Economics study

 

 В Comprehension

 

Now read the text again and choose the best answer А, В or С to complete each sentence.

1 A theory is only good if you can ...

A express it clearly.

В test it.

С measure it.

 

2 Empirical evidence is evidence that...

A we can see.

В economists can't use.

С can be measured.

 

3 Econometrics is ...

A the maths that economists use.

В a way to measure how much someone saves.

С a formula to find out why people save.

 

4 Panel data analysis ...

A only shows differences over time. В only shows differences between groups. С shows differences between groups and changes over time.

 

5 Econometrics is ...

A only good for proving theories.

В good for making practical economic

decisions. С only good for academic work.

 

Before you listen(10)

 

Discuss the following with your partner.

The table below is an example of econometric data.

What does the table show?

Is this time-series analysis or cross-sectional analysis?

What do you think are the missing numbers?

 

 С Listening )))

 

Weekly spending by children aged seven to fifteen in the UK

Girls Boys

sweets, snacks and food:     £(1).......... £4.60

clothing and personal care: £(2).......... £1.30

mobile phone charges:       £ (3).......... £0.40

magazines and books: £0.90      £(4).....

music, DVDs and videos:         £0.70 £0.90

games and hobbies: £0.90      £ (5).....

 

Now listen to somebody talking about a survey of young people's spending habits. Fill in the gaps in the table.

 

 

Before you read (11)

 

Discuss these questions with your partner.

Why do you think gold is expensive?

What might be the reason that so many electrical goods are quite cheap now ?

 

D Vocabulary

 

Complete each sentence with a word from the box.

■ applies	■ available	■ confusing
■ curve	■ demand	■ exception
■ impressive	■ increase	■ law
■ limited	■ set	■ shift
■ taxes

 

  

   1Some of the puzzles in this book are really.

2 Newton's.......................of gravity explains why  things fall towards the earth.

3 There is a lot of.......................for organic fruit  and vegetables these days.

4 When you throw a ball, it follows a.......................  back down to earth.

5 Gold is expensive because there is only a very  ....................... supply.

6 When a company stops making a product, it isn't  .......................any more.

7 Normally I arrive at work at 8.00 am. but Thursday  is an........................

8 This rule.......................to everyone in the school, even teachers.

9 Everyone who earns a salary must pay  .......................to the government.

10 There has been a.......................in public opinion  about the environment recently.

l1  There has been a huge....................... in demand  for air conditioners due to the hot weather.

12 Prices have been.......................too high and  nobody can afford the goods.

13  I found the work you've managed to do very  ........................Well done!

 

 

 

 

The law of demand

 

Economics can often be very confusing Econometric formulas and impressive charts are sometimes impossible to understand. Thankfully

though, some economic ideas arc completely

obvious. One of these ideas is the law of demand Economists are always disagreeing with each other, but the law of demand is the only thing they all agree on. They all agree on it because it makes sense even to non-economists like you and me

Demand is how much of the same good. Of service people would like to buy. The law of demand says that demand for something falls as its price rises. Economists show this concept with the demand curve which you can see in figure 1 on page 12.

The reason why the law of demand works is quite obvious: the money we have is limited. If

something becomes more expensive, we will have less money available to spend on our other needs.

lf the product or service is not a necessity, we will decide to buy less of it

Most rules haw exceptions, but economists agree that there are very few exceptions to the law of demand. It even applies to basic necessities like water. When water becomes more expensive, people find ways to use less When the government put higher taxes on petrol, people try not to use their cars so often. The fall in demand might be very small, but it is real. So price has an effect on demand, but the strength of the effect varies. The strength of the price / demand relationship is called price elasticity. Economists use a simple econometric formula to measure price elasticity for a certain product in a particular market. This helps governments and companies set prices at the correct level for a particular time and plan price increases.

Don't forget, though, that other things affect demand apart from price. For example, during a very cold winter, demand for heating fuel like gas or coal will rise at any price. If the winter is unusually warm, then demand for fuel will fall. Economists say that these situations cause a shift in the demand curve. You can see this in figure 2.

In figure 2. the curve is still the same shape because price still has the same effect on demand. However, something else has caused a general increase in demand at all prices. Л rise or fall in people's incomes, fashion, climate and many other things can influence demand in this way.

 

 E Comprehension(12)

 

 

Now read the text again and decide whether these statements are true or false.

 

The law of demand is easy to understand.

The law of demand says that when people want more of something, its price rises.

There are no exceptions to the law of demand.

Price elasticity shows how much prices change when demand changes.

There are many reasons why people decide to buy something, not only price.

A shift in demand changes the shape of the demand curve.

 

 

Before you listen_

 

Discuss the following with your partner.

The graph below shows one of the basic relationships in economics: supply and demand.

Talk about the graph with your partner.

Can you label the diagram with the words from the box?

 

 

 Listening )))

 

Now listen and check if you were right.

■ Amount bought and sold
■ Demand curve	■ Equilibrium point
■ Price	■ Supply curve

 

(13)

 

G Speaking

 

 

Discuss these questions with your partner.

Apart from price, what other things affect demand for a product or service?

If you were a producer, how would you react to increases, or the opposite - decreases in demand?

What products or services are most in demand in your country now?

 

 

 

Task

 

Give a two-minute talk on the relationship between demand and supply.

First, read text 2 again and look at the diagram for exercise F Listening. Then make notes on the following:

• the law of demand and the reasons for changes in demand

the supply curve and the reasons for it

• how the market takes into account the needs of producers and consumers

 

Pronunciation guide

 

Econometrics

Variable

Empirical

Curve

Necessity

Elasticity

Fuel

 

 

 H Writing

 

With a partner, look at the supply and demand charts for ice cream and answer the following questions together.

What do the two charts compare?

What happens to the supply of ice cream as price increases?

What happens to demand for ice cream as price increases?

What changes m June - supply or demand?

Why do you think there is a shift in demand for ice cream in June?

 

Report

 

Now write a short report describing the information in the charts. Organise your report like this.

 

PARAGRAPH 1

Introduction. Explain briefly what the charts are about and, very generally, what they show Begin like this: Both charts show demand and supply curves for ice cream. The charts also show

...

PARAGRAPH 2

The supply curve. Describe the supply curve for ice cream. Explain the relationship between price and supply. Give example figures from the chart to illustrate your points. Note that the supply curve is the same for both months. Begin like this: The supply curve for both December and June is the same. When production is low. the price ...

 

PARAGRAPH 3

The demand curve. Describe the general relationship between price and demand. Give example figures from the chart to illustrate your points.

Begin like this: The charts also show that there is a relationship between demand for ice cream and price. Demand rises ...

 

PARAGRAPH 4

Shift in demand. Describe the difference between the demand curve for December and June. Mention that the equilibrium point is higher in June than in December (give figures). Give reasons for the shift in demand. Begin like this: However, there is a big difference between the demand curve for December and the demand curve for June ...

 

Write about 220 words

 

 

Before you read _(14)

 

Discuss these questions with your partner.

Imagine a world without money.

How do you think society would be run?

Would there be an economy as we understand it?

Can you think of any examples of situations where people don't use money, either from the past or now?

Do you know what a traditional economy is?

 

 

 A Vocabulary

 

Choose the correct answer А, В or С from the list below.

 

1 Although we can buy meat in the shops, some people still like to.....................animals as a hobby

2.......................is another word for extra things  that are not needed.

3 There are still.......................of people living  traditional lives in the rainforests of South America.

4 In most modern societies........................like  celebrations and dances have disappeared.

5 Corn and wheat are two.......................that  farmers grow in their holds.

6 One of the.......................of playing sports is that  you keep fit.

7 One of the....................of living in a city is the noise.

8 Many African countries suffer from regular  .......................when no rain falls for months.

9 Heavy rain causes.......................in many parts of  Europe each year.

10 East Asian countries are well known for their  .......................industries such as computers

and cameras.

11 Exercises and sports at school are sometimes   called.......................education.

 

1a chase	1b hunt	1c eat
2a surplus	2в goods	2c shortage
3a customs	3b tribes	3c pygmies
4a parties	4b patterns	4c customs
5a crops	5b animals	5c foods
6a goods	6b disadvantages	6c benefits
7a drawbacks	7b benefits	7С customs
8a floods	8b droughts	8c hurricanes
9a floods	9b droughts	9c hurricanes
10a agricultural	10b heavy	10c technology
11a physical	11в mental	11c fun

Reading 1

 

The traditional economy

 

 

It's hard to imagine our lives without coins, banknotes and credit cards. Yet for most of human history people lived without money. For thousands of years human societies had very simple economies There were no shops, markets or traders. There were no employers, paid workers or salaries. Today, we call this kind of economy the traditional

 

(15)

 

parts of Asia, South America and Africa this system still exists.

People who live in a traditional economy don't have money because they don't need it. They live lives of subsistence. That means they hunt, gather or grow only enough food to live. There is almost no surplus in the traditional economy, and there is almost no property Families may own simple accommodation, but land is shared by all the tribe. Economic decisions are taken according to the customs of the tribe. For example, every family may need to give some of the crops they grow to the tribal leader, but keep the rest for themselves. They don't do this because it makes economic sense. They do it because the tribe has always done it. It's simply a custom.

Custom, also, decides what jobs people do in the traditional economy. People generally do the jobs that their parents and grandparents did before them. Anyway, there aren't many jobs to choose from in the traditional economy. Men are hunters, farmers or both. The woman's place is at home looking after children, cooking and home-making. This division of labour between men and women is another characteristic of the traditional economy. Whatever the work is, and whoever does it. you can be sure it's hard work. This is because traditional economies have almost no technology. Physical strength and knowledge of the environment are the tools for survival.

Like any other economic system, the traditional economy has its benefits and drawbacks Probably the biggest benefit is that these are peaceful societies. People consume almost everything they produce and own practically nothing. They are equally poor. For all these reasons, war is almost unknown in these societies.

However, people who live in traditional societies are among the poorest people in the world. Because custom decides what people do. nothing in these societies ever changes. Because there is no technology, people depend on nature to survive, They have no protection from environmental disasters like droughts and foods. They are always in danger of hunger and disease.

But the traditional economy is in danger itself. There arc only a few examples left on the planet .In 100 years from now, it may have disappeared forever.

 

В Comprehension

 

Now read the text again and match each paragraph with the correct heading.

PARAGRAPH 1.......................

PARAGRAPH 2.......................

PARAGRAPH 3.......................

PARAGRAPH 4.......................

PARAGRAPH 5.......................

PARAGRAPH 6.......................

 

A Life without money

B The advantages of the traditional economy

C The future of the traditional economy

D The disadvantages of the traditional economy

E The importance of tradition

F Work in the traditional economy

 

Before you listen_

 

Discuss these questions with your partner.

What kind of people do you think still live in a traditional economy today?

Where do they live?

What are their lives like?

 

 С Listening )))

 

Now listen and complete the notes about the Mbuti. Use one to three words for each gap. Then listen again and check your answers.

 

Pygmies

 

Pygmies live in parts of Africa and

(1)........................

Pygmies are known for their

(2)........................

They live in societies that still have a

(3)........................

 

The Mbuti

 

The Mbuti live in central (4)........................

They live in houses made from

(3)........................

(6).......................do the hunting.

(7).......................build houses.

(8).......................look after the children.

 

 

 

 

 

Before you read_

 

Discuss these questions with your partner.

 

Do you think most countries have a market which is free from government management?

Can you think of any examples supporting or disagreeing with this idea?

 

 D Vocabulary

 

Complete each sentence with a word or phrase from the box.

■ advertise	■ afford	■ competition	■ controlled	■ costs
■ incentive	■ limit	■ prepared	■ profit	■ raise
■ reduce	■ role	■ street market	■ theoretical

 

 

 

 

1 Every Saturday this road becomes the local  .......................where people come to buy fruit

and vegetables.

2 Businesses.......................thou products in the  media to attract more customers.

3 My.......................in the business is to meet  customers and find out what they want.

4 Making money is the main.......................to work.

5 bought this old camera for €50 and sold it for €75. That's  €26........................

6 If there's only one producer in the market, there's  no........................

7 Production.......................are the amount of  money companies spend to make a product.

8 The idea that life exists on other planets is ........................Nobody knows for sure.

9 A.......................economy is one where a  government decides what can be bought and sold and/or how it is done.

10 The speed.......................on this road is 90  kilometers’ per hour.

11 When there is a demand we.......................prices  but we.......................them if we want to sell  something quickly.

12 I can't.......................that car - it's far too  expensive.

13 People are.......................to pay a lot for services  if they are of a good quality.

 

 

The market economy(16)

Have you ever walked through a busy street market? People push their way through crowds of others in order to reach the stalls first. The air is full of deafening shouts. Stall owners уеll to advertise their goods. Buyers cry out their orders It's hard to imagine, but behind this noisy confusion is a very logical economic theory, the

market economy.

The market economy is sometimes called the free market. A free market is not controlled in any way by a government. It is also free from the influence of custom or tradition. In a free market, the only reason why things arc bought and sold is because there is a demand for them Prices for goods and services are simply what people are prepared to pay. The market economy is not really controlled by anyone. It controls itself.

The street market where we began has many of the characteristics of the free market. Customers arrive at the market with a shopping list of things they need. They also come with an idea of how much they are prepared to pay Stall owners sell what customers demand, and try to get the highest price they can for it. Supply and demand control what is on the market and how much it sells for. In the wider economy, we are all customers, and the stall owners are like companies.

The role of the company in the free market is to supply what people want. However, companies need an incentive. The incentive is profit There arc two ways for companies to make a profit. The first way is to raise their prices. The second way is to reduce their production costs. And this brings us to two more features of the market economy: competition and technology.

Competition exists in a free market because, theoretically, anyone can be a producer. This means that companies have to compete with each other for a share of the market. Competition is good for consumers because it helps to control prices and quality. If customers aren't happy with a product or service, or if they can't afford it, they will go to a competitor.

Technology exists in a free market because producers need ways to reduce their costs. They cannot buy cheaper raw materials. Instead, they must make belter use of lime and labour Technology is the use of tools and machines to do jobs in a better way. This helps companies produce more goods in less time and with less effort. The result: more profit.

People often think that most economies are free markets. However, at the macroeconomic level, a truly free market economy does not exist anywhere in the world. This is because all governments set limits in order to control the economy. Some governments set many limits, other governments set very few. but they all set some. For this reason, a true market economy is only theoretical. Nevertheless, many of the features of the market economy do exist in most societies today.

 

 E Comprehension

 

Now read the text again and answer these questions in your own words in the space provided below.

Who controls a market economy?

Who decides what products are for sale in a free market?

What do companies want?

Why is competition a good thing?

Why does technology exist in the market economy?

Why are there no true market economies in the world today?

 

Notes:

 

Before you listen(17)

 

Discuss these questions with your partner.

Do you think the free market is a good idea?  Is it good for society? Why / Why not?

 

 F Listening )))

 

Now listen and choose the correct answer.

Adam Smith's invisible hand theory:

1 People are naturally selfish / helpful.

2 The free market only demands what is good for society / producers.

3 When people work for their own good, they do good for consumers / society also.

In the real economy:

4 In the free market there is a demand for goods which are not expensive / necessary.