Vocabulary list

1. raw materials – сырье

2. labour – труд, работа

3. to utilize – использовать

4. revenue – доход (годовой, особенно государственный)

5. transaction – сделка

syn. deal

6. market economy – рыночная экономика

7. to act on somebody’s behalf – действовать от лица и по поручению кого-либо

8. supply – предложение, снабжение
v. to supply somebody with something

9. demand – спрос, требование

10. demand for something – спрос на что-либо

11. on demand – по требованию

12. to exceed – превышать

13. input – вложение

14. to guide – направлять, определять

15. output – выпуск, продукция

16. to govern – управлять, регулировать

17. preference – предпочтение

18. production costs – издержки производства

19. to determine – определять

20. opportunity costs – альтернативные издержки

21. to assess smth – оценить, подсчитать

n. assessment

22. in monetary terms – в денежном выражении

23. syn. in terms of money

Notes

1. the needy – нуждающиеся

2. given the scarcity of resources – с учетом недостатка ресурсов

3. … fiscal and monetary policy being the major facts – … причем бюджетно-налоговая и кредитно-денежная политика являются основными факторами

4. an opportunity forgone – упущенная возможность

5. interaction – взаимодействие

Ex 1. Suggest the Russian equivalents:

scarcity of resources; the rational solution to the problem; equitable distribution of revenues; a set of arrangements; at each unit price of the good; the compositions of output; the most valuable forgone alternative; mutually excluded; to be known with certainty assessed in monetary terms.

Ex 2. Fill in the gaps with the words and expressions from the text.

1. Any economic system is trying to find most …… and …… way of …… for the production of goods and services.

2. One of the main laws of the market is the ……

3. Supply is the …… between the price of a good and the quantity …… for sale from suppliers.

4. In free markets, prices direct …… of firms that make the most …… use of them.

5. The price …… also guides the decisions of producers concerning the …… of their ……

6. In economics, opportunity cost, or ……, is the cost of something in terms of an …….

7. Opportunity cost is not the sum of the ……, but rather of …… of them.

Ex 3. Find in the text the English equivalents for the following:

сырье; трудовые ресурсы; использование ресурсов; справедливое распределение доходов; свободное предпринимательство; бесчисленный; действующий от чьего-либо имени; по цене за единицу продукции; предложение превышает спрос; управлять процессом распределения; выгоды, которые могли быть получены; скрытые издержки; оцененный в денежном эквиваленте; иметь ценность для кого-либо.

Ex 4. Match each term with the appropriate explanation.

market, labour resources, supply, demand, cost

1. The amount of a commodity that the public are ready to buy at a certain price.

2. The amount of an economic good that will be offered for a sale in the market at a certain price and time.

3. The mechanism which allows individuals and organizations to trade with each other.

4. The physical and mental talents that people can make available for production.

5. The real effort and sacrifice needed to produce goods and services.

Ex 5. Answer the questions and do the assignments.

1. How can economic resources be classified?

2. What is the most efficient economic system?

3. How does the market operate?

4. What is the price determined by?

5. What role does the price mechanism play in free-market economy?

6. What does the allocation of resources reflect?

7. What does the law of supply and demand say?

8. What stands for the notion “opportunity costs”? Is it necessary assessed in monetary terms? Give examples.

Ex 6. Find in the text the words and phrases that refer to the following notions and comment on them:

1) scarcity of resources

2) the law of supply and demand

3) the market mechanism

4) an opportunity forgone

5) hidden costs (losses)

Ex 7. Comment on the statements.

1. The higher the price at which the good can be sold, the more of it producers will supply.

2. Opportunity cost need not be assessed in monetary terms.

3. Most opportunities are difficult to compare.

Text B

There are a number of ways in which a government can organize its economy and the type of system chosen is critical in shaping environment in which businesses operate.

An economic system is quite simply the way in which a country uses its available resources (land, workers, natural resources, machinery etc.) to satisfy the demands of its inhabitants for goods and services. The more goods and services that can be produced from these limited resources, the higher the standard of living enjoyed by the country’s citizens.

Planned Economies

Planned economies are sometimes called “command economies” because the state commands the use of resources (such as labour and factories) that are used to produce goods and services as it owns factories, land and natural resources. Planned economies are economies with a large amount of central planning and direction, when the government takes all the decisions, and decides on production and consumption. Planning of this kind is obviously very difficult, very complicated to do, and the result is that there is no society, which is completely a command economy. The actual system employed varies from state to state, but command or planned economies have a number of common features.

Firstly, the state decides precisely what the nation is to produce. It usually plans five years ahead. It is the intention of the planners that there should be enough goods and services for all.

Secondly, industries are asked to comply with these plans and each industry and factory is set a production target to meet. If each factory or farm meets its target, then the state will meet its targets as set out in the five-year plans. You could think of the factory and farm targets to be objectives which, if met, allow the nation’s overall aim to be reached.

A planned economy is simple to understand but not simple to operate. It does, however, have a number of advantages:

1. Everyone in society receives enough goods and services to enjoy a basic standard of living.

2. Nations do not waste resources for duplication of production.

3. The state can use its control of the economy to divert resources to wherever it wants. As a result, it can ensure that everyone receives a good education, proper health care or that transport is available.

Several disadvantages also exist. It is these disadvantages that have led to many nations abandoning planned economies over recent years:

1. There is no incentive for individuals to work hard in planned economies.

2. Any profits that are made are paid to the government.

3. Citizens cannot start their own businesses and so new ideas rarely come forward.

4. As a result, industries in planned economies can be very inefficient.

A major problem faced by command economies is that of deciding what to produce. Command economies tend to be slow when responding to changes in people’s tastes and fashions. Planners are likely to underproduce some items as they cannot predict changes in demand. Equally, some products, which consumers regard as obsolete and unattractive, may be overproduced. Planners are afraid to produce goods and services unless they are sure substantial amounts will be purchased. This leads to delays and queues for some products.

Market Economies

The best examples of this type of economy are to be found 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 businesses 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 ownership of the means of production and 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 favored. Firms producing these goods will make more profits and this will persuade more firms to produce these particular goods rather than less favored 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 profits and produce the new fashionable and favorable products.

Advantages:

1. The economy adjusts automatically to meet changing demands.

2. No planners have to be employed, which allows more resources to be available for production.

3. Firms tend to be highly competitive in such an environment.

4. 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 possible.

5. In a free market individuals are free to pursue their interests. They can become millionaires, for example. Suppose you invent a new kind of a 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.

Problems:

1. Some goods would be underpurchased if the government did not provide free or subsidizes supplies. Examples of this type of goods and service are health and education.

2. There are other goods and services, such as defense and policing, that are impossible to supply individually in response to consumer spending. Once defense or a police force is supplied to a country the 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 well 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.

Vocabulary list

1. a directive – директива

2. central planning and direction – центральное планирование и руководство

3. to comply with – подчиняться, соответствовать
in compliance with – в соответствии с

4. a production target to meet – производственная задача, которую надо выполнить
v. to meet (the target, the challenge, the expectations)

5. to overproduce – перепроизводить
n. overproduction

6. to intervene – вмешиваться
n. intervention

7. private ownership – частная собственность

8. public property– общественная собственность

syn. common ownership

9. personal property – личная собственность

10. state-owned property – государственная собственность

Notes

1. an overall aim – общая цель

2. to enjoy a basic standard of living – иметь средний уровень жизни

3. to duplicate production – дублировать производство

4. to divert - отвлекать

5. obsolete – устарелый, вышедший из употребления

6. delays and queues – перебои с товарами и очереди

7. private supplies of capital – частный капитал

8. surplus income available for investment in new business activities – дополнительный доход (излишек дохода), который можно вложить (инвестировать) в новое дело (бизнес)

9. to pursue one’s own interests – преследовать свои интересы

10. to move the production possibility frontier outwards – продвинуть вперед предел производственных возможностей

11. to provide free or subsidized supplies – обеспечить бесплатное или субсидированное предоставление (товаров, услуг)

12. a cornerstone – краеугольный камень

13. to alter swiftly – быстро меняться

Ex 1. Suggest the Russian equivalents:

each factory is set a production target to meet; to divert resources to wherever it wants; new ideas rarely come forward; tend to be slow when responding to changes; new advanced products; products which are favored; they try to make the largest profits possible; provide free or subsidized 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.

Ex 2. Fill in the gaps with the words and expressions from the text.

1. The type of system chosen is …… in ……, in which businesses operate.

2. An economic system is the way in which a country uses its …… to satisfy the demands of …… for goods and services.

3. It is …… that there should be enough goods and services for all.

4. Industries are asked…… these plans and each industry and factory is set ……

5. The state can use its control of the economy …… to wherever it wants.

6. It is ……that have led to many nations …… planned economies over recent years.

7. There is no…… for individuals to work hard in planned economies.

8. Command economies tend to …… when …… to changes in people's tastes and fashions.

9. Some ……and unattractive products may be……

10. The system is based on …… with ……of ……

11. In a market economy it is ……who decide what is to be produced.

12. The economy …… automatically to meet changing demands.

13. …… of the market system is that production …… to meet changing demands.

Ex 3. Find in the text the English equivalents for the following:

имеющиеся в распоряжении ресурсы; управлять использованием ресурсов; управление экономикой; отказываться от плановой экономики; иметь высокий жизненный уровень; иметь общие черты; подчиняться 5-летнему плану; значительное количество; ставить производственные задачи; полученная прибыль; стимул к эффективной работе; перебои и очереди; реагировать на изменения спроса; предсказывать изменения спроса; основная проблема, стоящая перед…; процветание нации; широкомасштабное вмешательство правительства; принимать законы; быстро меняться; конкурирующие фирмы; автоматически изменяться (приспосабливаться); быть конкурентоспособным; частные фирмы; фирмы, принадлежащие государству и управляемые им; краеугольный камень; иметь серьезные последствия для...; трудоемкое производство; сокращать производство; быть уверенным в...; не хватает уверенности в...; дорого платить за что-либо.

Ex 4. Match each term with the appropriate explanation.

a market economy, rival firms, consumers, an economic system,

planned economies

1. 1. The way in which a country uses its available resources to satisfy the demands of its inhabitants for goods and services. 2. 2. Economies with a large amount of central planning and direction, when the government takes all economic decisions. 3. 3. The system based on private enterprise with private ownership of the means of production and private supplies of capital. 4. 4. Companies operating in a certain sector and providing the same goods. 5. 5. The people who decide what is to be produced in a market economy.

Ex 5. Answer the questions and do the assignments.

1. What is an economic system?

2. What does a standard of living depend on?

3. What is a planned economy? What are its main features?

4. Give the advantages of a planned economy.

5. What causes delays and queues for some products?

6. What is a market economy?

7. What’s the main difference between a market economy and a planned economy?

8. Do changing demands affect production? In what way?

9. What is the mechanism of producing goods and services in a market economy?

10. Give the advantages of a market economy.

Ex 6. Read the following text and do the assignments after it.

Mixed Economy

Most economists would say that there are no examples in the world today of a completely free market or a 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 some free enterprise.

Economies 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 state 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 manufacturers.

These state sector industries use money that the government collects in taxes. Often they do not need to compete with other companies because no other company is allowed to provide the same product or service. However, many countries have recently started a process called deregulation.

Deregulation means reorganization of the economic structure within which private businesses are allowed 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. For 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.

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 a concept according to which 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 …… on 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.

Read the text again and answer the questions, choosing the best variant.

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 in 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.

c. 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.

b. Deregulation of hospitals and schools.

c. 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.

Ex 7.Comment on the following statements:

1. The type of the chosen system is critical in shaping environment in which businesses operate.

2. A cornerstone of the market system is that production alters swiftly to meet changing demands.

3. Many economists would argue that the mixed economy is the best system for consumers.

Ex 8. Increase your vocabulary.

A. Study the word combinations with the word “market”. Use them in the sentences of your own.

- active market – активный рынок

- domestic market – внутренний рынок

- consumer market – потребительский рынок

- wholesale market – оптовый рынок

- a share of the market – доля рынка

- on (in, at) the market – на рынке

- to be in the market (for) – намереваться купить

- to meet with a ready market – находить быстрый сбыт

- marketable – годный для продажи, ликвидный

Other adjectives: brisk, boom (advancing), flat, foreign, competitive, cash, internal, international, money (monetary), saturated, profitable, sensitive, strong, volatile.

Verbs: to affect, to corner, to create, to develop, to flood, to rule, to gain (get) access to, to study.

B. Translate into English.

1. Наша компания намеревается купить большую партию товаров.

2. Мировой кризис отрицательно повлиял на внутренний рынок этой страны.

3. Потребительский рынок переполнен товарами.

4. Рынок сейчас неустойчив, поэтому лучше не рисковать своим капиталом.

5. Чтобы получить доступ на мировые рынки, компания должна быть конкурентоспособной.

6. Когда рынок неактивен, нет смысла надеяться на получение быстрой прибыли.

7. Эта компания уже 10 лет на рынке. И ее доля на рынке постоянно увеличивается.

8. Нам необходимо изучить рынок, прежде чем открывать новую фирму.

9. Мы должны изменить нашу ценовую политику в соответствии с рыночным курсом.

10. Благодаря отличному качеству продукция этой компании нашла быстрый сбыт на рынке.

11. Производители наводнили рынок дешевыми товарами низкого качества.

12. Эти товары вполне ликвидны. Вне всякого сомнения, они будут пользоваться спросом.

Writing

Task I. Fill in the table comparing different types of economies.

Type	Major Features	Advantages	Disadvantages	Examples
Planned
Market
Mixed

Task II. Write a summary and a Gist of Texts A,B and Market Economy.

Task III. Write an essay comparing the planned economy with the mixed economy. Consider the advantages and disadvantages of each economic system. Decide which is best in your opinion.

Use these words and phrases to organize your ideas: despite this, nevertheless, consequently, in contrast, similarly, in addition to, therefore, thus.

Speaking

Task I. Comment on the table Task I (Writing).

Task II. Make a presentation on the economic system of the chosen country. Use visual aids to make it more interesting.

Task III. Act as an interpreter for parts A and B.

1.Мы рады приветствовать профессора Бредфорда, доктора экономики из Лондонского университета. Профессор любезно согласился принять участие в нашей дискуссии, посвященной таким понятиям, как «рынок», «рыночная экономика», «плановая экономика». Итак, профессор, давайте начнем с «рынка». Что экономисты вкладывают в это понятие? 2.В мире существуют различные экономические системы. Многие экономисты утверждают, что наиболее эффективной является рыночная экономика. А как же в рамках этой системы решаются основные вопросы экономики? 3.Давайте поговорим о плановой экономике. Какие общие черты отличают страны с плановой, или командной, экономикой? 4.Однако большинство экономистов все же признают, что не существует такой экономики, которая была бы полностью плановой или полностью рыночной. В той или иной степени черты рыночной экономики присутствуют даже в тех странах, где в экономике преобладает государственный сектор. Каково ваше мнение? 5.Благодарим вас, профессор, за интересную беседу и надеемся на дальнейшее сотрудничество.

Well, I’m really glad… Well, let me start with… As a matter of fact…     In this respect… I can’t but mention that…   There are some points that are worth focusing on …     I can’t but agree with… There is no denying the fact that…   Oh, it was real pleasure taking part in this discussion… I hope, I’ve managed to give you a clear picture of…

Task IV. Hold a Round-Table Talk discussing advantages and disadvantages of different economic systems.

Part 2

Ex 1. Read the passage below and match each paragraph with the appropriate heading.

a. How can I be sure I’m making the right choice?

b. Which type of study would suit me best?

c. How do I choose a course?

d. How do I know if it’s a good course?

e. What am I going to do after the course?

f. Qualifications – why do I need them?

g. What about my personal circumstances?

h. What type of course should I do?

How to Choose a University Course

1) ______

You’ve decided you want to do a course. Whether you would like to make a career, to find a good job or simply to learn something new, it’s a good idea to think carefully first. Here’s a guide to help you.

2)______

Qualifications prove you’ve acquired knowledge or developed skills. For some careers like medicine and law, it’s essential you have specific qualifications. For others, such as journalism, it helps to have a particular qualification.

Most universities set entry requirements for degree courses. Mature entrants don’t always need formal qualifications, but need evidence of recent study, relevant work experience or professional qualifications. Professional bodies may grant you membership if you have certain qualifications. It’s not always essential to have a qualification. Working knowledge, such as being able to use computer software, can be just as important.

3)______

Your motives will help you choose the best course for your aims and goals. If you are career-driven, you’ll need a course relevant to the profession you’ve chosen. If you are interested in self-development and meeting people, you should find out who else will be on the course. There are work-related (vocational) and academic courses. Further education colleges offer academic courses and work-related courses. Universities offer higher education qualifications, such as academic first degrees, and higher degrees, and the more vocational diplomas.

For career in plumbing, for instance, a vocational course is essential. For teaching you need a degree. However, for many jobs, you have a choice between academic and vocational courses. A vocational course is better if you like doing things and learning practical skills. You might prefer an academic course if you like researching, analyzing and presenting arguments.

4)______

Do you prefer on-the-job training – or do you prefer to research and gather facts? Do you like working in a group covering the same topics and working towards the same goal? If you prefer to work on your own, at your own pace, an open or distance learning course might suit you. You study from home, with the help of tuition packs, computers and tutor support via telephone or e-mail. You can speed through the course or take your time. But for this you do need self-discipline and motivation.

5)______

You might also prefer open or distance learning if:

· you're working and aren't sure how much time a week you can commit to studies;

· you work irregular hours;

· you're at home for some reasons.

Many colleges and training centers now offer flexible open-learning courses, where you can study at your own pace.

6)______

You've decided which subject and type of course you want, and how to study it. You now need to choose between different course titles and providers. There are many courses and they are not of equal value. The only way to assess the quality and value of a course is by research. Read the prospectus (course guide) carefully and note if a course is accredited or validated by a recognized body (this might be an awarding body or a professional body.) This can add extra weight to your qualification.

Don't take everything you read at face value; check out the facts about each course yourself. Ask the course tutor as many questions as you want.

7)______

Be clear of your goal. If you've decided on a particular job, get an idea of what the job's about and if you'll like it. Read careers information, buy trade magazines, and speak to people currently working in the job. This research is well worth it. It's better to take your time rather than doing a course that leads to a job you might not really want. You'll ensure that you don't waste any time or money.

8)______

Plan for when you finish. If you're aiming for a particular job, do voluntary work while studying. If you're doing a language course and want to be a journalist, you could write for the student newspaper or work on the radio. If you want to specialize, or enter your chosen field at a higher level, you could do a more advanced course after completing your first course.

Ex 2. Complete each sentence with the correct ending A-F from the box below.

Write the correct letter A-F next to questions 1-5

1. Student who want to do law ___

2. Mature students ___

3. Students who are motivated by self-development ___

4. Students who have young children ___

5. Students who choose a career in journalism ___

A. will not need any experience to start a course

B. will benefit from open-learning courses

C. could get relevant work experience while they study

D. can be accepted onto a course without qualifications

E. should enquire about the other students on their course

F. must have certain qualifications

Ex 3. Classify the following statements as applying to

a. academic courses

b. vocational courses

c. both academic and vocational courses

1. These courses are available through further education colleges.

2. You must take this kind of course if you wish to have a career in plumbing.

3. You will learn research methods on this type of course.

4. You will learn practical skills on this course.

Ex 4. Speak about yourself and answer the questions you have put before each paragraph.

Ex 5. Role-play: hold a TV Talk Show on the problem of choosing a university course.

Unit IV

Part 1

Competition

competition, monopoly, oligopoly, perfect competition, product differentiation, incentive

Text A

Competition is the rivalry of two or more parties over something. Competition occurs naturally between living organisms which coexist in an environment with limited resources. For example, animals compete over water supplies, food, and mates. In addition, humans compete for recognition, wealth and entertainment.

Competition can be remote, as in a free throw contest, or antagonistic, as in a standard basketball game. These contests are similar, but in the first one players are isolated from each other, while in the second one they are able to interfere with the performance of their competitors.

Competition gives incentives for self-improvement. If two watchmakers are competing for business, they will lower their prices and improve their products to increase their sales. If birds compete for a limited water supply during a drought, the more suited birds will survive to reproduce and improve the population.

Competition is another important force of the market. On the one hand, it protects the customers — they have the right of choice and they benefit from the fact that competition keeps prices close to costs; on the other hand, it makes producers and suppliers of scarce resources utilize them economically, using most sophisticated technologies.

All businesses produce goods and services and seek profits. They all compete with each other for inputs of labour, capital and natural resources, including foreign partners.

Seen as the pillar of capitalism in that it may stimulate innovation, encourage efficiency, or drive down prices, competition is touted as the foundation upon which capitalism is justified. According to microeconomic theory, no system of resource allocation is more efficient than pure competition. Competition, according to the theory, causes commercial firms to develop new products, services, and technologies. This gives consumers greater selection and better products. The greater selection typically causes lower prices for the products compared to what the price would be if there was no competition (monopoly) or little competition (oligopoly).

However, competition may also lead to wasted (duplicated) effort and to increased costs (and prices) in some circumstances. For example, the intense competition for the small number of top jobs in music and movie acting leads many aspiring musicians and actors to make substantial investments in training that are not recouped, because only a fraction become successful. Similarly, the psychological effects of competition may result in harm to those involved.

Three levels of economic competition have been classified:

1. The most narrow form is direct competition (also called category competition or brand competition), where products that perform the same function compete against each other. For example, a brand of pick-up trucks competes with several different brands of pick-up trucks. Sometimes two companies are rivals and one adds new products to their line so that each company distributes the same thing and they compete.

2. The next form is substitute or indirect competition, where products that are close substitutes for one another compete. For example, butter competes with margarine, mayonnaise, and other various sauces and spreads.

3. The broadest form of competition is typically called budget competition. Included in this category is anything that the consumer might want to spend their available money on. For example, a family that has $20,000 available may choose to spend it on many different items, which can all be seen as competing with each other for the family's available money.

Competition does not necessarily have to be between companies. For example, business writers sometimes refer to " internal competition ". This is competition within companies. The idea was first introduced by Alfred Sloan at General Motors in the 1920s. Sloan deliberately created areas of overlap between divisions of the company so that each division would be competing with the other divisions. For example, the Chevy division would compete with the Pontiac division for some market segments. Also, in 1931, Procter & Gamble initiated a deliberate system of internal brand versus brand rivalry. The company was organized around different brands, with each brand allocated resources, including a dedicated group of employees willing to champion the brand. Each brand manager was given responsibility for the success or failure of the brand and was compensated accordingly. This form of competition thus pitted a brand against another brand. Finally, most businesses also encourage competition between individual employees. An example of this is a contest between sales representatives. The sales representative with the highest sales (or the best improvement in sales) over a period of time would gain benefits from the employer.

It should also be noted that in most countries competition often is subject to legal restrictions. For instance, competition may be legally prohibited as in the case with a government monopoly or a government-granted monopoly. Tariffs, subsidies or other protectionist measures may also be instituted by government in order to prevent or reduce competition. Depending on the respective economic policy, the pure competition is to a greater or lesser extent regulated by competition policy and competition law.

Competition between countries is quite subtle to detect, but is quite evident in the world economy, where countries like the US, Japan, the European Union and the East Asian Tigers each try to outdo the other in the quest for economic supremacy in the global market.

A monopoly (from Greek mono, alone or single + polo, to sell) is a persistent situation where there is only one provider of a product or service in a particular market. Monopolies are characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods. A government-granted monopoly or legal monopoly is sanctioned by the state, often to provide an incentive to invest in a risky venture. The government may also reserve the venture for itself, thus forming a government monopoly.

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