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Economic Considerations

LESSON 2.The aim of the lesson is to teach you to relate the given information to your practical experience and fill in your experiential and linguistic information gaps. “Economic considerations” will help you broaden your perspective of economics and increase your communicative skills in English.

1. Consider the issues below. After you have reached some conclusions, share your ideas with the whole group.

1) The dictionary defines economics as “the study of the production of wealth and the consumption of goods and services in a society.” List five economic issues relating to production and consumption that your national or local government has to deal with today.

2) John Maynard Keynes, one of the most influential economists of the twentieth century said, “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else.” What do you think Keynes meant by this statement? Do you agree or disagree? Give reasons to support your opinion.

3) Two basic components of an economic system are business enterprise and households. Businesses produce goods and services, households consumethem. Clothes, cars, stereos, books, and other material items are economic goods. They cost money - or have economic value. It takes skill and effort to create goods. People want them, and a limitednumber are available. Therefore, goods are scarceand have a price.

Explain the following phrases using the above passage:

(a) Economics is the study of the allocation of scarce resources.

(b) A person doesn’t have to give up anything to acquire free goods.



3. The challenge of an economic system is to ensure enough production of goods and services for its people and to arrange for the distribution of this production. An economic system faces basic questions in solving these problems:

* What to produce? Should society produce ships and missiles or hospitals and homes? Fewer cars or more trains? Often there are competing goals: people want cars, but they don’t want congested downtowns, traffic deaths and air pollution. Can society provide a car for everyone and clear air at the same time?

* Who will produce? A basic problem of production is to mobilize human energy. Jobs must fit the skill of the work force, and they must be located where the workers are. When these conditions are not met, the result is unemployment.

* How much to produce? The supply of a good or service must match the demand for it. When this match does not occur, either the prices will be driven up (demand is greater than supply) or inventories on producers’ shelves will pile up and workers will be laid off (supply is greater than demand). When the supply and demand are not equal, the result is inflation or recession.

* To whom to distribute the output? What distribution is proper and fair? Should the economic pie of a society be divided evenly? The distribution of output is a very controversial issue.

If the goals are not met, there is often unrest. In a democratic society, where people can vote for change, economic issues are resolved at the polls.

What is your priority list of challenging economic issues? Explain.


4. Before you read the following article, skim through it quickly and underline two sentences that convey the main idea.

Supermarket Economics

Supermarkets offer valuable economic lessons. The modern supermarket illustrates in a small way how the market system operates in the economy as a whole. Each supermarket has tens of thousands of items of various sizes and brands. Store owners and managers compete for the customer’s dollars by trying to offer the best service and the greatest variety of goods possible at prices their customers are willing to pay. The modern supermarket provides everything from basic foods to gourmet items from any place in the world. Customers can shop in the supermarket’s deli or make their own lunch at a soup-and-salad bar. Supermarkets also sell cosmetics, toys, small appliances and even videos of recent movies. They attempt to maintain a bright and cheerful atmosphere that will make shopping pleasant for large numbers of customers.

Information about consumer preferences in this huge mix of products is generated by a simple procedure. Consumers take their selection to the checkout line. Checkout clerks enter information about the sale on the store’s computer by passing the product’s bar code across a scanner.

The store responds to differing consumer preferences for health, economy, convenience, and vanity by stocking the goods consumers prefer. Products that fail to satisfy are replaced by more attractive products. "Winners" are selected and the "losers" gradually lose shelf space. Ultimately producers either improve their products or pass from the scene. The customer is really king. The market registers their preferences and reconciles supply with demand.

Sum up using the following questions as a guide:

*The market generates information about wants and provides incentives to pay attention to customers’ preferences: (a) How does the market generate information about preferences? What are the “incentives” referred to in question 1?

* Why is “self-interest” significant to the operation of a market system?

* The article states that “...losers gradually lose shelf space. Ultimately producers either improve their products or pass from the scene. Who are the “losers”? Explain the meaning of the underlined sentence.

* How large is the share of supermarket economics on our market today? Account briefly and support your analysis by a few examples.


5. Just to stay alive requires a certain amount of food and shelter from harsh weather. For millions of years, people had little more than that. In most of the world today, people still have little more than the essentials with which to survive. They live at bare subsistence level. At the time, some other places in the world today are abundant in consumer goods and services. People do not notice that too often supply shapes demand, and it can be expressed in the following ironic way: the more people are offered, the more they consume.

Express your agreement or disagreement with the following statement:

“People’s wants, or desires, far exceed their needs, or basic requirements.”


6. Explain the following paradoxes and maxims:

(a) “Мне не надо необходимого, но я не могу без лишнего”. (М.Светлов)

(b) “Mummy, why is it so cold at home? - We have no coal to make a fire. We have no money to buy coal: Daddy is out of job. He is unemployed because the coal-mine has been closed down: there is already too much coal in the country.”

(c) "Wealth makes the man." (An ancient Greek saying.)


7. Organizing our thoughts. In pairs, discuss the following questions and report back to the entire group on your major conclusion.

* Why should everyone understand basic economics?

* Economics has been called “the study of scarcity and choice.” How does this relate to your budget for the week, or for the month? How does this relate to our nation’s budget?

* How do different economic systems solve the problem of scarcity? Give specific examples.

LESSON 2 (Supplement)

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