VI. Answer the questions

1. What is economics?

2. What is it based upon?

3. What two things do economists study?

4. What does the economist try to describe?

5. What should the economist’s methods be?

6. What is the science of Economics concerned with?

7. What is an underlying problem of Economics?

8. What does the word ‘macroeconomics’ mean?

9. What are the concerns of a macroeconomist?

10. What is difference between the question asked by macroeconomists and micro economists?

11. What is, according to the text, the important task of macroeconomics?

12. What does macroeconomic analysis attempt to explain?

13. What are the concepts of macroeconomics?

14. What is according to the text microeconomics?

15. What is meant by “economics in the small”?

16. What economic phenomena are of microeconomists’ attention?

17. Where is microeconomic theory used?

18. What does the positive economics deal with?

19. What is the aim of normative economics?

20. What is the difference between positive and normative economics in regard to the role of research?

Литература

Основная: 1, 5, 6.

Дополнительная: 2, 3,4,5.

TOPIC 2.

THE BASIC ECONOMIC PROBLEM

The central problem of economics is to determine the most efficient ways to allocate the factors of production and solve the problem of scarcity created by society’s unlimited wants and limited resources. In doing so, every society must provide answers to the following three questions:

1. What goods and services are to be produced, and in what quantities are they to be produced?

2. How are those goods and services to be produced?

3. Who will receive and consume (get to use) those goods and services?

The solution of these questions depends on the economic system of each particular society.

The economic system determines how the nation's resources of land, labour, machinery and raw materials are allocated and used. The problem of allocating resources is a central theme of economics, because most resources are scarce. The allocation of scarce resources and the distribution of the product of those resources are a major part of the subject matter of economics.

In Western economies many resources are allocated to whoever is willing and able to pay the most for them. The distribution is determined by the amounts of money paid as wages, rent and other forms of income.

A country's economic system is its way of organizing economic activities, including the ways in which people come to specialize in particular tasks they do best. The more goods and services can be produced from limited resources, the higher the standard of living enjoyed by the country’s citizens.

Different economic systems answer the “what”, “how” and “for whom” questions differently. There is a variety of economic systems, which can be divided into three groups:

a) Market or decentralized economic systems.

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.

b) Planned or centralized economic systems, in which economic decisions are taken by government planners.

Planned economies are economies with a large amount of central planning and direction, when the government takes all the decisions, the government decides production and consumption. A planned economy is simple to understand but not simple to operate.

c) Mixed economic systems, in which many economic activities are organized in a decentralized way, but in which the government takes some of the most important economic decisions. In mixed economies some resources are controlled by the government whilst others are used in response to the demands of consumers. In a mixed economy the government and the private sector interact in solving economic problems.

In practice, every economic system is mixed to some extent.

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