Reading 1
Welfare economics
Ik-hind tin- numbers, charts.mil formulas of economies, there are people. This is sometimes easy to forget. Economies isn't only about profits, losses and utility. It's about society. Economic ideas ami theories often seem to 1ч- issues that are-far removed from people's everyday lives. Welfare economics, however, tries to correct this It looks at how economic policies affect society, families and the individual.
t)ne of the biy issues in welfare economies is equity. Equity means fairness, and я;\1/агс
Httmllftn Gal4«lo ((Oaomici U»it IS 51
wnoniists are interested in mcasurinu how lair our economic systems are. ()ue way they do this is to look at how income and wealth are distributed among the population. Weliare economists also investigate the effects of •joveinment polio\ on equity.
(iovernments" main weapon to fight inequity I unfairness) is taxation. Welfare economists try to find out how taxation affects vertical equity and horhiiiiHil equity, which are two ideas that taxation systems can be based on. The idea behind vertical equity is that people with more income will pay more than those with less income. The idea behind horizontal equity is that people with the same income will pay the same amount of tax Ideally, a tax system will have both \ertieal and horizontal equity,
IIowe\er. some economists feel that any kind of taxation on people's earnings is unjust. They believe it is unfair to penalise entrepreneurs anil hard-workers. Why should people who arc less able or less hard-working Ik' supported by others V In this \iew of welfare economies, inequity is a natural feature of every economic system. Trying to create equity, they say. is just a waste of time. Instead, it is better to make economic systems more efficient. Л more efficient economy grows faster and everyone in society benclits.
Welfare economics isn't only about the fairness ot economic systems. It's also about the impact that economic choices have on our lives. Economic transactions often affect other people who are not directly involved in those transactions. Economists call these results externalities. Externalities are sometimes good and sometimes bad for society, lor example, pollution is a Щ native externality of the ear industry. But cars give people better mobility, which is a positive externality of the same industry.
Production is not the only cause of negative externalities for society. Many are due to our use ОГ consumption of goods. People's litter in parks and on beaches is one example: noisy neighbours playing their (ID player loudly is another. These are both examples of externalities causing pollution. However, health problems from smoking and drinking alcohol an- also externalities from economic transactions. These have a cost for individuals, but also for soeietv as a whole.
Щ В Comprehension
Now read the text again and answer these questions in your own words in the space provided below.
According to the text, what do people often forgot about economics?
How do governments try to make the economy fair?
What is the difference between horizontal and vertical equity?
Why do some economists think equity is not important?
What are externalities?
Notes:
Before you listen
Discuss the following with your partner.
-> When externalities are good for society, they are called positive externalities. Can you think of any economic transactions that could have positive externalities?
■ С Listening Щ)
Now listen and tick which transactions in the list are mentioned.
1 buying a new house
2 fixing up an old homo
3 buying books
4 paying for a course at a local coilege
5 joining a gym
6 going on holiday
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-* What do you think your government spends money on?
-* Whore do you imagine most of the government's money goes?
-* Would you say the government spends wisely?
Щ D Vocabulary
Complete each sentence with a word or phrase from the box.
• benefits • charge ■ discourage
■ essential ■ financial ■ harmful
■ income gap ■ luxuries ■ source
■ taxation
4_______________________________________ J
1 If you give someone................... help, you give
them money.
2................... are money that the government
gives to people who need help.
3 If you................... someone from doing
something, you persuade them not to do it.
4................... things are not good for your health.
5 The difference between the highest salaries and
the lowest is called the.....................
I Companies.................... customers for
their service*.
i For most people, the.................... of their income
is paid work.
- Governments get most of their money through
9 Water is................... to life, but it costs
very little.
10 are expensive things that we don't
|
really need.
ВReading 2
Government revenue and spending
In the I'K. the government spends about £500 billion a year. When' does mich a huge amount of money come ггошг l'erhap> more importantly, what does the government spend it onV The money governments have to spend is called revenue. Revenue comes from several sources, including charging for services and borrowing. However, a government's main source of revenue is taxation. There are different kinds of taxes. For example anyone with a regular income has to pay income tax on their earnings. This is a percentage of their income which gives ю the government. Many countries operate a system called pragre&stoe income teat. Under this
system, people with a higher income pay a hither percentage to the government. Another kind of tax is value added lax. This is paid when we buy goods or services which arc not essential or are regarded as luxuries.
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So where does the money go'r Revenue is generally spent on a combination ol public services and somethint; called transfer /тупи lit*. Transfer payments ate benefits that are given to families and individuals in society who need financial support. In Britain, transfer payments make up almost a third of all public spending. These paymente include safety net henejiis such as unemployment benefit and social security benefits for families who do not have enough income to get by.
Most of the list of tin- revenue goes on public goods. These can be divided into two areas: pure public goods and >nixe<l VtibHc goods. Pure public gotnls arc things like street lighting or national
defence. These m* Important for everyone in a
society, but they cannot be supplied by private business To understand why not. let's look at the example of street lighting. Lighting needs to Ik- offered to everyone who uses tin- streets If a private business provided street lighting, they would need to charge for it. But how could they make everyone pay? Non-payers would benefit from (he lighting, too. It would 1ч- impossible (o slop them, This is why a government, and not private businesses, offers street lighting; everyone pays for it through their taxes
Mixed public goods are things which people ought to have because they are beneficial, such as health care and education. Why do many governments fund these things У The reason is that having a healthy, educated population is good for the economy and for SOOiety as a whole. People, especially those on low incomes, may not be able to spend money on these setvices l iovcrnmcnts fund the services so that everyone can afford them, and this encourages people to use them.
E Comprehension
Now read the text again and match each paragraph with the correct heading.
PARAGRAPH 1....................
PARAGRAPH 2....................
PARAGRAPH 3....................
PARAGRAPH 4....................
PARAGRAPH 5...................
The aims of taxation
Services that businesses won't provide С Providing what's good for us
Providing social support
Collecting income
Before you listen
Discuss the following with your partner.
The pio chart below shows how the UK government spends its revenue. Each segment of the pie (A to H) shows a different area of spending. The key shows what these areas are. Some labels are missing. Which of these areas do you think they are?
~* Defence
Education ~* Environment
Health care ~* Transport
■ F Listening Щ)))
Now listen and complete the chart
54 Mabmillin G a 14 • re EronomUt U a 11 10
ЩG Speaking
Discuss these questions with your partner.
In your opinion, what is more important for an economic system - equity or efficiency?
Do you think the tax system in your country is fair? Why / Why not?
Task
Work in groups of four. Each of you has one of the following roles.
Finance Minister - you decide on how government revenue should be spent.
Education Mmister - you want more spending on education.
Talk about:
overcrowded classrooms -» lack of facilities -* teacher training
Environment Minister - you want more spending on roads and public transport.
Talk about:
dangerous roads improving country roads increased underground train system free transport for retired people
Health Mimster - you want more spending on
hospitals and health care.
Talk about:
-* cheaper medicine
waiting lists in hospitals
length of time to get a doctor's appointment -* hospital facilities
Ministers: persuade the Finance Minister to give you more money. Finance Minister: ask questions to decide who needs more money.
Pronunciation guide Issue if 117
Consumption клп v\mp(n Equity 'ckw.'li Externality oksriirwetoti' Beneficial hem fijl/ Percentage p,.sentiiiv' Revenue,'ie\.viiu:
И H Writing
Write the following composition:'What is welfare economics and why is it important?'
First read through the texts again and make notes, then use the outline plan to organise your composition.
Composition
PARAGRAPH 1
Explain what welfare economics studies.
Points to include:
economics is not just numbers, economics with a heart, government policies affect society
Useful words and phrases: everyday lives, equity, externalities
PARAGRAPH 2
Say how economic relationsliips affect the welfare of a society.
Mention these relationships:
Buyers and sellers - how do prices affect people's lives?
Workers and employees - how does work affect people's lives?
Factories and the environment - what is the affect of the economy on our environment?
Useful words and phrases: cost of living, wages, working conditions, damage, pollution
PARAGRAPH 3
Explain how taxation can create equity m the economy.
Points to include:
What is equity?
How can taxation help to create equity? How can a tax system have vertical and horizontal equity?
Useful words and phrases: fairness, unfairness, income, distribute, wealth
PARAGRAPH 4
Sum up by saying why you think welfare economics is important.
Points to include:
Importance of understanding how economics effects our lives.
Can economic policies make our lives better?
Useful words and phrases: to sum up. in my
view, helps us appreciate, impact, improve
Write 200-250 words
MitmilliO 1,. i. 4 с to EtO"v«KI Unit 1С 55
G a way of saving money for when you got old and stop working
things someone owns, but usually things that car. be moved
if you save money in a bank, you get this extra money for keeping it there
movement like a river
important or worth money
I a collection or supply of things kept for later use
part of the value of a company - people buy and sell these
 |
Discuss these questions with your partner.
-> What do you think it means to be wealthy? •* Why are some people wealthier than others?
Q A Vocabulary
Match the words and phrases with the definitions.
valuable invest
pension scheme static
belongings flow
distribution interest savings inequality extent
stocks and shares store
to lend money to a company or bank in order to earn more money
how large or important something is
the way in which a supply of something, like money, is shared among people
money put somewhere for later use. for example in the bank
immobile, not moving
unfairness
ading 1
Wealth, income and inequality
What docs it mean to be liX'ulthy': The answer to this question varies from culture to culture. In the modernised, industrial world that we live in. wealth generally means all the collected Store of valuable things that belong to a person (or family, company or country). Wealth can include money saved in bank accounts, or invested in pension schemes. It can include land, houses or other property and valuable belongings such as works of ait or precious jewels Many people also own stocks ami shares in companies. The various things that make up a person's wealth are often called
56 Miimiln t,i,i<> id h»ii*iii Оки II
Sd wealth is a static thing. The term income, on the other hand, suggests njloic of money. Income is the amount of money that a person (or family or company) receives over a period of time. For most people, this means the salary they get for the work they do. However, there are other sources of income. < hie source is government benefits, such as unemployment benefit or family supj>ort. Another source is rent from projierty and another is interest from savings.
Huge inequalities in wealth owned by individuals exist in many countries. Take the United Kingdom for example. A fifth of all the marketable wealth is owned by just one per cent of the UK's population That one per cent own over S3 55 billion of assets. Figure 1 on page 56 shows how the rest of the United Kingdom's wealth is distributed. As you can see. the richest 50 per cent of the population own over 93 |>er cent of the wealth. In other words, half the population own nearly all the wealth and the other half own only a tiny pereentage. The chart also shows that the richest one per cent of the population own over a fifth of all the country's wealth
barge inequalities also exist in the distribution of income. The extent of these Inequalities can be shown with something called the /,orvns ei/rce. You can see an example in figure 2 Mow. The straight blue line shows perfectly equal distribution of income For example, the bottom 20 per cent earn JO per cent of the total income. The Ivottom 40 per cent earn 40 per cent and so on. This is the ideal situation. The red curve, however, shows the real situation for the United
f |
Kingdom. You can see immediately how far from perfect the distribution is. Half of the population, for example, earn just under a third of the total income. Move horizontally along the population line and you can see that 00 per cent of depopulation take only 70 per cent of the total income. This means that the top ten per cent ol the population earn nearly M) pet cent of the country's total income.
В Comprehension
Now read the text again and match each paragraph with the correct heading.There are two extra headings that you don't need.
PARAGRAPH 1 PARAGRAPH 2 PARAGRAPH 3 PARAGRAPH 4
How governments can create more equality Inequalities in income Inequalities in wealth What income is i What wealth is Why there are inequalities m wealth and income
Before you listen__
Discuss the following with your partner.
Economic inequality also exists on a global scale. Below are some facts about global economic inequality. See if you can guess which figures from tlie box complete the notes.
J
The lowest earning Americans have higher
incomes than (1)........................ of the
worlds population.
The world's richest (2)......................... per cent
earn more than the combined income of the
world's poorest (3)......................... per cent.
The (4)...................... richest people in
T |
the world have incomes that are more than
the combined incomes of the poorest (5)
.................... countries in the world.
С Listening Щ)))
Now listen and check your answers.
HI What does poverty mean? Is mere a way to define it?
-*> How many people in the world do you think live in poverty?
-*> Do you believe people m industrialised countries live in poverty?
D Vocabulary
Complete each sentence with a word or phrase from the box.
absolute * associate ■ average corruption ■ cycle ■ define generation ■ natural disasters shelter ■ trap
We................... high crime rates with poverty
and unemployment.
Having a..................... a roof over your head, is
a basic need of humankind.
How does the dictionary.................... this word?
Hoods, droughts, hurricanes and other
.................. are happening more frequently.
Giving money secretly to judges or politicians so
that they help you is an example of..................
Hunters will sometimes set a...................
instead of using a gun.
Let"s hope the next.................. finally put an
end to hunger and poverty.
The world's water supply is a................... which
involves the sea. rainfall and rivers.
i If somebody lives in................... poverty, that
means they are completely without money to buy basic necessities.
и The................... salary at that company is
very high.
Й Reading 2
Poverty
Without a doubt poverty is a Initio problem in the world today. Figures suggest that three billion people or ball' the world's population live in poverty. However, although we associate powm with developing countries, poverty ofsome kind also exists in industrialised nations. For example, it is now thought that quite possiblj one in every ten Americans lives in poverty. However, poverty means different things to different people. How do
economists define poverty?
' tag measure oi' poverty is absolute poverty.
People live in absolute poverty when they live on or below the poverty line. This is a level of income that is so low that people cannot afford the basic necessities to live, such as food, clothing and shelter. According to the World Hank, these are people who are living on two dollars a day.
However, there arc от- billion people in the world who live on less than one dollar a day. The World Hank defines this as extreme poverty.
Few people in industrialised countries live in absolute poverty, but many live in relative poverty. This measure oi poverty takes into account tile differences thai exist in a population between the rich and the poor. For example, sonic economists say that people who earn less than half the average income live in relative poverty In Britain, this means 14 million people.
Why docs poverty still exist\ There is no single answer to this question. In developing countries, causes oi absolute poverty include natural disasters like droughts and floods, political corruption and war. However, in many eases people and whole populations - are caught in a trap- the poverty trap
People on a low income spend everything they have i4i daily necessities. They save almost nothing. In order to raise themselves out of poverty, they need education. This costs money. Even when governments providt 11ч. schooling, the poor may not send their children because they need them to work These families cannot afford the cost of sending a child to school. Without education, the children cannot find better paid work. In this way. generations of the same family remain poor.
I be same cycle that traps individuals can trap a whole population, Economic growth depends on Investment, Investment money conies from savings. Л nation that has almost no savings cannot yrow economically. This keeps waives low. so again people cannot save and the cj ele continues
^ E Comprehension
Now read the text again and answer the questions.
Poverty is...
or.ly found in developing countries. В mostly in industrialised countries. С found m both developing and industrialised countries.
What number of people live in extreme poverty? A three billion I two billion one billion
How can relative poverty be explained? It takes into account that there are rich people. i It's a kind of poverty found in mdustr... • i countries.
It's a kind of poverty only experienced in Britain.
What cause of poverty is;i< <i mentioned in the text? war
lack of natural resources natural disasters
Why can't people escape from the poverty trap? Because they refuse to send theu children to school.
Because they need any income their children can earn.
Because governments don't provide free oducaaon.
According to the text, why are countries often trapped in a poverty cycle?
i There is no money for investment. There are no schools. The land is not good for growing crops.
Before you listen___
Discuss these questions with your partner.
-* What do you think are the possible results of living in poverty?
-* In what ways does poverty affect people's lives?
F Listening Ц)))
Now listen and complete the notes. Health
Poor people (1).......................... younger.
Life expectancy is (2).......................... years
shorter.
(3)...................... is more common.
Family
Teenage girls are more likely to (4)
(5)...................... are more common.
(6)....................... rates are higher.
Education and training
Children drop out of (Z)...........................
earlier.
No (8)....................... at work.
M ■ 1 rn. ■:. r Guide Iff f tOPOrttrt Unit II 59
G Speaking
Discuss this question with your partner.
Do you think it is possible to share wealth equally?
Task
Give a two-minute talk on the subject of poverty. First read text 2 again and make notes below on the following.
■ ways of measuring poverty
striking facts about poverty m the world today
where poverty exists
causes of poverty
how poverty affects people's lives
the poverty trap
Щ H Writing
Write a report describing the charts on pages 56 and 57.
First, read text 1 again. Then look carefully at figure 1 and figure 2. Use the outline plan to help you. Remember to include the following language:
The chart shows...
It is clear from the figures that...
The majority of the population...
Л very small percentage of the population...
about ' approximately almost
a quarter ' half / a third
In comparison...
In contrast...
is owned by...
earn...
Report
Pronunciation guide
Inequality inikwobti Modernised 'iiKid.-mai/tl Precious pief.^s Jewel ',: u
Lorenz curve ВШШ кЗЯ Poverty 'pm-.iti Associate |ч | о-лфеи Corruption k,ir\pjn Drought draot Flood il.ul Schooling Vkuilni
PARAGRAPH 1
Introduction. Say generally what the charts are about - use the titles to help you.
Begin like this: These charts show how wealth and income are distributed in the UK. Figure 1 shows...
PARAGRAPH 2
Describe figure 1 in more detail. Say how
much of the wealth the top one por cent own. Compare this with the bottom 50 per cent.
Begin like this: Figure 1 shows how unfairly wealth in the UK is shared out. You can clearly see from the chart that...
PARAGRAPH 3
Describe figure 2 in more detail. Describe the perfect distribution shown by the blue line. G:vo examples from the Chart. Describe the real distribution shown by the rod line. Give examples from the chart. Say how much of the total income the lowest 40 per cent earn. Say how much of the total income the top 30 pei cent of the population earn.
Begin like this: Figure 2 compares perfect distribution of income with real distribution in the UK. The blue line shows what happens if income is evenly distributed...
PARAGRAPH 4
Conclusion. Explain briefly what the figures show about the UK economy.
Write 200-250 words
60 НкшИ» „u.e. re Etor.on.it > U»n II
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Before you read____
Discuss these questions with your partner.
-* Micio means small and macro means large. What do you think macroeconomics is?
-» How is it different from microeconomics?
5?A Vocabulary
Match the words and phrases with the definitions.
devastating collapse | something that happens |
fiscal policy | 1 a method or tool for |
| doing something |
domestic | control of spending |
| through taxation |
steady growth | money you have to |
| spend after paying tax |
monetary policy | E a serious slowing down |
| of the economy |
recession | f at a slow, unchanging |
| rate |
7 mechanism | 0 move around |
disposable income | control of the cost |
| of borrowing and |
| movement of money in |
| economy |
interest | 1 the members of the |
| population able to work |
i 1 circulate | something you know will |
| happen |
depression | ■ complete destruction |
predictable | !. the cost of borrowing |
| money |
ever.: | not foreign |
workforce | N a very bad period for the |
| economy |
Macroeconomics
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