И.П. Агабекян, П.И. Коваленко 11 страница

The peoples of the nations of the world continually seek to supplement and maximize their welfare by a wide variety of interactions and exchanges across boundaries. Differences in aspirations (human, natural) and capital resources; technology: culture; social and political systems; and other factors are always apparent and lay the foundation for mutually advantageous economic relationships and conflicts.

Vocabulary

contend - утверждать distribution of wealth - распределение богатств to take as a given — принимать за должное purposes — цели to betray - предавать virtually — практически, фактически profound — глубокий allegedly — якобы to be content — быть довольным чем-либо to do away with — расстаться с чем-либо subsistence - существование, пропитание allotment — доля adherents — приверженцы to adjust — приспосабливаться

to reject — отвергать, отклонять

diverse body of concepts — across boundaries — через разнообразие концепций границы to admit — допускать aspirations — устремления

mutually — взаимно

General understanding:

1. When did neoclassical economics come under attack?

2. What were the reasons for the criticism?

3. What did neo-Ricardian group claim?

4. What were visions of Kirzner, Murray and Lachmann?

5. Who was the author of «Foundation of Economic Analysis»?

6. What does neoclassical school pretend to do?

1. Complete the table:

SUBSCHOOL	PERSONALITIES	CRITICISM OF NEOCLASSICA L ECONOMICS	VISIONS

2. Translate into Russian:

a) Neoclassical economics came under attack for a variety of reasons.

b) Neo-Ricardian school, claims that neoclassical economics has betrayed the mission of the older classical school.

c) Relative demand or utility plays virtually no role in defining relative commodity prices in long-run equilibrium.

d) Neoclassical economics represents an aberration from the more profound analysis

e) The attempt is to show that the distribution of income to the workers is politically determined.

f) Some scientists were more concerned with the process by which markets adjust or fail to adjust to change

g) The peoples of the nations of the world continually seek to supplement and maximize their welfare

3. Find equivalents in Russian for:

a) the efficiency criterion ignores considerations of equity

b) surplus value

c) distribution of wealth

d) supply and demand model

e) profound analysis

f) long-run equilibrium

g) the reproduction of annual output

h) opportunity costs

i) a wide variety of interactions and exchanges

4. Explain the difference between the following words. Write one sentence with each to illustrate it:

a) disciples — followers

b) theory — concept

c) adjust — reject

d) attempt — attain

e) dear — expensive

f) needs — wants

g) illegal — illegitimate

Questions for discussion:

1. Do you agree that new economic theories emerge in the periods of stagnation and decline?

2. Jt has been not mentioned in the text any Russian economists. Why? Are there any modern prominent Russian economists?

3. Do you think that complicated economic processes could be explained in terms of «the twin forces of supply and demand»?

UNIT 4

Levels of economics

^Text 1 MACROECONOMICS

The word macroeconomics means economics in the large. The macroeconomist’s concerns are with such global questions as total production, total employment, the rate of change of overall prices, the rate of economic growth, and so on. The questions asked by the macroeconomist are in terms of broad aggregates — what determines the spending of all consumers as opposed to the microeconomic question of how the spending decisions of individual households are made; what determines the capital spending of all firms combined as opposed to the decision to build a new factory by a single firm; what determines total unemployment in the economy as opposed to why there have been layoffs in a specific industry.

Macroeconomists measure overall economic activity; analyze the determinants of such activity by the use of macroeconomic theory: forecast future economic activity; and attempt to formulate policy responses designed to reconcile forecasts with target values of production, employment, and prices.

An important task of macroeconomics is to develop ways of aggregating the values of the economic activities of individuals and firms into meaningful totals. To this end such concepts as gross domestic product (GDP), national income, personal income, and personal disposable income have been developed.

Macroeconomic analysis attempts to explain how the magnitudes of the principal macroeconomic variables are determined and how they interact. And through the development of theories of the business cycle and economic growth, macroeconomics helps to explain the dynamics of how these aggregates move over time.

Macroeconomics is concerned with such major policy issues as the attainment and maintenance of full employment and price stability. Considerable effort must first be expended to determine what goals could be achieved. Experience teaches that it would not be possible to eliminate inflation entirely without inducing a major recession combined with high unemployment. Similarly, an overambitious employment target would produce labor shortages and wage inflation.

During the 1960s it was believed that unemployment could be reduced to 4 percent of the labor force without causing inflation. More recent experience suggests that reduction of unemployment to 5.5 percent of the labour force is about ss well as we can do.

VOCABUALARY

total production — общая производительность total employment - общая занятость the rate of change of

overall prices - коэффициент изменений предельных цен rate of economic growth — темпы экономического роста

broad aggregates - масштабные совокупности

individual households - индивидуальные хозяйства layoff — увольнение economic activity — экономическая активность determinants - показатели, определители values — ценности meaningful totals — значимые итоги gross domestic product (GDP) — валовой внутренний продукт (ВВП)

national income — национальный доход personal income — личный доход

personal disposable income —

личный доход после уплаты налогов business cycle - экономический цикл economic growth — экономический рост

General understanding

1. What does the word macroeconomics mean?

2. What are the concerns of a macroeconomist?

3. What is the difference between the questions asked by macroeconomists and microeconomics?

4. What is, according to the text, the important task of macroeconomist?

5. What does macroeconomic analysis attempt to explain?

6. What are the concepts of macroeconomics?

7. What are the most important theories of macroeconomics ?

8. What is said about the correlation between the inflation and unemployment?

1. Macroeconomics vs. microeconomics. Fill in the table to show the difference between:

MACROECONOMICS	MICROECONOMICS

2. Which of the following statements are true about macroeconomics and macroeconomists:

A. Macroeconomics deals with global questions only.

B. Macroeconomics means economics in the large because it asks more questions than microeconomics.

C. Macroeconomist analyzes activities of families and large firms.

D. Such concepts as gross domestic product, national income and personal disposable income serve as meaningful totals.

E. Macroeconomic analysis shows the development of the economic theory.

F. Theory of business cycles concerns business. That is why this is a microeconomic theory.

G. Inflation could not be eliminated without some negative changes in economics.

H. More recent experience proves that macroeconomists of 60s were wrong.

3. Translate into Russian:

A. The questions asked by the macroeconomist are in terms of broad, aggregates.

B. What determines the capital spending of all firms combined as opposed to the decision to build a new factory by a single firm?

C. Macroeconomists measure overall economic activity; analyze the determinants of such activity by the use of macroeconomic theory.

D. Macroeconomic analysis attempts to explain how the magnitudes of the principal macroeconomic variables are determined.

E. Considerable effort must first be expended to determine what goals could be achieved.

F. More recent experience suggests the reduction of unemployment to 5.5 percent of the labor force.

G. Experience teaches that it would not be possible to eliminate inflation entirely.

4. Explain in your own words the importance and practical applications of the following concepts. (Give Russian equivalents):

a) total production

b) total employment

c) the rate of change of overall prices

d) GDP

e) national income

f) personal income

g) personal disposable income

5. Are you able to answer the following macro- economic questions (If not, explain why it is impossible):

1. What determines the spending of all consumers?

2. What determines the capital spending?

3. What determines the capital spending of all firms?

Questions for discussion:

1. Was there a difference between macroeconomics and microeconomics in the Soviet economics? In 18th century? In 19^th century?

2. What is more important for economy in general - microeconomics or macroeconomics?

3. Is there a difference in analyzing macroeconomic and microeconomic problems?

MICROECONOMICS

The word «micro» means small, and microeconomics means economics in the small. The optimizing behavior of individual units such as households and firms provides the foundation for microeconomics.

Microeconomists may investigate individual markets or even the economy as a whole, but their analyses are derived from the aggregation of the behavior of individual units. Microeconomic theory is used extensively in many areas of applied economics. For example, it is used in industrial organization, labor economics, international trade, cost-benefit analysis, and many other economic subfields. The tools and analyses of microeconomics provide a common ground, and even a language, for economists interested in a wide range of problems.

At one time there was a sharp distinction in both methodology and subject matter between microeconomics and macroeconomics.

The methodological distinction became somewhat blurred during the 1970s as more and more macro- economic analyses were built upon microeconomic foundations. Nonetheless, major distinctions remain between the two major branches of economics. For example, the microeconomist is interested in the determination of individual prices and relative prices (i.e., exchange ratios between goods), whereas the macroeconomist is interested more in the general price level and its change over time.

Optimization plays a key role in microeconomics. The consumer is assumed to maximize utility or satisfaction subject to the constraints imposed by income or income earning power. The producer is assumed to maximize profit or minimize cost subject to the technological constraints under which the firm operates. Optimization of social welfare sometimes is the criterion for the determination of public policy.

Opportunity cost is an important concept in microeconomics. Many courses of action are valued in terms of what is sacrificed so that they might be undertaken. For example, the opportunity cost of a public project is the value of the additional goods that the private sector would have produced with the resources used for the public project.

Theory of the Consumer

The individual consumer or household is assumed to possess a utility function, which specifies the satisfaction, which is gained from the consumption of alternative bundles of goods. The consumer’s income or income- earning power determines which bundles are available to the consumer. The consumer then selects a bundle that gives the highest possible level of utility. With few exceptions, the consumer is treated as a price taker — that is, the consumer is free to choose whatever quantities income allows but has no influence over prevailing market prices. In order to maximize utility the consumer purchases goods so that the subjective rate of substitution for each pair of goods as indicated by the consumer’s utility function equals the objective rate of substitution given by the ratio of their market prices. This basic utility - maximization analysis has been modified and expanded in many different ways.

Theory of the Producer

The individual producer or firm is assumed to possess a production function, which specifies the quantity of- output produced as a function of the quantities of the inputs used in production. The producer’s revenue equals the quantity of output produced and sold times its price, and the cost to the producer equals the sum of the quantities of inputs purchased and used times their prices. Profit is the difference between revenue and cost. The producer is assumed to maximize profits subject to the technology given by the production function. Profit maximization requires that the producer use each factor to a point at which its marginal contribution to revenue equals its marginal contribution to cost.

Under pure competition, the producer is a price taker who may sell at the going market price whatever has been produced. Under monopoly (one seller) the producer recognizes that price declines as sales are expanded, and under monopsony (one buyer) the producer recognizes that the price paid for an input increases as purchases are increased.

A producer’s cost function gives production cost as a function of output level on the assumption that the producer combines inputs to minimize production cost. Profit maximization using revenue and cost functions requires that the producer equate the decrement in revenue from producing one less unit (called marginal revenue) to the corresponding decrement in cost (called marginal cost). Under pure competition, marginal revenue equals price. Consequently, the producer equates marginal cost of production to the going market price.

Vocabulary

behavior — поведение to investigate - исследовать applied economics — прикладная экономика distinction — отличие subject - предмет, субъект matter - вопрос, материал to blur — затуманивать, размывать to remain — оставаться exchange ratio - ставка (соотношение) обмена optimization - оптимизация utility — полезность utility function - функция полезности satisfaction - удовлетворение constraints — ограничение, стеснение monopsony - монопсония (рынок, на котором выступает лишь один покупатель товара, услуги или ресурса) opportunity cost — альтернативные издержки to sacrifice - пожертвовать, приносить в жертву to undertake - взять на себя to allow — позволять, разрешать

to influence - влиять to maximize — максимально увеличивать revenue — доходы

General understanding:

1. What is, according to the text, microeconomics?

2. What is meant by «economics in the small»?

3. What economic phenomena are of microeconomists attention?

4. Where is microeconomic theory used?

5. What is «optimization»?

6. What is the concept of the theory of consumer?

7. What is the major difference between the theory of consumer and the theory of producer?

1. Find equivalents in Russian:

a) optimizing behavior of individual units

b) industrial organization

c) labor economics

d) international trade

e) cost-benefit analysis

f) sharp distinction in both methodology and subject matter

g) subjective rate of substitution

2. Translate into Russian:

A. Microeconomic theory is used extensively in many areas of applied economics.

B. Their analyses are derived from the aggregation of the behavior of individual units.

C. The consumer then selects a bundle that gives the highest possible level of utility.

D. The consumer is free to choose whatever quantities income allows but has no influence over prevailing market prices.

E. The producer equates marginal cost of production to the going market price.

F. The producer recognizes that price declines as sales are expanded.

g) Under pure competition, the producer is a price taker who may sell at the going market price whatever has been produced.

3. Give definition to the following:

a) microeconomics

b) applied economics

c) optimization

d) opportunity action

e) utility maximization

Questions for discussion:

1. What areas of applied economics are of the most importance?

2. What distinction in methodology between macro— and microeconomics is the most distinctive?

3. Does the author’s concept of theories of consumer and producer comply with your own?

^Text A THE LAW OF DEMAND

Demand is a key concept in both macroeconomics and microeconomics. In the former, consumption is mainly a function of income; whereas in the latter, consumption or demand is primarily, but not exclusively, a function of price. This analysis of demand relates to microeconomic theory.

The theory of demand was mostly implicit in the writings of classical economists before the late nineteenth century. Current theory rests on the foundations laid by Marshall (1890), Edgeworth (1881), and Pareto (1896). Marshall viewed demand in a cardinal context, in which utility could be quantified. Most contemporary economists hold the approach taken by Edgeworth and Pareto, in which demand has only ordinal characteristics and in which indifference or preferences become central to the analysis.

Much economic analysis focuses on the relation between prices and quantities demanded, the other variables being provisionally held constant. At the various prices that could prevail in a market during some period of time, different quantities of a good or service would be bought. Demand, then, is considered as a list of prices and quantities, with one quantity for each possible price. With price on the vertical axis and quantity on the horizontal

axis, the demand curve slopes downward from left to right, signifying that smaller quantities are bought at higher prices and larger quantities are bought at lower prices. The inverse relation between price and quantity is usually called the law of demand. The law rests on two foundations. One is the theory of the consumer, the logic of which shows that the consumer responds to lower prices by buying more. The other foundation is empirical, with innumerable studies of demand in actual markets having demonstrated the existence of downward-sloping demand curves.

Exceptions to the law of demand are the curiosa of theorists. The best-known exception is the Giffen effect

— a consumer buys more, not less of a commodity at higher prices when a negative income effect dominates over the substitution effect.

Another is the Vehien effect — some commodities are theoretically wanted solely for their higher prices. The higher these prices are, the more the use of such commodities fulfills the requirements of conspicuous consumption, and thus the stronger the demand for them.

Vocabulary

in the former - в прошлом implicit - подразумевающийся

hold the approach — придерживаться взглядов approach - подход provisionally — временно list — список, перечень vertical — вертикальный

demand curve — кривая спроса

to slope down — спускаться to signify - означать, выражать

substitution effect — эффект замещения conspicuous consumption —

потребление заметное

General understanding:

1. What is «demand»?

2. What is the current theory of demand based on?

3. What prominent economists contributed to the development of the theory of demand?

4. How is it possible to show the interrelation of price and quantities consumed?

5. What is «Giffen effect»?

6. What is Vehien effect?

1. Find equivalents in Russian and write two sentences with each:

a)	key concept
b)	consumption
c)	empirical foundation
d)	curiosa of theorists
e)	of a commodity at higher prices
f)	strong demand
g)	quantities of a goods
h)	ordinal characteristics
i)	conspicious consumption

2. Complete the table:

PERSONALITY	YEAR	IDEAS

3. Which is not true about the law of demand:

A. Consumption is the key concept of microeconomics.

B. Classical economists contributed a lot to the development of the theory of demand.

3. Translate into Russian:

A. Much economic analysis focuses on the relation between prices and quantities demanded.

B. Marshall viewed demand in a cardinal context, in which utility could be quantified.

C. Consumption or demand is primarily, but not exclusively, a function of price.

D. With price on the vertical axis and quantity on the horizontal axis, the demand curve slopes downward from left to right.

E. A consumer buys more, not less of a commodity at higher prices when a negative income effect dominates over the substitution effect.

Г. Innumerable studies of demand in actual markets having demonstrated the existence of downward- sloping demand curves.

2. Explain the difference and write one sentence with each:

a) sign — signify

b) list - page

c) quantity — quality

d) effect — effective

e) substitute - restitute

f) conspicuous - curious

3. Find antonyms to the following:

a) negative -

b) possible -

c) numerable -

d) vertical -

4. Think of examples of exceptions to the Law of Demand in the contemporary Russia. Write an essay of 100—150 words.

Questions for discussion:

1) Do you agree that «conspicuous consumption» plays the great role in the economy of Russia?

2) Do you think that the economic crisis and instant and immediate raise of prices in September 1998 in Russia was provoked by a) producers b) consumers c) wholesalers d) traders?

3) Do you think it is logical that «consumer responds to lower prices by buying more»? Think of an example when consumer believes that prices would go even lower and doesn’t react immediately in the expected way.

^Text В CHANGES IN CONSUMER DEMAND

Increases or decreases in demand are changes in the quantities that would be bought at any of the possible array of prices. Changes in demand are shifts or movements of the entire demand curve. A shift to the right means an increase in demand. It can come from any one or a combination of the following: a change in consumer desire or taste, sometimes augmented by volumes of advertising; a rise in consumers income; a rise in the prices of<substitutes; or a fall in the prices of complements. Of course, opposite changes in these factors cause a decrease in demand, i.e.. a leftward shift of the entire demand curve. An exception here applies to inferior goods, which are defined as those goods and services bought in smaller amounts as consumer incomes rise.

In an uncertain economy, especially an inflationary one, price expectation can affect demand. For storable commodities, when consumers believe that expected future prices will be higher, buyers tend to increase their current demand and thus tend to make their expectations self-fulfilling.

The demands for durable goods can fluctuate widely over time, as consumers’ incomes vary. A durable good has both a stock demand and a flow demand. The stock demand is for the amount that consumers want to hold over a period of years. The flow demand in a given year consists of replacement demand, i.e., for purchases to maintain the stock at some level, and of expansion demand, i.e., for purchases to increase the stock.

Vocabulary

array - массив, множество shifts — движение, сдвиг, перемена entire — целый to augment — увеличивать volume — объем, количество to substitute — заменять substitutes — заменители complements - дополнители inferior goods - низшие блага, товары низкого качества

amounts - количества

inflationary - инфляционный

to affect - влиять storable commodities - товары длительного хранения

self-fulfilling — самовыпол- няющиеся to fluctuate— колебаться stock demand — биржевой спрос

flow demand - текущий спрос

General understanding:

1. What are increases or decreases in demand?

2. What does the shift to the right of the demand curve mean?

3. What are possible causes of the process?

4. What does the shift to the left of the demand curve mean?

5. Are there exceptions to the general rule?

6. How does price expectation affect demand?

7. What is said about demand fluctuations?

1. Find equivalents in Russian and write two sentences with each:

a) array of prices

b) increase in demand

c) a fall in the prices of complements

d) price expectation

e) current demand

f) replacement demand

g) flow demand

2. Translate into Russian:

1) Changes in demand are shifts or movements of the entire demand curve.

2) Inferior goods are those goods and services bought in smaller amounts as consumer incomes rise.

3) In an uncertain economy, especially an inflationary one, price expectation can affect demand.

4) The stock demand is for the amount that consumers want to hold over a period of years.

3. Explain the difference between the following words. Write one sentence with each to illustrate the lexical meaning:

a) able — willing

b) occur — happen

c) exceed — prevail

d) affect — effect

e) dependent — interdependent

f) relate — relative - relations

4. The following table shows how words are formed around the verb to produce:

	e	r
produc	t	'v(e)	Ity
		ion

Fill the gaps with the words:

a) The publishing house’s new _______ is a color daily

newspaper.

b) TL е plant____ a new model of car every spring.

c) The___ of this worker has gone down over the last 5

years.

d) 486 computer is not as____ as Pentium III.

e) The___ of computers make huge investments in their

industries.

f) The Board of Governors of State of New York has

come to a decision to decrease the___________ of cheap

products.

Questions for discussion:

1. What products could be referred to as inferior?

2. Do you think that the tern inferior goods could be applied to the products of some countries, i.e. China, Turkey, etc.

3. Do you think that it has become traditional in Russia to have a stock of such storable commodities as salt, sugar, soap and matches?

<^Text С LAW OF SUPPLY

⇐ Предыдущая 6 7 8 9 101112 13 14 15 Следующая ⇒