MARKET ECONOMICS

The best examples of this type of economy are to be founded in small South-East Asian states like Hong Kong and Singapore, though even they are not pure examples of market economies. Even they contain some business owned and run by the state.

In a true market economy the government plays no role in the management of the economy, the government does not intervene in it. The system is based on private enterprise with private supplies of capital, which can be defined as surplus income available for investment in new business activities. Workers are paid wages by employers according to how skilled they are and how many firms wish to employ them. They spend their wages on the products and services they need. Consumers are willing to spend more on products and services, which are favoured. Firms producing these goods will make more profit and this will persuade more firms to produce these particular goods rather than less favoured ones.

Thus, we can see that in a market economy it is consumers who decide what is to be produced. Consumers will be willing to pay high prices for products they particularly desire. Firms which are privately owned see the opportunity of increased profits and produce the new fashionable and favoured products.

Such a system is, at first view, very attractive. The economy adjusts automatically to meet changing demands. No planners have to be employed which allows more resources to be available for production. Firms tend to be highly competitive in such an environment. New advanced products and low prices are good ways to increase sales and profits. Since all firms are privately owned they try to make the largest profits possible. In a free market individual people are free to pursue their own interests. They can become millionaires, for example. Suppose you invent a new kind of car. You want to make money out of it in your own interests. But when you have that car produced, you are in fact moving the production possibility frontier outwards. You actually make the society better-off by creating new jobs and opportunities, even though you become a millionaire in the process and you do it without any government help or intervention.

Not surprisingly there are also problems. Some goods would be underpurchased if the government did not provide free or subsidised supplies. Examples of this type goods and service are health and education. There are other goods and services such as defence and policing, that are impossible to supply individually in response to consumer spending. Once defence or police force is supplied to a country then everyone in this country benefits.

A cornerstone of the market system is that production alters swiftly to meet changing demands. These swift changes can, however, have serious consequences. Imagine a firm which switches from labour-intensive production to one where new technology is employed in the factory. The resulting unemployment could lead to social as economic problems.

In a market economy there might be minimal control on working conditions and safety standards concerning products and services.

It is necessary to have large - scale government intervention to pass laws to protect consumers and workers.

Some firms produce goods and then advertise heavily to gain sufficient sales. Besides wasting resources on advertising, firms may also duplicate one another’s services. Rival firms, providing rail services, for example, could mean that two or more systems of rail are laid.

Finally, firms have to have confidence in future sales if they are to produce new goods and services. At certain times they tend to lack confidence and cut back on production and the development of new ideas. This decision when taken by many firms, can lead to a recession. A recession means less spending, fewer jobs and a decline in the prosperity of the nation.

NOTES:

to own and run – владеть и управлять бизнесом;

to manage business -/-/-

to operate -/-/-

to intervene - вмешиваться;

private enterprise – частное предприятие;

entrepreneurship -/-/-

private ownership of the mean of production – частная собственность на средства

производства;

private property - /-/-

public property – общественная собственность;

common ownership - / -/-

personal property - личная собственность;

state-owned property - государственная собственность;

state ownership - /-/-

private supplies of capital - частный капитал;

surplus income available for investment in new business - дополнительный доход (излишек

дохода), который можно вложить (инвестировать) в новое дело (бизнес);

to employ - использовать, предоставлять работу, нанимать;

employer – работодатель;

employee – служащий;

employment – занятость;

unemployment – безработица;

to persuade – убеждать;

at first view - на первый взгляд;

at first sight - /-/-

to adjust automtically - автоматически приспосабливаться, приводиться в соответствие;

competitive – конкурентноспособный;

to make the largest profits possible - получить наибольшую возможную прибыль;

to pursue one’s own interests - преследовать свои интересы;

to make money out of it - заработать деньги на этом;

to move the production possibility frontier outwards – продвинуть вперед предел

производственных возможностей;

to make the society better off - сделать общество более состоятельным;

to create new jobs and opportunities - создать новые рабочие места, новые возможности;

to underpurchase - недостаточно раскупать;

to overpurchase - / -/ -

to provide free or subsidised supplies - обеспечить бесплатное или субсидированное,

(дотированное) предоставление (товаров или услуг);

in response to = in answer to - в ответе на;

a cornerstone - краеугольный камень;

to alter swiftly - быстро меняться;

consequences – последствия;

labour-intensive production - трудоемкое производство;

to pass laws - принимать законы;

to gain sufficient sales - добиться достаточного объема продаж;

rival firms - фирмы-конкуренты, соперники;

to have confidence - иметь уверенность;

to lack confidence - не хватать уверенности;

COMPREHENSION QUESTIONS:

1. What’s a market economy?
2. What’s the main difference between a market economy and a planned economy?
3. Do changing demands affect production? In what way?
4. What’s the mechanism of producing goods and services in a market economy?
5. Give the advantages of a market economy.
6. What are the disadvantages of a market economy?

VOCABULARY EXERCISES:

Exercise 1. Suggest the Russian equivalents:

New advanced products; products which are favoured; they try to make the largest profits possible; provide free or subsidised supplies; produce goods and then advertise heavily; a firm which switches from labour-intensive production to a new one; a decline in the prosperity of the nation.

Exercise 2. Replace the underlined words by synonyms:

Business owned and run by the state; products and services, which are favoured; at first view; production alters swiftly.

Exercise 3. Fill in the gaps with the words and expression from the text:

1. Small South-East Asian states like Hong Kong and Singapore contain some business ___ by the state.
2. The system is based on ___ with ___ of ___.
3. Private supplies of capital can be defined as ___ available for ___ in ___.
4. Consumer are willing to spend more on products and services which ___.
5. More profits will ___ more firms to produce those particular goods that are favoured.
6. In a market economy it is ___ who decide what is to be produced.
7. The economy ___ automatically to meet changing demands.
8. In a free market individual people are free ___.
9. Some goods would be ___ if the government did not provide ___ supplies.
10. Some other goods and services, such as defence and policing, are impossible to ___ in response to consumer spending.
11. ___ of the market system is that production ___ to meet changing demands.
12. If a firm switches from ___ to one where new technology ___ in the factory, it can lead to ___ and ___ problems.
13. It is necessary to have ___ to pass laws ___ consumers and workers.
14. Firms have ___ in future sales if they are to produce new goods and service.
15. A recession means ___ spending, ___ jobs and ___ of the nation.

Exercise 4. Find in the text English equivalents for the following:

Управление экономикой; процветание нации; широкомасштабное вмешательство правительства; принимать законы; быстро меняться; конкурирующие фирмы; автоматически изменяться (приспосабливаться); быть конкурентноспособным; частные фирмы; фирмы, принадлежащие государству и управляемые им; краеугольный камень; иметь серьезные последствия для; трудоемкое произвоство; сокращать производство; быть уверенным в; не хватает уверенности в; дорого платить за что-либо.

Exercise 5. Translate the sentences using all the active possible:

1) В рыночной экономике невелика или очень мала необходимость в планировании, контроле и широкомасштабном вмешательстве со стороны государства (правительства) в экономический процесс.

2) В условиях рыночной экономики изменения потребительского спроса играют заметную роль в формировании политики фирм.

3) Чтобы быть конкурентоспособным и увеличивать доходы, фирмы должны постоянно изучать спрос и менять свою деятельность в ответ на его изменения.

4) Чем более выгодный товар, тем более высокую цену надо за него платить.

5) Некоторые виды услуг, например, здравоохранение и образование, не могут быть полностью обеспечены только частными фирмами.

6) Рыночная экономика характеризуется частной собственностью на ресурсы и использованием системы рынков и цен для управления экономической деятельностью.

7) В такой системе каждый ее участник волен преследовать свои собственные интересы; каждая экономическая единица стремится получить наибольший возможный доход на основе индивидуального принятия решений.

Exercise 6. Divide the text into logical parts and make up a plan of the text.

Exercise 7. Retell the text in short.

Exercise 8. Compare market and planned economies.

Exercise 9. Make up bits of conversation using the following formulas expressing concluding a report.

1. Based on this data...

2. In view of the facts mentioned above

3. In conclusion, therefore...

4. I (we) suggest that...

- основываясь на этих данных...

- ввиду упомянутых выше фактов...

- в заключение, следовательно...

- я (мы) предлагаем...

Text B

Exercise 1. Read the text without using a dictionary and answer to the following questions.

a) What is Mr. V. Claus?

b) How had the radical reform of property relations been realized?

c) What were officials of Prague irritated by?

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