Levels a price

1. Property owners know they will make a profit if they can produce goods and services that buyers want, at ________ they are willing to pay.

2. Government in America functions at three _______.

3. In our economic lives we spend ________ to buy the things we want.

4. Price stability refers to time during which ________ remain constant.

5. As a national goal, economic efficiency refers to the entire economy's ability to get the most out of its limited ________.

6. _________ are people who use goods and services to satisfy their wants.

7. The price system provides _________ to the fundamental questions of what goods and services will be produced, how they will be produced, and who will receive them.

IV. Read and translate the text:

The «pillars» of economic system are private property, the price system and competition.

The right to private property gives the owners of natural resources and capital the incentive to use their assets as they can. The price system provides the answers to the fundamental questions of: «What goods and services will be produced?»; «How they will be produced?» and «Who will receive them?». Competition refers to the rivalry among buyers and among sellers.

Economic incentives influence our decisions about what and where to buy. The desire to achieve the greatest profit for our efforts is the principal economic incentive in the American and other market economies. Economists refer to this as economic self-interest.

Profits are what remain after the costs of production have been deducted from sales. The quest for profits, or the profit motive, as it is often called, is the force that drives our economic system.

People in business buy or sell land or other natural resources if they think they can profit from the transaction. They also put those resources to use in such a way as to make the greatest profit. Profits affect the allocation of labor, influence the allocation of capital resources. Profits drive entrepreneurs to risk capital, hire employees and purchase the things they need to produce goods and services. Profits also provide the incentive to improve products, reduce costs and outsell the competition.

Government in America functions at three levels: federal, state and local.

The government does the following:

- compel people to sell their property for public use through the power of eminent domain;

- decide who may sell electric power in a geographic region;

- control which medicines may be sold commercially;

- license certain businesses (such as banks, barber shops, taxi cabs and restaurants);

- pay dairy farmers for not producing as much milk as they can;

- forbid export of certain machinery to specific foreign countries;

- establish the minimum wages employers must pay;

- issue permits for and inspect construction of homes and buildings.

The following economic responsibilities are best fulfilled by government:

- safeguarding the market system;

- providing public goods and services;

- dealing with externalities;

- assisting those in need;

- helping specific groups;

- stabilizing the economy.

The gross national product, or GNP, is the total value of all the goods and services produced by the American economy in a single year. Government transfer payments, payments like Social Security benefits, pensions, welfare, and interest on government debt represent a significant percentage of GNP.

In order to calculate the GNP, government economists add the amounts that were spent by the three elements of the economy (households, business and government) to purchase the finished products. We can express this mathematically as C + I + G = GNP, where:

C – consumer household spending;

I – investment, or business;

G – government purchases of goods and services.

V. Answer the following questions:

1. What are the «pillars» of economic system?

2. What does the right to private property give the owners of natural resources and capital?

3. How do prices influence American economic system? Give your own examples.

4. What does competition refer to?

5. How do you understand the term «profits».

6. What is the force that drives our economic system?

7. What is the role of profits in the economic system?

8. What economic responsibilities are best fulfilled by government?

9. What is «the gross national product»?

VI. Define the terms:

Competition

Economic self-interest

Profit motive

Private property

GNP

Consumers

Profit

Price system

VII. Translate into English:

1. Приватна власність, цінова система, конкуренція – головні «опори» економічної системи. 2. Цінова система відповідає на такі питання: а) які товари та послуги вироблятимуться? б) як їх вироблятимуть? в) хто їх отримуватиме? 3. Економічні стимули впливають на наше рішення, що і де купити. 4. Бізнесмени купують або продають землю чи інші природні ресурси, якщо сподіваються на прибуток від цієї угоди. 5. Валовий національний продукт – це загальна вартість усіх товарів і послуг, вироблених за один рік. 6. Для того щоб купити щось, треба мати гроші. 7. Споживачі – це люди, які користуються товарами та послугами для задоволення своїх потреб.

VIII. Read and dramatize the following dialogue:

Mary (a student): Would it be troubling you too much, Mr. Brown, if I ask you some questions about economics?

Mr. Brown (an American teacher of economics): Not at all, dear. I'll answer all your questions with great pleasure, but what particulars are you interested in?

M.: I'm mostly interested in everything concerning the American economic system.

Mr. B.: Well, ask your questions and I'll do my best to satisfy you.

M.: Thank you. First of all I should like to know what is Adam Smith and why is he considered «the father of modern economics»?

Mr. B.: Well, you see, 1776 the year that we associate with the signing of the Declaration of Independence, also marked the publication in England of one of the most influential books of our time «The Wealth of Nations» written by Adam Smith. It earned the author the title «The father of economics».

M.: Did he describe the principal elements of the economic system in this book?

Mr. B.: Yes, he did. He differed with the physiocrats who argued that land was the only source of wealth. He also disagreed with the mercantilists who measured t he wealth of a nation by its money supply, and who called for government regulation of the economy in order to promote a «favorable balance of trade».

M.: In Smith's view a nation's wealth was dependent upon production, not agriculture alone, wasn't it?

Mr. B.: Yes, it was. How much it produced, he believed, depended upon how well it combined labor and the other factors of production. The more efficient the combination, the greater the output, and the greater the nation's wealth.

The heart of Smith's economic philosophy was his belief that the economy would work best if left to function on its own without government regulation. In those circumstances, self-interest would lead business firms to produce only those products that consumers wanted and to produce them at the lowest possible cost. They would do this, not as a means of benefiting society, but in an effort to outperform their competitors and gain the greatest profit. But all this self-interest would benefit society as a whole by providing it with more and better goods and services, at the lowest prices.

M.: Now, I know why Adam Smith is considered «the father of economics». I think that the other sections dealing with the factors of production, money and international trade are as meaningful today as when they were first written.

Mr. B.: Yes, of course. Adam Smith gave the best description of the principles upon which our economic systems are based.

IX. Make your own dialogue using the following words, expressions and word-combinations:

the role of government free enterprise

price system the American economic system

private property competition

gross national product

X. Read and change the sentences according to the model:

M о d e l: Adam Smith describes the principal elements of the economic system in his book «The Wealth of Nations».

The principal elements of the economic system are described by Adam Smith in his book «The Wealth of Nations».

1. Everything concerning the American economic system interests me. 2. They consider Adam Smith «the father of modern economics». 3. Economic incentives influence our decisions about what and where to buy. 4. Economic forces affect decisions in the world of business. 5. Prices direct market economies.

XI. Translate into English:

1. Рентою називають ціну за користування землею. 2. Термін «капітал» часто вживається бізнесменами. 3. Економічні системи можуть бути класифіковані як традиційні, загальні та ринкові. 4. Людей, які користуються товарами та послугами для задоволення своїх потреб, називають споживачами. 5. Загальна вартість усіх товарів і послуг за один рік називається валовим національним продуктом.