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Fundamental economic notions

Economics studies how various resources are best allocated to produce the highest standard of living and quality of life. The resources that go into creation of goods and services are called the factors of production. They include natural resources, human resourcesand capital. Each factor of production has a place in the economic system and each has a particular function.

Our country is rich in natural resources that include land, water, mineral resources and climate. The price paid for the use of land is called rent. Rent becomes income to the owner of the land.

Physical and mental effortsthat people put into creation of goods and services are called labourorhuman resources. The price paid for the use of labour is called wagesorsalary. Closely associated with labour is the concept of entrepreneurship, meaning the managerial or organizational skills used by firms to produce goods and services. The reward to entrepreneurs for the risks, innovative ideas and efforts that they have put into the business are profits. Profit is whatever remains after the owners of land, labour and capital received their payments.

Capital is something created by people to produce goods and services. A factory, tools and equipment are capital resources. The term ‘capital’ is often used by business people to refer to money they can use to buy factories, machinery and other productive resources. Payment for the use of someone else’s money or capital is called interest.

Human wants are unlimited while resources needed to satisfy these wants are scarce or limited. Thusevery society has to address the main economic problems: What goods and services to produce? How to produce them? Whom to produce them for? The way in which a society deals with these problems is known as its economic system.

Exercise 3. Answer the following questions:

1. What does economics study?

2. With what aim are resources best allocated?

3. What do we call factors of production?

4. What do we include into natural resources?

5. What is rent?

6. What do we call labour / human resources?

7. What is the meaning of the concept of entrepreneurship?

8. What are profits?

9. In what meaning do businessmen use the term ‘capital’?

10. What is interest ?

11. What economic problems does every society have to address?

Exercise 4. Translate into English.

Найвищий рівень життя; ресурси, що йдуть на створення товарів та послуг; кожен має певну функцію; тісно пов’язаний (з чимось); ризик; термін; в той час як; кожне суспільство; звертатися до проблеми.

Exercise 5. Translate into Ukrainian.

Quality of life; the owner of the land; efforts that people put into something; the concept of entrepreneurship; whatever remains; someone else’s money; to deal with the problem.

Exercise 6. Match and learn the synonyms.

A: capital, concept, each, equipment, income, particular, wages;

B: profit, salary, machinery, notion, money, definite, every.

Exercise 7. Match and learn the opposites.

A:include, innovative, various, profit, physical;

B: loss, mental, exclude, particular, outdated.

Exercise 8. Choose the proper word in brackets to complete the sentences.

1. Managerial skills are (physical/mental) efforts that firms use to produce goods and services. 2. When we calculate (profits/losses) we have to (include/exclude) the payment for land, labour and capital resources. 3. Our firm is successful thanks to (innovative/outdated) ideas proposed by the management. 4. Each factor of production has its (various/particular) function in the economy.

Exercise 9. Compose all possible word combinations with the word resourcesand translate them. Combine phrases with similar meaning.

Resources – capital, economic, energy, financial, human, labour, land,

limited, mineral, natural, productive, scarce, water.

Exercise 10. Complete the sentences with the proper words from the list below:

allocation, factor of production, the standard of living, income, new equipment, innovative ideas

1. Every … has its particular function in the economy. 2. Entrepreneurship is closely associated with … and risks. 3. We allocated big capital to buy … for our factory. 4. Rational … of resources is the basis of economic growth. 5. Governments do their best to increase … of their citizens. 6. Being the owner of the land he receives his … in the form of rent.

Exercise 11. On the basis of the text define the following terms:

Factors of production, natural resources, rent, labour/human resources, entrepreneurship, production resources, profit, capital, interest, wages/salary.


Grammar Points:* Comparative structures.

Present Indefinite Tense: Active and Passive Forms (p. 131-134).

Types of Questions (p.116-117).

* Sometimes you can use two comparatives together to say that something is changing continuously, e.g. harder and harder, more and more interesting.

Exercise 12. Use comparative structure in the following sentences.

1. Natural resources become …(scarce). 2. In consumer society people buy …(much). 3. Labour resources become …(expensive). 4. Risks associated with new businesses become …(high). 5. As I wait for my interview I get …(nervous). 6.As we learn more, we become …(skilful).

Exercise 13.Use the verb in brackets in the proper form.

1. He (to say) he (to earn) high profits. 2. They often (to buy) products that they (to need) in this supermarket. 3. She (to be) a successful entrepreneur. 4. We often (to receive) letters from our friend who (to live) in Glasgow. 5. Each factor of production (to have) a particular function. 6. She (not to use) computer very often. 7. Where you (to come from)? 8. He (not to understand) the concept of entrepreneurship. 9. What time you (to start) work ?

Exercise 14. Use these sentences to make questions. Begin with the word(s) in brackets.

1. She often visits the nearest supermarket (How often?) 2. Jane teaches economics (Where?) 3. People make mistakes (Why?) 4. She comes from Scotland (Where?) 5. He watches programmes on economy (When?) 6. He gets up in the morning (What time/usually?) 7. I write to my parents (How often?) 8. Entrepreneurs receive rewards for their efforts (Who?)

Exercise 15.Read the text and mark sentences with passive forms. In what cases is the doer of the action mentioned/omitted?

Exercise 16. Make passive transformations according to the model.

Model: Suppliers provide products. - Products are provided by suppliers.

1. The government allocates resources. 2. People create capital. 3. Prices motivate production. 4. The interaction of demand and supply determines prices. 5. Workers receive wages twice a month. 6. They sell product at low price. 7. Business people often use the term ‘capital’. 8. Every society addresses the main economic problems. 9. The owner of the land receives rent. 10. Economics studies demand, supply and interrelations between them.

Exercise 17. Choose the proper form of the verb in brackets.

1. We often (divide/are divided) markets into two groups: goods and services. 2. Goods and services that (buy/are bought) in the market (call/are called) products. 3. Capital (uses/is used) to buy productive resources. 4. Natural resources (include/are included) land, water, mineral resources and climate.

Exercise 18. Make up questions to the words underlined.

1. Change in price is represented graphically. 2. Markets are usually classified into two categories. 3. Entrepreneurs’ risks are not always rewarded.

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