are dangerous. They may also create laws to make sure companies trade honestly or to prevent monopolies. If a company has a monopoly, normal market forces do not affect it. This is bad for consumers and the economy in general. Governments may also

regulate methods of production. They do this to

guarantee that products are safe for consumers and to protect the environment

Many economists would argue that the mixed economy is the best system for consumers. This is because consumers have two ways to control the economy by choosing to buy a company's goods or services and by choosing to give political parties their votes.

 

 E Comprehension(22)

 

Now read the text again and answer the questions.

 

1 What do most economists believe about economies in the world today?

A There are a number of free markets, B Some countries have a completely planned economy.

C A mixed economy exists I some way in all countries.

 

2  Why do governments choose to run some industries?

A So they can collect taxes.

B Because they need to be protected from the risks of the free market.

С To encourage a divided economy.

 

3 Why do governments deregulate some industries? A To make the industries more efficient. B To protect them.

C Because there is too much competition.

 

4 According to the text, what is not very popular with the public?

A Deregulation of public transport. В Deregulation of hospitals and schools. С Deregulation of telecommunications and banking.

 

5 What type of state control is not mentioned in paragraph 5?                       A Controlling the way companies do business.

B Controlling what companies sell.

C Controlling the prices companies set.

 

Before you listen_

 

Discuss the following with your partner.

Here is a list of arguments against state-run hospitals and arguments against private hospitals.

Read the list and decide under which heading you think each one should go.

 

 F Listening )))

 

Now listen and check your answers.

1 badly organised

2 creates a class of poor, unhealthy people

3 hospitals in bad condition

4 hospitals will reduce costs to make money

5 is bad for society in general

6 long waiting lists for patients(23)

2 only the rich can afford health care

8 staff are poorly paid

9 taxpayers support everyone

 

Against state run hospitals	Against private hospitals

G Speaking

 

Discuss these questions with your partner.

Do people only work for money?

What other motivation is there to work?

 

Task

 

Work in groups of three. Each of you will take one of the following roles.

 

STUDENT A

You believe that the planned economy is best.

STUDENT В

You believe that the free market is best.

STUDENT С

You believe that a mixed economy is best.

Take turns to present arguments to support your ideas for the best economic system.

 

Remember to include:

 

  why the system is good for the economy

  why it is good for society

When each of you has presented his or her argument, have an open discussion.

 

 H Writing

 

Write an essay comparing the planned economy with the mixed economy. Discuss the advantages and disadvantages of each economy. Decide which is best in your opinion.

Use these words and phrases to organise your ideas: despite this, nevertheless, consequently, in contrast, similarly

Read texts 1 and 2 again and use these notes to help you. Write four

paragraphs.

 

Discursive essay

 

PARAGRAPH 1

What is a planned economy?

What is a mixed economy?

Introduce the subject by saying generally there

are those two kinds of economies that have

advantages and disadvantages.

PARAGRAPH 2

Describe a planned economy, explaining its advantages and disadvantages.

PARAGRAPH 3

Describe a mixed economy, explaining its advantages and disadvantages.

PARAGRAPH 4

Conclude by saying which system you think is

best.

Or

Explain why you think neither system is the best.

Write 200-250 words

 

Pronunciation guide:

Commodity

Shortage

Hoard

Drawback

Enterprise

Deregulation

Guarantee

 

 

 

 

 

 

 

Revision Vocabulary   Units 1 to 4(24)

 

Complete the crossword. Some letters have been given to help you.

 

ACROSS

1 This kind of economy is both planned and free market.

3 The first kind of economy that existed.

4 The point where demand and supply meet.

5 This kind of economics simply describes the economy.

6 A measure of how much demand influences price.

10 This kind of economics makes recommendations.

11 This kind of economics locks at the details of the economy.

DOWN

2 This kind of economics looks at the whole picture.                                          7 In this economy, the government decides everything.                                            8 This falls as prices rise.

9 In this kind of economy, price is set by supply and demand.

12  Something that can be measured, like money spent or babies born.

 

 B1 Find six pairs of opposites.

■ benefits	■ consumer	■drawbacks
■  drought	■ flood	■ manufacturer
■ private sector	■ save	■ shortage
■ spend	■ state sector	■ surplus

    

B2 Now write five example sentences using as many words as possible from this exercise.

 

C Complete the text with one word for each gap. The first letter has been given.

 

The traditional economy is the oldest form of economy. It has existed for thousands of years, although today it has almost disappeared. People in a traditional economy do not own (l)p........................They do not earn a

(2) s.......................and thus neither do they pay

(3) t........................In fact, there is no money.

They live on the raw (4) m.......................that the

forest provides them. They don't grow food or

have any organised (5) a.......................with farms

and (6) с.......................growing in fields. Instead,

they (7) g.......................wild fruit and vegetables

or (8) h.......................wild animals. They eat most

of the food they find, and may (9) h.......................

some food for the winter, but they do not sell it. It's

a difficult life. There are often (10) s.......................

of food when there is not enough to eat. When this

happens, the (11) t.......................must move on to

another part of the

 

 

25 CNH

 

Before you read _

 

With your partner discuss how you make choices about what you arc going to buy. Think about:   budget                                                    the price

satisfaction with the goods

 

A Vocabulary

 

Choose the correct word or phrase.

 

1 If you are m a hurry, it can be difficult to make a  maximum / rational decision.

2 The amount of money you have to spend is your  budget constraint / deciding factor.

3 The maximum / rational speed limit on this road  is 120 kilometers per hour.

4 Quality is often the deciding factor/ budget  when people choose something to buy.

5 Some people how much they  spend every week.

6 Green is a combination / an alternative of  yellow and blue.

7 When you buy something from a shop, you make a  purchase / budget constraint.

8 When you something is true,  you guess that it is true.

9 The use or satisfaction you get from something you buy is called utility / purchase.

10 Olive oil is a healthy alternative / combination to butter.

 

Reading 1

 

Consumer choices 

 

Its a hot summer day. You've been out walking all morning and you're getting thirsty. It's also about lunchtime, and you're feeling pretty hungry, too. What luck! Here's a kiosk selling snacks. You've got six euros to spend. You can buy bars of chocolate or bottles of water ... or a combination of both. Now you've got another problem: consumer choice.

It you're a neoclassical economist, however, there's nothing to worry about. Neoclassical economists believe that consumers make rational choices. Before a consumer buys something, they think about the cost and the amount of satisfaction the purchase will give them They then compare the price and satisfaction of possible alternative purchases. In the end. they buy what gives them maximum satisfaction at the lowest cost.

So. what will you buy from the kiosk? An important deciding factor is the amount you have to spend. Economists call this your budget constraint Your total budget is six euros. Bottles of water are two euros each, chocolate bars are

 

 

 

 

(26)

 

one euro each. You could buy three bottles of water, or you could buy six chocolate bars. Or you could buy any combination that adds up to your total budget We can put all of this information on a budget line, like the one in figure 1. The budget line shows what combinations of goods are possible. Economists call these combinations of goods bundles But which is the best bundle? This depends on something called utility. Utility is the economists' word tor the satisfaction we get from a purchase. Each good has its own utility value for the consumer The utility of a bundle depends on two things: the utility of the goods in the bundle, and how much of each good is in the bundle. Figure 2 on page 25 shows the bundles of chocolate and water that give the same level of utility. This kind of chart is called an indifference curve. Any point on the curve has the same utility value as any other point. For example, two bottles of water and two chocolate bars has the same Utility as one bottle of water and four chocolate bars.

In figure 2. we assume that chocolate and water have the same utility value for the consumer. But it water had a higher utility value than chocolate, the curve would be a different shape. Many things can affect the utility of a good. These include the cost of the good, the consumer's income and something called marginal utility.

To understand marginal utility, just think about chocolate bars. Every time you consume a bar of chocolate, the satisfaction you get from the next bar will be less. In other words, you get less utility every time you eat another bar. This decrease in utility is called the marginal utility. The marginal utility is the one of an additional item, for example:

bars of	Marginal	Total
chocolate	Utility	Utility
0	-	0
1	10	10
2	9	19
3	8	27
4	7	34