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English for Economics . . , M arcia A. Rauch, M .A. (TESOL EFL Fellow, sponsored by the Public Affairs Section, U.S.

U.S. State Department)

- ,

2006

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English for Economics: / . .., M arcia A. Rauch, M.A. : , 2006. 216 .

IS BN 5-88187-286-X English for Specific Purposes . . , , ESP. , . - . : . .., . . .., . -

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CONTENTS Part I. Texts on Economics 1. The Science of Economics 2. M icroeconomics and M icroeconomics 3. The Future of Economics 4. Economic Systems: Two Important Distinctions 5. Labour 6. Unemployment 7. Supply and Demand 8. Wants and Utilities 9. M arket 10. M arkets and M onopolies 11. M oney 12. Pricing 13. The Problem of Inflation 14. Banking 15. Central Banking: An Overview 16. Loans in the United Kingdom 17. M arket Research 18. M arketing 19. Consumer Choice Part II. Review Tests TEST 1 (The Science of Economics, M acroeconomics and M icroeconomics, The Future of Economics, Economic Systems: Two Important Distinctions) TEST 2 (Labour, Unemployment) TEST 3 (Wants and Utilities, Supply and Demand) TEST 4 (M arket, M arkets and M onopolies) TEST 5 (M oney, Pricing, The Problem of Inflation) TEST 6 (Banking, Central Banking, Loans in the UK) TEST 7 (M arket Research, M arketing, Consumer Choice) 98 Part III. Resource Tests 1. Alternative M arket Structures 2. Free-M arket M edicine in Russia. Is the Patient Recovering 3. Should Health Care Provision be Left to the M arket? 82 85 88 90 93 96 43 47 50 54 59 60 63 66 73 77 82 6 6 9 13 16 19 24 29 35 39

101 101 103 108

4. Can the M arket Provide Adequate Protection for the Environment? 5. Strategic Trade Theory. An argument for protection? 6. Concentration Ratios. Measuring the degree of competition 7. Competitive Advantage and the Small Fir m Sector 8. Growth Through Diversification 9. The Firm as a Legal Entity 10. Should Central Bank be Independent of Government? 131 11. Are the Days of Cash Numbered? EFTPOS versus ATMs 12. Regulation US-Style 13. The Political Business Cycle 14. Managers and Owners: High Salaries and Corporate Goals 15. Inequity and Poverty 16. Technology and Employment. Does Technological Progress Create or Destroy Jobs? 17. Do People Volunteer to be Unemployed Part IV. Fundamentals of Translation Introduction Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5 Lesson 6 Lesson 7 Lesson 8 Lesson 9 Lesson 10 Lesson 11 Lesson 12 Glossary Bibliography

113 116 119 122 125 127 134 137 140 143 145 148 151 154 154 159 162 167 171 175 178 181 186 189 192 196 200 205 214

Part I. Texts on Economics THE S CIENC E OF ECONOMICS Economics, like physics or meteorology, is a science to the extent that it comprises a set of analytical principles that work with consistent regularity. Unlike the so-called natural sciences, however, economics is a social science because it studies human behavior r ather than the disembodied workings of nature. T hus it is appropriate to describe the subject, by analogy, as a set of tools. Just as a carpenters tools may be used to build a house, a printers tools to make a book, so an economist uses tools to build understanding in this case, understanding of human behavior and its consequences. Each social science makes the same claim, however. So what distinguishes economics from its sister social sciences, such as sociology or psychology? The unique feature of economics is that it studies human behavior within the context of markets. A market is an institutional arrangement that fosters trade or exchange. M odern economics, therefore, is the study of how markets work of how value is determined, and how inputs relate to each other in production, for exa mple. But there is a larger set of questions involved: where did the market come from? Is it the only way to organize economic activity? What are its alternatives? How might they work? The history of economic thought is replete with writers who sometimes addressed the former set of questions (i.e. how markets work) and sometimes the latter (what are its alternatives). Occasionally, but rarely, a writer will address both. M arx was such a writer. M ost of the writers who achieved lasting fame as architects of the discipline of economics stuck to the former set of questions, however. So dominant was this tendency that it may be termed mainstream, or orthodox. By contrast, attempts to explore the second set of questions are typically regarded as unorthodox, or outside the mainstream. Surely the market place of ideas encourages variety. Although others might present the subject differently, the important point that should be derived from any historical survey of the subject is that economics is a vibrant form of intellectual discourse, not a set body of principles.

Even in this new millennium, there is increasing evidence that economics continues to ferment. Even among mainstream economists, gnawing questions persist about the nature, scope and method of economic inquiry, and the value and place of economics among competing social sciences. Disagreement persists about the proper boundaries of the subject, the role of the individual versus the group, the method of analysis to be employed, and the usefulness of the field itself. TAS KS I. Give the English equivalents to: , , , , , , , , , , . II. Find words with similar meanings in the text: Resources required for production, to promote commerce, the way people act, academic discussion, economic r esearch, to remain, a related science, the first of two, to develop, a definite set of concepts, a dominant tendency. III. Answer the following questions: 1. Why can economics be called a science? 2. What kind of science is economics? Why? 3. What other social sciences do you know? 4. What is the difference between economics and other social sciences? 5. What are the two sets of questions connected with modern economics? 6. What questions were addressed by the mainstream economists? 7. Can M arx be regarded as a mainstream economist? 8. What evidence is there that economics continues to develop? 9. What are the main areas of disagreement among contemporary economists? IV. Are the following statements true or false? Correct the false ones: 1. To build understanding all economists use the same tools as carpenters and printers do. 2. Modern economics studies problems connected only with the market. 3. Economics is based on a set body of principles. 4. There are a lot of authors addressing both sets of questions mentioned in the text. 5. M ost scientists agree on the methods and scope of economic r esearch. V. Render the text in English: , (, -

), . , , . , . , , . ( , ), . . : , , . VI. Give a summary of the text.

MACRO ECONOMICS AND MICROECONOMICS M acro is derived from the Greek word makros meaning large. M acroeconomics considers the whole economy from a national point of view. In studying macroeconomics we turn our attention to the major forces acting and interacting within the economy. M acroeconomics in a modern economy is largely a study of government economics. Central and local governments play such a signif icant role in the formation and application of economic policies that it has become essential for businessmen to appreciate the bases of government economic policy. In former times, and in a very few countries perhaps still today, the free play of market forces was left to decide the level of national income, and the rate of growth of the economy. As a result of this policy of laissez-faire (let the thing work itself out) the economy tended to grow in spiral-like movements of business activity. Years of rapid expansion, called booms, were followed by years of consolidation and slower progress, called slumps. The economy was always growing, but it suffered from cycles of activity spiraling upwards. The more exposed members of society, the poor, and the immigrant, suffered great misery. A cry went out for more conscious control of business activity, and eventually Keynesian economics showed the way to achieve it. Under this final group of studies we must consider: a) The national income; what it is, how it may be increased, and how it may be fairly shared; b) Business cycles; their causes and cures. This involves a study of deflation, inflation, and equilibrium levels of activity in the economy; c) Problems associated with full employment, structural unemployment, and regional under-employment; d) The public sector of the economy; its conflict with the private sector and their reconciliation with one another; e) Public finance; f) The balance-of-payments problem presents itself mainly at macroecono mics levels; g) The international implications of national policies and co-operation with other countries. Though macroeconomics has been defined as the study of the whole, or of the aggregate, of a national economy, the central problem of it in the second half of the twentieth century is the management of prosperity to maximize individual welfare. In fact, the whole economy stands or falls by what is achieved for the individual. If I am not prosperous, what use is it to me that society as a whole is prosperous? What satisfaction do I get, when I am poor, to know that others are rich? If I am unemployed, high levels of general employment do me no good, and what use is the general security if I am insecure?

The British economist, John Maynard Keynes, is one of the most influential economists of the 20th century. In 1936 his book The General Theory of Employment, Interest, and Money transformed the economic thinking of that time. 9

The application of economic theory to the aggregate level is a process subject to a reasonably high degree of uncertainty. No one can be absolutely sure what the outcome of a particular macroeconomic policy will be. There is though, in practical terms, every reason for the study of macroeconomics. That a point cannot be made 100% clear ought not to detract from the achievement of a highly probable prediction. Business itself is founded upon the principle of exploiting uninsurable risk. Those who operate businesses ought to appreciate what is likely to happen within the national and international economy so that they can reduce the risk element in their own businesses. M icroeconomic analysis offers a detailed treatment of individual decisions about particular commodities. For example, we might study why individual hous eholds prefer cars or bicycles and how producers decide whether to produce cars or bicycles. We can then aggregate the behavior of all households and all firms to discuss total car purchases and total car production. Within a market economy we can discuss the market for cars. Comparing this with the market for bicycles, we may be able to explain the relative price of cars and bicycles and the relative output of these two goods. The sophisticated branch of microeconomics known as general equilibrium theory extends this approach to its logical conclusion. It studies simultaneously every market for every commodity. From this it is hoped that we can understand the complete pattern of consumption, production, and exchange in the whole economy at a point in time. M icroeconomists tend to offer a detailed treatment of one aspect of econo mic behavior but ignore interactions with the rest of the economy in order to preserve the simplicity of the analysis. A microeconomic analysis of miners wages would emphasize the characteristics of miners and the ability of mine owners to pay. It would largely neglect the chain of indirect effects to which a rise in miners wages might give rise. When microeconomic analysis ignores such indirectly induced effects it is said to be partial analysis. TAS KS I. Answer the following questions: 1. What do macroeconomics and microeconomics consider? 2. Why does the study of modern macroeconomics involve governments? 3. Is there any interaction of general and individual in economics? Give your reasons. 4. Despite a high degree of uncertainty macroeconomics is necessary to study. Do you agree with the statement or not? Explain your point of view. 5. What is the interconnection of macroeconomics and microeconomics? 6. What is known as a partial analysis? 7. John M aynard Keynes said that: The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. (What do you think Keynes meant by this last statement? Do you agree or disagree? Give the reasons that would support your opinion.) II. Fill in the blanks using the correct term: microeconomics, macroeconomics, microeconomists or macroeconomists:

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1. is concerned with what actions governments can take to achieve desired ends. 2. deliberately simplifies the individual building blocks of the analysis in order to retain a manageable analysis of the complete interaction of the economy. 3. worry about the breakdown of consumer goods into cars, bicycles, televisions, and calculators. 4. prefer to treat cars, bicycles, televisions, and calculators as a single bundle called consumer goods. 5. ignore interactions of one aspect of economic behavior with the rest of the economy in order to preserve the simplicity of the analysis. 6. The conflict between p ublic and private sectors exists mainly at levels. III. Consider which of the following matters might be classified as macroeconomic and which as microeconomic: 1. The size of aggregate output. 2. The assortment of commodities to which resources are devoted. 3. The distribution of the wealth created by the production of cars. 4. The rate of growth of output from one period to another for the economy as a whole. A IV. Match a line in A with a line in B: B A. the aggregate net product and the sole source of payment for all the agents of production B. the state of having prosperity C. a decrease in the supply of money usually produced intentionally by a government in order to reduce demand and check rising prices D. a period of increasing business activity E. combining in bringing about the result F. regularly recurring rhythms of business activity G. bring or come together in a mass

1. Aggregate 2. Business cycle 3. Boom

4. Co-operation 5. Deflation 6. National income 7. Welfare

V. Give a summary of the text. VI. Render the text in English: . . , , , ; ; , ; , . , , , . , -

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THE FUTURE OF ECONOMICS The modern word economics has its origin in the Greek word oikonomos meaning a steward. The two parts of this word oikos, a house, and nomos, a manager, show what economics is all about. How do we manage our house, what account of our stewardship can we render to our families, to the nation, to our descendants ? From Socrates and Aristotle to J. M . Keynes, and Prof. J. K. Galbraith is a span of 2,250 years. It takes us from a slave society, where all but a few were poor, to an affluent democracy. Great changes of taste and fashion have occurred. Socrates rose in the morning, put on his cloak and went out into the public square to engage in conversation and discussion. His needs were few. Today we are obsessed with material wants, and struggle to the beach with a car loaded with deck chairs and aqua-lungs, towing a yacht or a power boat behind us. Economics is the study of mankind in the everyday business of providing this enormous variety of goods and services. This book has attempted to describe the major aspects of production, distribution and exchange. It is clearly only a beginning to the vast study of sp ecialized aspects of the economy. Certainly economics is a liberal study. Everyone needs to know some economics, for it explains the framework of prosperity and a liberal life is only possible when prosperity exists. Historically follow the flowering of art, literature and science around the world, and you will find they flourished most where prosperity was to be found. Even today only where the economy is strong can men be spared from production to think sublime thoughts, create beautiful objects, paint immortal pictures, or compose imperishable melodies. The humblest worker in such societies is ennobled by his labour, for it alone makes possible the culture of his times. Within the last 30 years Thomas Carlyle's characterization of economics as the Dismal Science has been invalidated. The new economics can handle the cycles of depression which gave such distress in the early years of the capitalist system. There are still problems to be solved, but reasonable affluence appears to be within the reach of all men if the political and social framework can be adjusted to suit the new situation. No longer do the greatest economists of their age stand aghast at the enormity of the problems. Instead they look blithely and optimistically forward to a future where the stockpiling of consumer goods ceases to be the major preoccupation of mens minds. When private wealth is assured, social well-being becomes a possibility. We turn from investment in things to investment in man himself. Part of that investment must include a reappraisal of our attitude to material things. If we are to avoid the exhaustion of the earths resources, to preserve natural beauty, to prevent the destruction of our traditional environment and protect what little innocence is left we must examine what economic growth implies for world society. Inevitably controls over economic activity seem bound to increase unless

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individuals can show restraint. The fullest development of man requires a return to Socratic contemplation of the state of The Republic. TAS KS I. Give the English equivalents to: , , , , , , , , , , , , . II. Find words and expressions that mean: 1. a man who is employed to look after a house and lands (old use); 2. a period of time; 3. a prosperous democratic society; 4. to spend much time in communication; 5. to move violently in a certain direction; 6. fast growth in any sphere of life; 7. deathless and timeless things; 8. to adapt to new conditions. III. Match the terms with their definitions: 1. Goods A. the period that is characterized by high une mployment, low prices, low business activity, etc. 2. Services B. the dividing up of something among a number of people or places C. the process of giving and receiving by common agreement D. things in everyday use such as food, clothing, and personal services, such as those of doctors, etc. E. the work done by an employee, consultant or helper of any kind F. all personal movable property other than money G. the act of using money to obtain profits H. the act or process of manufacturing something

3. Consumable goods 4. Production 5. Distribution 6. Exchange 7. Depression 8. Investment

IV. Divide the text into 4 parts and formulate the main idea of each of them. V. Answer the following questions:

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1. Where does the word economics come from? 2. How can the word oikonomos be interpreted? 3. How can you describe a slave society and the modern world in terms of prosperity? Give your own examples. 4. What is the aim of business? 5. What are the three components of business? 6. What is the connection between prosperity and a liberal life? Can you explain your point of view? 7. How did Th. Carlyle characterize economics? Do you think Carlyles definition is still applicable? 8. Why is it important for us to change our attitude to material things? VI. Give a summary of the text.

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ECONOMIC S YS TEMS : TWO IMPORTANT DIS TINCTIONS Economic systems can be distinguished along many lines, but two are most fundamental. The first is: How is economic activity coordinated by the market or by the plan? The question does not, of course, demand an either, or answer. Rather the choice extends over a wide range fro m pure laissez-faire to rigid central planning. Society must decide which decisions it wants made in markets by individual bus inesses and consumers acting in their own self-interests, and which decisions it wants centrally planned so that businesses and consumers act more in the national interest. The second crucial distinction among economic systems concerns who owns the means of production. Specifically, are they privately owned by individuals or publicly owned by the state? Again, there is a wide range of choice and, to our knowledge, there are no examples of nations at either the capitalist extreme where all property is privately owned or at the socialist extreme where no private property whatever is permitted. For example, while most industries are privately owned in the United States, a few are not. M any business owners face restrictions on what they can do with their capital. Automobile companies must comply with environmental and safety regulations. Private communication and transportation companies may have both their prices and conditions of service regulated by the government. Even in China, where large enterprises are publicly owned, anyone who can afford it can own a car, a bank account, or even a small business. People tend to merge the two distinctions and think of capitalist economies as those with both a great deal of privately owned property and heavy reliance on free markets. By the same token, socialist economies typically are thought of as highly planned, as were those in the former Soviet bloc. However, while there is an undeniable association between private ownership in a country and the degree to which it relies on markets, it is a mistake to regard these two features as equivalent. Socialism can exist with markets and capitalism can exist with rigid state planning. So, in thinking abstractly about a societys choice among economic systems, it is best to keep the two distinctions separate. History holds examples of planned, capitalist economies-such as Germany under Hitler, Italy under M ussolini, and Argentina under Juan Peron. To a much lesser extent, Japan and the other Asian tigers have also planned their capitalist economies-apparently with great success.

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TAS KS I. Give the English equivalents to: , , , , , , , , , . II. Answer the following questions: 1. What are the two fundamental distinctions of economic sy stem? 2. Give examples of the capitalist extreme or the socialist e xtreme? 3. Are all the industries in the US privately owned? 4. Can socialism exist with markets and can capitalism exist with rigid state planning? III. Complete the following sentences: 1. The first fundamental distinction among economic systems is 2. The second crucial distinction among economic systems is 3. Capitalist economies are based on a great deal of 4. Socialist economies are thought of as IV. Match a line in A with a line in B: A 1. Important 2. Rigid 3. Small 4. National 5. Publicly (privately) 6. Safety 7. Bank 8. Free

B 1. Account 2. Business 3. Regulations 4. M arket 5. Planning 6. Interest 7. Owned 8. Distinction

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V. Are the following statements true or false? Correct the false ones: 1. There are three fundamental distinctions among economic systems. 2. M ost industries are privately owned in the US. 3. Business owners dont face restrictions on what they can do. 4. In China anyone (who can afford it) can own a small business. 5. Socialism can exist with markets. 6. There are examples of nations who are at either a capitalist extreme or at a socialist extreme. 7. Capitalism cant exist with rigid state planning. VI. Render the text in English: . : . : . , . . , , , , , . , , , , . VII. Gi ve a summary of the text.

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LABOUR Labour is the supply of human resources, both physical and mental, which is available to engage in the production of goods and services. The supply of labour depends on two things: the total labour force available, i.e. the population less any sections of the population who do not work the number of hours per week the population is prepared to work The Working population. The groups who do not work consist of: Young People. The number of young people available for work varies with the education available. If education is largely a matter of parental instruction and the handing down of techniques from father to son, as in many peasant communities, children will participate in production from an early age. If education is a matter of specialist tuition by professional educators the labour supply will be correspondingly reduced as pupils and students are withheld from the labour force during their schooling. Retired Persons. The age of retirement affects the supply of labour. If, for example, retirement at the age of 65 is normal, so that perfectly healthy and energetic men and women retire compulsory at that age, the supply of labour is reduced. M any people of retirement age today are quite capable of continuing in productive employment. The Hours Worked per Year. If the working week is reduced the supply of labour falls, unless the resultant improvement in health enables more efficient labour to take place in the shorter working week. Today reducing the 40-hour week to 35 hours almost certainly lowers the supply of labour. Holiday periods reduce the supply of labour. Some workers prefer extra income to shorter working hours, so that moonlighting (doing one job by day and another in the evening) is quite common. M oonlighting therefore increases the supply of labour available to entrepreneurs. The Quality of Labour. M ore important than the actual supply of labour is the quality of labour. It is skilled, semi-skilled, or unskilled. Skilled labour is labour which has either mastered a particular craft, like toolmaking or printing, or has been professionally trained, like doctors, dentists, lawyers, and accountants. Semi-skilled labour is in some way a misnomer, since the operatives who are described as s emiskilled have in fact reached very high degrees of skill over a very limited range of activities. Such labour can be very quickly trained, in from 4 to 6 weeks at the most. Unskilled labour, as its name implies, requires little specialized training. Skilled labour tends to be more specific than semi-skilled or unskilled labour. The idea of specificity is an important one in economics. If a factor of production is specific it can be used in only one particular task: for instance, a dentist must be employed in dentistry if his true talents are to be used. If we take a dentist and turn him into the fields to cut sugar cane we shall be wasting his talents. Of course it may do the dentist a world of good to find out what a hard life the caneworker leads, but this is no substitute for the efficient use of his services in caring for his patients teeth. Unfortunately, specialization can have some negative consequences. The most sig-

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nificant drawback is the boredom and dissatisfaction many employees feel when they do the same job over and over. Monotony can be deadening. Bored employees may be absent from work frequently, may not put much effort into their work, and may even sabotage the company. Because of these negative side effects, managers have recently begun to search for alternatives to specialization in the design of jobs. The three most common antidotes to the problems that job specialization can breed are job rotation, job enlargement, and job enrichment. Job rotation is the systematic shifting of employees from one job to another. For example, a worker may be assigned to a different job every week for a fourweek period and then return to the first job in the fifth week. The idea behind job rotation is to provide a variety of jobs so that other workers will be less likely to get bored and dissatisfied. Companies that use job rotation include Ford, Xerox, the Prudential Insurance Co. of America, and the US Nissan subsidiary. In job enlargement, the worker is given more things to do within the same job. For example, under job specialization, each worker on an assembly line might connect three wires to the product as it moves down the line. After job enlargement, each worker might connect five wires. AT&T, IBM , and the M aytag Co. have all experimented with job enlargement. Job enrichment is perhaps the most advanced alternative to job specialization. Whereas job rotation and job enlargement do not really change the routine and monotonous nature of jobs, job enrichment does. It is, in essence, providing workers with both more tasks to do and more control over how they do their work. In particular, under job enrichment many controls are removed from jobs and workers are given more authority. Moreover, employees are frequently given new and challenging job assignments. By blending more planning and decision making into jobs, job enrichment builds more depth and complexity into jobs. These changes tend to increase the employees sense of responsibility and provide motivating opportunities for growth and advancement. Factors affecting the efficiency of labour include: 1. The general education and background knowledge of the labour force. If it has been born into the television era of an advanced society it will be knowledgeable, adaptable, and sophisticated. If it has only recently left a peasant community it will be unsophisticated, superstitious, nervous, and slow to adapt itself. 2. The general health of labour force. This may be improved by diet, and adequate welfare services of all sorts. A developing nations progress may be slow because a fully effective labour force depends on raising the standard of living. This is a slow process and depends on an efficient labour force. We therefore have a vicious circle, which spirals slowly upwards, but at an increasing pace as the years go by. 3. The incentives offered to labour. Where there are few incentives labour will be less efficient. Where the incentives are great labour will apply itself more assiduously. 4. The availability of other factors of high quality. This is the commonest method of increasing the efficiency of labour. If it is backed by good quality land, labour itself will be more efficient. If it is backed by well chosen tools and adequate power supplies, even a poor labour force will be highly productive.

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TAS KS I. Give the English equivalents to: , , , , , , , , , , , , , , . II. Match the terms with their definitions: 1. Labour A. an individuals working career at a certain age with the expectation that he or she will no longer undertake paid employment. 2. Job enlargement B. having a second job on the side during the normal working hours of his or her main employment.

3. Retirement 4. M oon-lighting

C. the monetary and non-monetary elements which together make up a persons lifestyle. D. any form of pay system which rewards an employee or group of workers in such a way as to induce increased effort of production. E. the systematic shifting of employees from one job to another F. any competence possessed by someone. In an employment context it often refers to a combination of knowledge and manual dexterity amongst manual workers. G. one of the three factors of production. The contribution to productive activity made by the workforce both by hand and mentally. H. giving a worker more things to do within the same job.

5. Standard of living 6. Incentive

7. Skill

III. Answer the following questions: 1. What is labour? 2. What does the supply of labour depend on? 3. What are the main population groups who do not work? 4. How does education influence the number of young people available for work? 5. In what way does the age of retirement affect the supply of labour? 6. What are the results of reducing of the working week?

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7. What is moonlighting? How does it affect the supply of labour? 8. What is more important than the actual supply of labour? 9. What is skilled, semi-skilled, unskilled labour? 10. How do you understand the idea of specificity? Give some e xamples. 11. Enumerate the major factors affecting the efficiency of labour. Speak on each of them. 12. Think of possible disadvantages of job rotation, enlargement and enrichment. IV. Are the following statements true or false? Correct the false ones: 1. Labour is the supply of physical human resources which is available to engage in the production process. 2. The number of young people available for work depends on the education available. 3. Pupils and students are usually withheld from the labour force if education is a matter of parental instruction. 4. Moonlighting decreases the supply of labour available to entrepreneurs. 5. The quality of labour is as important as the actual supply of labour. 6. Where there are more great incentives, labour will be more efficient. 7. If labour is supported with well-chosen tools and adequate power supplies, it will be highly productive. V. Render the text in English: , . , . , , . , . , , , . , , , . , , . , . , , , ; .

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UNEMPLOYMENT Not everyone wants a job. Those people who do are called the labor force. The labor force comprises all those people holding a job or registered as being willing and available for work. The participation rate is the percentage of the population of working age who declare themselves to be in the labor force. The postwar growth of the labor force has been caused less by an increase in the population of working age than by an increase in participation rates, most notably by married women. The unemployment rate is the percentage of the labor force without a job but registered as being willing and available for work. Of course, some people without a job are really looking for work but have not bothered to register as unemployed. These people will not be included in the official statistics for the registered labor force, nor will they appear as registered unemployed. Yet from an economic viewpoint, such people are unemployed. This is an important phenomenon. Economists used to classify unemployment as frictional, structural, demand-deficient, or classical. Frictional Unemployment. This is the irreducible minimum level of unemployment in a dynamic society. It includes people whose physical or mental handicaps make them almost unemploy able, but it also includes the people spending short spells in unemployment as they move between jobs in an economy where both the labor force and the jobs on offer are continually changing. S tructural Unemployment. In the longer run the pattern of demand and production is always changing. In recent decades industries such as textiles and heavy engineering have been declining in the UK. Structural unemployment refers to unemployment arising because there is a mismatch between skills and job opportunities when the pattern of demand and production changes. For example, a skilled welder may have worked for 25 years in shipbuilding but is made redundant at 50 when the industry declines in the face of foreign competition. That worker may have to retrain in a new skill which is more in demand in todays economy. But firms may be reluctant to take on and train older workers. Such workers become the victims of structural unemployment.

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Demand-deficient Unemployment. This refers to Keynesian unemployment, when aggregate demand falls and wages and prices have not yet adjusted to restore full employment. Aggregate demand is deficient because it is lower than fullemployment aggregate demand. Until wages and prices have adjusted to their new long-run equilibrium level, a fall in aggregate demand will lead to lower output and employment. Some workers will want to work at the going real wage rate but will be unable to find jobs. Only in the longer run will wages and prices fall enough to boost the real money supply and lower interest rates to the extent required to restore aggregate demand to its full-employment level, and only then will demand-deficient unemployment be eliminated. Classical Unemployment. This describes the unemployment created when the wage is deliberately maintained above the level at which the labor supply and labor demand schedules intersect. It can be caused either by the exercise of trade union power or by minimum wage legislation which enforces a wage in excess of the equilibrium wage rate. The modern analysis of unemployment takes the same types of unemployment but classifies them rather differently in order to highlight the behavioral implications and consequences for government policy. M odern analysis stresses the difference between voluntary and involuntary unemployment. The natural rate of unemployment is the rate of unemployment when the labor market is in equilibrium. This unemployment is entirely voluntary. A worker is involuntarily unemployed if he or she would accept a job offer at the going wage rate. So, frictional, structural and classical types are voluntary unemployment and demand-deficient is involuntary unemployment. TAS KS I. Give the English equivalents to: , , , , , , , , , , , , , , , . II. Match the terms with their definitions: 1. Unemployment 2. Unemployment rate 3. Labour force A. the proportion of a countrys total population which makes up the countrys labour force. B. a work task or series of work tasks to be performed in order to produce a good or a service. C. the pay made to an employee for the use of his or her labour as a factor of production. It is usually paid on a weekly basis and it will depend on the hourly wage rate and the number of hours which constitute the basic working week.

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4. Participation rate

D. the money payment made to a worker for each unit of his or her labour input, usually measured either on an hourly time basis, or for each unit of output produced. E. unemployment which is due to workers refusing to take paid jobs because they consider that the wage rate for such jobs are too law, particularly in relation to the employment and/or other social security benefits they are currently receiving.

5. Wage rate

6. Natural rate of unemployment 7. Wage

F. the non-utilization of labour resources, as a result of which the actual output of the economy is below its potential gross national product. G. the total number of workers available for employment in a country. It comprises those people currently working as employees, the self-employed and people currently unemployed. H. the general rate of unemployment which is consistent with a stable rate of inflation. I. unemployment which is due to workers being unable to find paid jobs even though they are prepared to work at current wage rates because there are insufficient jobs available due to recession, or because they dont have the necessary skills to perform available work. J. the number of unemployed workers expressed as a percentage of a countrys labour force.

8. Job 9. Voluntary unemployment

10. Involuntary unemployment

III. Answer the following questions: 1. What is labour force? 2. What is unemployment rate? 3. Who is considered to be unemployed? 4. How do economists classify unemployment? 5. How is functional unemployment characterized? 6. Who becomes a victim of structural unemployment? 7. What does demand-deficient unemployment refer to? 8. How is classical unemployment described? IV. Are the following statements true or false? Correct the false ones: 1. The labour force only comprises those people holding a job.

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2. People who havent bothered to register as unemployed will not be included in the official statistics for the registered labour force. 3. Frictional unemployment refers to unemployment arising because there is a mismatch between skills and job opportunities when the pattern of demand and production changes. 4. Demand-deficient unemployment happens when aggregate demand falls and wa ges and prices have not yet adjusted to restore full employment. 5. Classical unemployment arises when the wage is deliberately maintained below the level at which the labour supply and labour demand schedules intersect. 6. The natural rate of unemployment is the rate of unemployment when the labour market is in disequilibrium. 7. Voluntary unemployment only includes classical unemployment. V. Render the text in English: , , , . , , , , - , . , 30 , , . . , , , . , . , , , , , , . . . , , . , .

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S UPPLY AND DEMAND Demand. If production is undertaken in order to supply the wants of mankind demand must be the most basic idea in economics. Every individual demands goods and services. When all the ind ividual demands are put together the resulting composite demand is what the industry must supply if people are to achieve satisfaction. In defining demand economists cannot equate demand with want, because an industry cannot be expected to supply goods and services without payment. In attempting to discover the demand for a particular commodity we only consider demand that is backed by purchasing power. M ans wants are unlimited, but his demand for a particular item is very often limited if the price he must pay is too high. The demand for goods or services is therefore that quantity consumers will be prepared to buy at a given price, in a given period of time. Demand is not fixed, but varies with changing conditions. The demand for silk stockings has been completely altered by the invention of nylon fiber, and the demand for bicycles in advanced nations has been greatly reduced by the development of motor vehicles. The chief factors affecting demand may be divided into the factors affecting the individual consumer or family of consumers and those factors affecting the total demand of the whole market. Factors Affecting the Demand of Households. a) The Tastes of the Households. Every family is different, and even me mbers of the same family have different preferences. We may demand goods because they satisfy innate wants; or because they are fashionable; or because we have been convinced by advertising that they are desirable. The demand for all such goods will rise, and the demand for goods which are not to our taste or less well promoted will decline. b) The Income of the Household. Family income is always decisive as to whether a commodity is demanded or not. M any families own a car, some own two cars, and many are resigned to the fact that they will never be in the car-buying income range. c) The Necessity of the Commodity, and its Alternatives if Any. Some goods are demanded by everyone because they are necessities. Some goods become necessities because they are habit-forming, like tobacco and alcohol. Where a commodity has alternatives it is not a necessity, but the alternative must be in the same price range. d) The Price of Other Goods. If the price of a commodity is high compared with the price of other goods the demand for it will be relatively weak. If the goods are close substitutes for one another (for instance, motor cycles and motor scooters),

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the price of one will be seriously affected by a lower price of its competitor. Factors Affecting the Total Market Demand. a) The Size and Structure of the Population. If there are many people to be fed, clothed, and housed demand will tend to be strong, especially if the population is able to back its wants with purchasing power. The structure of the population will influence demand for particular items. A bulge in the birthrate for any reason will alter demand as the children born develop through to maturity. In the early years the demand for childrens clothes, toys, etc., will be increased. Gradually the increased demand will change to school books and games equipment, later to cosmetics and motor cars. Finally, an increased demand for wheelchairs and bearing aids may result. b) The Distribution of Income among the Population. Some societies are so organized that classes of rich and poor persons appear. Others are organized to achieve greater equality of wealth. A progressive system of taxation, which taxes the rich to help the poor, is often used to achieve greater equality. M arket demand will be stronger in egalitarian societies than in those where obvious inequalities exist, for the mass of the people there can back their wants with purchasing power. The Consumers S cale of Preferences. The result of these conditions often called the determinants of demand, is a scale of preferences for each customer. High on each consumers scale of preferences come the things he needs most or likes best. Lower on the scale come things he will buy if income permits, once all the more satisfying items have been purchased. The scale changes with the pressure of daily events. We all know of things we have been meaning to buy for years, but somehow their purchase eludes us because more pressing requirements prevent them reaching the top of our scale of preferences. Every consumer subconsciously has a personal demand schedule for each class of goods, which reflects his individual attitudes and inclinations. This schedule takes for granted that the only thing that has changed to alter the demand is the price of the commodity. All other conditions of demand, like family income, or personal taste, or fashion, have not changed. The phrase ceteris paribus (ot her things being equal) is often used in economics to describe a situation where only one aspect of situation is deemed to be changed. Supply. The responses that entrepreneurs make to the demands of consumers bring on to the market a wide variety of goods and services. The total quantity of a good, or service, made available to the general public

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as a result of the business decisions of the entrepreneurs in the industry is called the supply of that good or service. Factors Affecting Supply. a) The Price of the Commodity. The price of the commodity affects the prospect of profitability of an enterprise. Every entrepreneur is assumed in economics to be engaged in production in order to achieve maximum profit. He must certainly achieve a normal return on capital invested, or there is no incentive at all to stay in the industry. Good prospects of profitability will encourage him to come in and produce the supplies required. He will expand the production of his enterprise until output reaches such a level that profit is at a maximum. b) Conditions of Supply. They are the costs of production, the state of technological development (the more advanced the technology, the greater the flood of supplies that pours on to the market), natural influences (hurricanes, tornadoes, hail, frost, and drought disrupt output) and abnormal political influences (war, strikes, civil unrest, government interference prevent the normal activities of production). Thus, we must note that just as want is the basis of demand, the prospect of profitability is the basis of supply; and just as consumers vary in their demand for goods, suppliers vary in their ability to supply. This is shown in the Laws of Supply and Demand summarized as follows: 1. When the price of a commodity falls the quantity that is demanded will be increased. 2. When the price of a commodity rises the quantity that is supplied will be increased. 3. Prices will adjust to that level which equates demand and supply. 4. All increased supply lowers market price and causes an e xtension of demand. 5. A decreased supply raises market price and causes a reduction of demand. 6. A decreased demand lowers price and also brings about a reduction of supply. 7. An increased demand raises price and also brings about an extension of supply. TAS KS I. Give the English equivalents to: , , , , () , , , . II. Give one word from the text which matches the following definition: A thing used instead of something else; things that are desired; any article

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that can be bought and sold; a person who buys goods; a person who buys goods that he will use himself; the amount of a particular good or service that will be bought by consumers at a given price; all the money coming in to an individual or a business firm. III. Explain in your own words: 1. The population is able to back its wants with purchasing power. 2. M any families will never be in the car-buying income range. 3. Every entrepreneur must achieve a normal return on capital invested. 4. The great flood of supplies pours onto the market. IV. Answer the following questions: 1. What is the demand for a particular good or service? Distinguish demand from want. 2. What is the supply of particular goods or services? What motivates an entrepreneur to supply a commodity or service? 3. What are the determinants of demand and supply? 4. What is the basis of a scale of preferences? 5. What are the seven laws of demand and supply? V. Are the following statements true or false? Correct the false ones: 1. M ans wants and demands are unlimited. 2. Price is decided by the interaction of demand and supply. 3. Demand is set. 4. If there is an alternative to a commodity, then it is no longer a necessity. 5. The price of a substitute cannot seriously affect the price of a good. 6. A progressive system of taxation strengthens the purchasing power of consumers. 7. The least preferred items are put on the top of the scale of preferences. 8. Even when a good is free, the amount wanted will be limited. 9. Supply describes the behavior of buyers. VI. Explain what will happen to the demand for apples if: 1. Workers get a 10% pay raise. 2. The price for oranges and p ears has fallen. 3. A health report is published saying that apples should be part of everyones diet. VII. Explain what will happen to the supply of apples if: 1. Workers on farms growing apples get a 10% pay raise. 2. A new type of tree is introduced which produces 50% more apples per acre of

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apple orchard. 3. The price of pears doubles and stays very high over a number of years. 4. The apple crop is ruined by bad weather. VIII. Here are some of the laws of supply and demand. Read them very carefully and correct the mistakes where necessary: 1. When the price of a commodity falls the quantity that is demanded will also fall. 2. When the price of a commodity rises the quantity that is supplied will increase. 3. A decreased supply lowers market price. 4. An increased demand raises price and brings about an extension of supply. IX. Fill in the gaps with the words below: Free, supply, quantity, fall, purchase, produce, supply, price, rise, quantity Demand is not a particular __1__ such as six bars of chocolate, but rather a full description of the __2__ of chocolate the buyer would __3__ at every __4__ which might be charged. Even when chocolate is __5__ only a limited amount will be wanted. As the price of chocolate __6__ the quantity demanded __7__ other things being equal. Chocolate cannot be __8__ for nothing. Nobody would wish to __9__ if they received a zero price. Thus, __10__ is the quantity of a good sellers wish to sell at each conceivable price. X. Render the text in English: , . , , , . , . , . , . , . , . , , , , .

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WANTS AND UTILITIES The study of economics begins with understanding human wants. By want the economist means the endless succession of material wants which are displayed by all living things. Everyone needs air, food, and water to support life. If we live in some climates we need clothing and shelter from the weather. Everyone needs a home to call his own; some territory which is his, by right. Even when we have these basic needs, other more advanced wants present themselves. We want comfortable homes, entertainment, education, and transport. As the things we want increase in variety and become more and more sophisticated, the economy becomes more intricate too, until thousands of men are cooperating in different countries to produce the raw materials, designs, and specialized machinery which are necessary for a single thing we want such as an aeroplane or a motor vehicle. Everyone has an individual scale of preferences, a ladder-like arrangements of things in ones own mind with the most preferred items towards the top of the scale. Some things never climb up the scale higher than the first few rungs, for they are constantly leapfrogged by other unexpected items. Every father of a family can think of things, often quite essential things, which he has been meaning to buy for years, but repeatedly has to reject for other items which the children need if they are to make the progress he wishes them to make. What is it that decides the position of an item on a consumers scale of preferences? The answer is that preferences are based upon the consumers view of utility of a particular good. Utility is the ability to satisfy wants. The basic needs of mankind are called wants, the means of satisfying these wants are called utilities. The purpose of an economy is to create utilities which will satisfy mankinds wants. Total utility is the total satisfaction we derive from the possession of a commodity. Usually total utility will continue to rise as we acquire more and more of the same goods. This would certainly be true, for example, of a collectors acquisition of antiques. It might not be quite so true of a smokers purchases of cigarettes. There might come a point with many commodities where total utility had reached a maximum and a further supply would be a positive nuisance. Marginal utility is the utility of one unit of a good or service. In fact we have to value it in imaginary units of satisfaction. Take the housewife buying bread. Her usual daily supply is two loaves, and each of these loaves will have great utility but the first loaf more than the second.

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Diminishing marginal utility sets in as soon as the first loaf is bought; each extra loaf is valued less and less. Another loaf may have negative utility and be a cause of dissatisfaction. We may say then that diminishing marginal utility sets in very soon after we have purchased a normal supply. How does the housewife choose a balanced supply of goods and services? By comparing in her mind the marginal utilities of a further unit of various goods and services, one with another, and choosing the ones which will maximize her familys satisfaction. The production of utilities. Satisfaction can be achieved in two ways: by the enjoyment of goods or the enjoyment of services. Goods are tangible items which either satisfy the basic requirements of human life or make that life fuller and richer. Common examples are foods, clothing, housing, furniture, books, television sets, and motor cars. The actual point of satisfaction occurs when we consume the food, or beverage, wear the clothing, make use of the furniture, and so on, so that the name consumer goods is usually applied to these tangible utilities. There is another class of goods, called producer goods. These are goods which do not yield personal satisfaction to consumers but are part of the capital assets of production. A drilling machine, or an assembly line in a factory, are examples of producer goods. Services are intangible utilities, which satisfy our needs by personal attention. The dentist who extracts a painful tooth; the surgeon who sets a broken leg; the television personality who brightens an otherwise dull evening; or the hairdresser who prepares us for a social occasion are examples of people offering personal service. As with goods, there is a class of services which is not directly personal in this way, but forms part of the productive organization. Such services are commercial services; trade, banking, transport, insurance, and communications are the chief examples. The whole purpose of production, which makes use of producer goods and commercial services in the course of its activities, is to create utilities by providing an endless flow of consumer goods and personal services. In order to achieve this production of utilities the resources available to mankind must be mobilized. These resources are called the factors of production. TAS KS I. Answer the following questions: 1. What does an economist mean by want? Is there a difference between need and want? 2. What is a scale of preferences? 3. What is the basis of a scale of preferences?

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4. What is utility? 5. What is the purpose of economy according to the concept of utility? 6. What are the differences between marginal and total utility? 7. How do you choose your supply of goods and services? 8. What are producer goods? 9. What are tangible goods? 10. What are the factors of production? II. Match the terms with their definitions: 1. Utility A. goods that satisfy personal need rather than those required for the production of other goods 2. Consumer goods 3. Wants 4. Total utility 5. M arginal utility B. total satisfaction derived from the possession of a commodity C. the ability to satisfy wants D. the utility of one unit of a commodity E. the basic needs of people

III. Translate the words and word combinations: , , , , , , , . IV. Are the following statements true or false? Correct the false ones: 1. If total utility reaches a maximum, a further supply is a positive nuisance. 2. A drilling machine, or an assembly line in a factory are examples of tangible items. 3. Total utility rises while marginal utility always falls. 4. Consumers base their choice of a supply of goods on the total utility they can obtain. 5. Utility is a subjective concept. V. Render in the text English: , , . . , , , . .

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, . . , , , , . VI. Give a summary of the text.

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MARKET A market is where buyers and sellers transact business for the exchange of particular goods and services and where the p rices for these goods and services tend toward equality. In order for a market to clear or function properly, the quantity of goods and services demanded and supplied must be equal at some given price. At any particular point in time, markets can be in equilibrium or disequilibrium depending on whether or not aggregate supply equals aggregate demand at the prevailing price. M arkets may differ in scope and do not necessarily require buyers and sellers to meet or communicate directly with each other. Business may be transacted through the use of intermediaries as well. There are two fundamental dimensions of market definition: (i) the product market, where products group together, and (ii) the geographic market, where geographic areas group together. M arket definition takes into account both the demand and supply considerations. On the demand side, products must be substitutable from the buyers point of view. On the supply side, sellers must be included who produce or could easily switch production to the relevant product or close substitutes. M arket definition generally includes actual and potential sellers, that is, firms that can rapidly alter their production processes to supply substitute products if the price so warrants. The rationale for this is that these firms will trend to dampen or curb the ability of firms in the market to raise price above the competitive level. The location of buyers and sellers will determine whether the geographic market is local, regional, national or international. The e xchange of goods and services in the world, or global, market is known as international trade. There are three main benefits to be gained from this type of exchange. First, international trade makes scarce goods available to nations that need or desire them. When a nation lacks the resources needed to produce goods domestically, it may import them from another country. For example, Saudi Arabia imports automobiles; the United States bananas; and Japan oil.

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Second, international trade allows a nation to specialize in the production of those goods for which it is particularly suited. This often results in increased output, decreased costs and a higher national standard of living. Natural, human and technical resources help determine which products a nation will specialize in. Saudi Arabia is able to specialize in petroleum because it has the necessary natural resource; Japan is able to specialize in the production of televisions because it has the human resources required to assemble the numerous component s by hand; and the United States is able to specialize in the computer industry because it has the technical expertise necessary for design and production. There are two economic principles that help explain how and when special ization is advantageous. According to the theory of absolute advantage, a nation ought to specialize in the goods that it can produce more cheaply than its compet itors or in the goods that no other nation is able to produce. According to the theory of comparative advantage, a nation ought to concentrate on the products that it can produce most efficiently and profitably. For example, a nation might produce both grain and wine cheaply, but it specializes in the one which will be more profitable. The third benefit of international trade is its political effects: nations that trade together develop common interests which may help them overcome political differences. Economic cooperation has been the foundation for many political alliances, such as the EC (Common M arket) founded in 1957. TAS KS I. Match the terms with their definitions: 1. Equilibrium 2. Aggregate supply 3. Aggregate demand A. an individual acting as a link between persons or companies B. prices now current in the market C. a state of balance when all the economic forces present in a situation have an equal influence and there is no tendency to change

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4. Prevailing price

D. the total amount of goods and services resulting from adding together all the spending power of people in the complete economy of a country

5. Intermediary

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

6. Substitute 7. M arket share

F. the proportion of the total demand (for a product) that is supplied by a particular manufacturer G. a thing that replaces or can be used in place of something

II. Answer the following questions: 1. What is a market? 2. When does a market function properly? 3. What are the key points of market definition? 4. How do markets differ in scope? 5. What benefits can be gained from international trade? 6. Why is specialization advantageous? 7. What political changes can economic cooperation lead to? 8. How can we balance market growth and development with conservation of natural resources and protection of the environment? III. Are the following statements true or false? Correct the false ones: 1. A market is where sellers raise or fix prices and reduce output in order to increase profits. 2. A market functions properly if the quantity of goods and services demanded and supplied is equal at some given price. 3. When a market is in disequilibrium, aggregate supply equals a ggregate demand at the prevailing price. 4. M arkets are all similar in scope. There are only local markets, where buyers and sellers must meet and communicate directly with each other. 5. To define a market, all you need is to identify the number of companies and products available in the market. 6. M arket definition takes into account supply and demand. 7. In defining a market, potential sellers are not considered. 8. Specialization brings about a rise in both output and costs.

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9. According to the theory of comparative advantage, a nation should focus on the goods that it can produce more cheaply than its competitors. 10. Economic cooperation is the best way to solve political problems. IV. Render the following sentences in English: , . , . : , . , . V. Give a summary of the text.

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MARKETS AND MONOPOLIES A monopoly is a situation where there is a single seller in the market. In conventional economic analysis, a monopoly is taken as the polar opposite of perfect competition. By definition, the demand curve facing the monopolist is the industry demand curve, which is downward sloping. Thus, the monopolist has significant power over the price it charges, i.e. is a price setter rather than a price taker. Comparison of a monopoly and perfect competition * reveals that the monopolist will set a higher price, produce a lower output and earn above normal profits (sometimes referred to as monopoly rents). This suggests that consumers will face a higher price, leading to a loss. In addition, income will be transferred from consumers to the monopoly firm. The preceding arguments are purely static and constitute only part of the possible harm resulting from monopoly. It is sometimes argued that monopolists, being largely immune from competitive pressures, will not have the appropriate incentives to minimize costs or undertake technological change. M oreover, resources may be wasted in attempts to achieve a monopoly position. However, a counter argument advanced is that a degree of monopoly power is necessary to earn higher profits in order to create incentives for innovation. M onopolies can only continue to exist if there are barriers to entry. Barriers which sustain monopolies are often associated with legal protection created through patents and monopoly franchises. However, some monopolies are created and sustained through strategic behavior or economies of scale. The latter are natural monopolies which are often characterized by steeply declining long-run average and marginal costs and the size of the market is such that there is room for only one firm to exploit available economies of scale or duplication of facilities would be wasteful.

Perfect (pure) competit ion is the complete form o f competit ion. It is the market situation in which there are many buyers and sellers of a product, and no single buyer or seller is powerful enough to affect the price of the product. 40

Monopsony. A monopsony consists of a market with a single buyer. When there are only a few buyers, the market is defined as an oligopsony. In general, when buyers have some influence over the price of their inputs they are said to have monopsony power. Natural monopoly. A natural monopoly exists in a particular market if a single firm can serve that market at lower cost than any combination of two or more firms. Natural monopoly arises out of the properties of productive technology, often in association with market demand, and not from the activities of governments or rivals. Generally speaking, natural monopolies are characterized by steeply declining long run average and marginal-cost curves such that there is room for only one firm to fully exploit available economies of scale and supply the market. Oligopoly. An oligopoly is a market characterized by a small number of se llers who realize they are independent in their pricing and output polices. The number of sellers is small enough to give each seller some market power. An oligopoly is distinguished from perfect competition because each seller in an oligopoly has to take into account their independence; from monopolistic competition because firms have some control over price; and from monopoly because a monopolist has no rivals, in general, the analysis of oligopoly is concerned with the effects of mutual interdependence among firms in pricing and output decisions. There are several types of oligopoly. When all sellers are of (roughly) equal size, the oligopoly is said to be symmetric. When this is not the case, the oligopoly is asymmetric. One typical asy mmetric oligopoly is the dominant firm. An oligopoly industry may produce goods which are homogeneous (undifferentiated) or may produce goods which are heterogeneous (differentiated). The analysis of oligopoly behavior normally assumes a symmetric oligop oly, often a duopoly. Whether the oligopoly is differentiated or undifferentiated, the critical problem is to determine the way in which the firms act in the face of their realized independence.

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TAS KS I. Give the English equivalents to: , , (/ ), , , , , , / , - , , . II. Match the terms with their definitions: 1. Barriers to entry 2. Franchise 3. Economies of scale A. a market with a single buyer who has some influence over the price of his output B. factors which prevent the entry of new firms into an industry C. a situation when a single firm can serve a particular market at lower cost than any combination of two or more firms D. a situation when the average costs per unit of output decrease with an increase in the size of the output produced by a firm 5. Natural monopoly 6. Duopoly 7. Oligopsony E. a market consisting of two sellers F. a market with a few buyers G. privileges

4. M onopsony

III. Answer the following questions: 1. What is a monopoly? 2. What is the difference between a monopoly and perfect competition? 3. Who sets prices in a monopolistic market? 4. What are the results of monopolistic behavior in a market? 5. Under what conditions does a monopoly continue to exist? 6. What are the main types of monopolies? 7. What are the distinctive features of a natural monopoly? IV. Do the following tasks: 1. Describe a monopoly from the standpoint of conventional economic analysis. 2. Compare a monopolistic market to a normal competitive environment.

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3. List all the arguments against monopolies and counter arguments in favor of monopolies. 4. Describe the conditions under which monopolies continue to exist. 5. List all kinds of monopolies and describe in what way they differ from each other. V. Render the text in English: - . , . , . . , , . , . , .

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MONEY People practising specialized production must exchange their outputs of goods and services with one another. Until a full money system has been developed, such an exchange is usually carried on by barter. T his is the exchange of goods directly for other goods and services. Barter, however, has certain disadvantages. The chief of these are the need for a coincidence of wants, the difficulty of equating values, and the indivisibility of large items. M oney is a solution to the problems of barter, because each commodity or service can be exchanged for money, which can then be used by the new owner to purchase a balanced supply of utilities. M oney is any medium of exchange which is generally acceptable. Types of money. a) Token coins. These are coins made from metals whose real value is less than the face value of the coin. b) Paper money. Printed money is more convenient than coins, being lighter to carry and easier to handle in large quantities. One more advantage of paper money is ease in guarding against forgery. The denominations of notes can be arranged to suit price levels in common use. c) Bank deposits. Amounts placed to the credit of customers accounts at banks are the same as money. These deposits can then be transferred from one person to another by means of cheques. So cheques are not money, but only orders to pay money. Any means of payment which people are forced by law to accept in settlement of a debt is legal tender. M oney need not be legal tender and in fact bank deposits, which are money, are not legal tender. If legal tender is not generally accept able, then it will cease to be money. In Germany at the end of the Second World War, marks, which were legal tender, were often not accepted in payment whereas cigarettes often were. M oney functions as a medium of exchange, a measure of value and store of value. a) Medium of exchange. This is the chief function of money. It overcomes the need for a coincidence of wants, since everyone wants money, which represents a claim against any goods or services which will yield satisfaction. b) Measure of value. The value of goods and services is measured in terms of money. It is then known as price.

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c) Store of value. Wealth can be kept in the form of money. The use of money as a store of value only applies when individuals are storing it; a whole nation could not do so. The value of money, like the value of anything else, is whatever it can be exchanged for. It is, in effect, its purchasing power. A rise in prices means that the value of money has fallen; a fall in prices, that it has risen. The value of money changes inversely with changes in the price level. It is highly desirable that the value of money should remain stable over the years, otherwise its functions cannot be fulfilled properly. TAS KS I. Give the English equivalents to: , , , , , , . II. Match the terms with their definitions: 1. Token money A. the form of money in which a person has a right by law to pay a debt 2. Barter 3. Legal tender 4. M edium of exchange 5. Value of money 6. Bank deposit B. the banks liabilities to its customers C. exchange of goods for goods D. any convenient and commonly acceptable means of payment E. Coins in which the metallic content is less valuable than the face value F. the quantity of goods and services that money will buy at a certain time

III. Fill the gaps with the following words: coins, money, barter, legal tender, notes, value: 1. Until a full money system has been developed, trade is usually carried on by . 2. M oney is only a claim against the real goods that have . 3. is of no use unless wealth is created. 4. Bank of England notes are to any amount in the UK. 5. Where devaluation of a currency is possible, foreigners are unwilling to accept the and of the country in question. IV. Answer the following questions: 1. What are the disadvantages of barter? 2. What are the main functions of money? 3. What is meant by the value of money? 4. Why are these functions less effectively performed if money changes in value?

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5. What is the correlation between the value of money and prices? 6. What is meant by legal tender? V. Are the following statements true or false? Correct the false ones: 1. Barter is the exchange of goods for money. 2. Bank deposits and cheques are types of money. 3. Price is the value of goods and services measured in terms of money. 4. Paper money consists of notes issued by commercial banks. 5. One of the advantages of paper money is ease in handling in large quantities. 6. Any type of money can be classified as legal tender. 7. A rise in prices means that the value of money has also risen. VI. Render the text in English: C . , . . . . . . . . , . . ( , ) , . , , , , , . , . VII. Gi ve a summary of the text.

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PRICING Price is one element of the marketing mix. A business must decide how to price its product. In making this decision it needs to consider: what are the prices charged by competitors; how prices can be used to increase sales of the product; whether the price will cover costs of p roduction. Competition based pricing. One factor which is likely to influence is the price of similar competitive products. To sell a bottle of Tresor, produced by LOreal, at 50 a bottle when Chanel 5 is selling at 30 a bottle may lose LOreal sales. On the other hand, to sell it at 10 might not increase sales because consumers might think that Tresor was a lower quality perfume. Any business needs to think carefully about the price charged by rivals. When a perfume house sets a price which is roughly the same as that set by other perfume houses, it has decided to avoid price competition. Instead, it could attempt to get customers through advertising attractive packaging or other marketing means. On the other hand, some businesses deliberat ely attempt to undercut their competitors prices. In 1993 and 1994, for instance, The Times newspapers deliberately cut its price from 45p to 30p and then to 20p a copy to raise sales. Market orientated pricing. Whilst thinking about prices charged by competitors, the worlds perfume manufacturers also use a number of other pricing strategies to raise sales and profits. These strategies are called market oriented pricing strategies because they are based on analyzing the market and its characteristics. Discounts, special offers and sales. To encourage consumers to buy, the perfume houses often run special offers. The price of a bottle of perfume might be lower if another product is bought at the same time. Discounts might be offered at a particular time of the year. Top perfumes are rarely reduced in a sale because this would affect their high class image. However, many other products, like clothes, are sold at a lower price in sales. Price discrimination. The perfume houses sell perfumes at different prices in different areas of the world. Selling the same product at different prices to different segments of the market is known as price discrimination. The perfume houses attempt to charge what the market will bear in order to earn the highest profit possible in each market. If, for example, consumers in the USA were prepared to pay a higher price for a bottle of Chanel 5 than consumers in the M iddle East, then Chanel might charge a higher price in the USA. Penetration pricing. A new competitor to the perfume market might be tempted to use penetration pricing. This is charging a lower price for a product at the

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start in order to gain market share. Once a product is established in the market, the business would raise its price. This is suitable for products where price is important in influencing spending decisions and where there is a long term market for the product. The problem with using this strategy with perfumes is that price can be linked to quality in the minds of consumers. Consumers may be happy to buy cheap sample bottles, but a low priced bottle of perfume could be seen as low quality. Creaming. Creaming (or skimming) is the opposite of penetration pricing. It is setting a high price for a product initially and lowing it later on. It is used, for instance, with hi-tech products. When video machines first came out, they cost thousand of pounds. They were bought by companies and enthusiasts who were prepared to pay a high price for a product. However, to create a mass market for the video machines, the manufacturer had to lower the price. A gain, a perfume house is unlikely to want to lower prices when a product reaches the maturity stage of its life cycle because price is often linked to image of quality with perfumes. Cost based pricing. Perfume manufacturers are in business to make a profit. Charging a price similar to competitors is one way to set prices but might lead to losses. Another way would be to base price on costs of product ion. A retailer like Superdrug might use cost plus pricing. It could calculate the cost of selling a perfume, add a make-up or profit margin for its profit and this would then be the price of the bottle. The cost is the average cost and is made up of: ~ the variable cost mainly the cost of buying the bottle from the distributor; ~ the fixed cost such as wages of staff, rent, heating and lighting. When the price covers both the average fixed and variable costs of the product, the business is said to be full-cost pricing. Sometimes, another competing retailer might run a special offer on a product line. Superdrug might respond by cutting its prices too, below the full-cost price. So long as the new price more than covers the variable cost, it will at least make some contribution towards paying the fixed costs of the business. This contribution might be far more than if Superdrug didnt cut its price and sales of the product fell dramatically. In 1993, Superdrug was, in fact, in dispute with the major perfume manufacturers. They refused to sell to Superdrug unless Superdrug charged the high prices found in retailers like Harrods. The manufacturers didnt want perfume to be sold on price. Superdrug said that its prices were based on its costs. If it had lower costs than Harrods, why should it not be allowed to sell at a lower price? The manufacturers won and have forced Superdrug to sell at higher prices than it would like to. This shows that there are many different ways to fix a price for a product.

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TAS KS I. Answer the following questions: 1. What is meant by competitive pricing? 2. Why do shops have sales? 3. Why might penetration pricing be a good price strategy to use when launching a new brand of yogurts? 4. M obile phone networks have used price creaming strategies when setting prices. Explain what this means. 5. What is meant by cost based pricing? II. Match the terms with their definitions: 1. Competition based pricing A. setting an initial low price for a new product so that it is attractive to customers. The price is likely to be raised later as the product gains more market share 2. Cost plus pricing 3. Creaming or skimming B. setting a price based on an analysis of the market C. fixing a price by adding a percentage profit margin to the cost of production of the good or service D. the extra which is added to the cost of a product to cover the profit to be made E. setting a price based on the charged by competitors for similar products F. the percentage added to the cost of production which equals the profit on the product J. selling product at a high price, sacrificing high sales in order to earn high profits I. setting a different price for the same product in different segments of the market

4. M arket orientated pricing 5. M ark-up or profit margin 6. Penetration pricing 7. Price discrimination 8. Profit margin

III. Give synonyms to the words and expressions from the text: Effect, keep away from, method, pleasant-looking, example/case, planning of an action, special features, region, part, obtain/get, at the beginning, let. IV. Render the text in English: , . , . -

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: . , . , , . , . , , . Bausch&Lomb, 70- . , 50% . Cooper-Vision , Bausch&Lomb 10-15 . V. Give a summary of the text.

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THE PROBLEM OF INFLATION Of the large number of definitions of inflation to be brought forward by economists, the simplest and most widely understood is that inflation is a period of rising prices. Further consideration though, reveals that in the United Kingdom some prices have reduced since the Second World War, the examples are color television sets, calculators, etc. Does this mean that there is no inflation? The answer, obviously, is no; the measurement of inflation depends upon the general price level and it is perfectly possible for the general price level to rise while specific prices fall. The general price level must therefore be a form of average. The normal m ethod of calculation is by the use of price index. The best known price index, and the one usually chosen to indicate the level of inflation, is the Index of Retail Prices. Further points arising from the index are as follows: The Inflation Rate The inflation rate can be calculated by dividing the change in the index of retail prices over the last year by the starting index, and multiplying the result by 100. If we analyze the following table, we can make any calculations. Year 1977 1978 1979 Year 1977 1978 1979 General Index of Retail Prices in the United Kingdom Jan. Feb. Mar. Apr. May 172.4 174.1 175.8 180.3 181.7 189.5 190.6 191.8 194.6 195.7 207.2 208.9 210.6 214.2 215.9 July 183.8 198.1 Aug. 184.7 199.4 Sept. 185.7 200.2 Oct. 186.5 201.1 Nov. 187.4 202.5 June 183.8 197.2 Dec. 188.4 204.2

The calculation for M ay 1979 is: Inflation Rate =

The purchasing power of the pound Until the middle 1960s the rate of inflation was relatively low: 2-3 per cent per annum. So-called creeping inflation took place. Economists found no reason for alarm in this. In fact, after the period of depression between the wars, when for a time prices fell, some commentators were enthusiastic over rising prices. It became generally accepted in economic literature that a period of gradually rising prices was a good thing since it made businessmen optimistic about their chances of profit mak-

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ing. Inflation was welcomed as a sign of growth and prosperity, and no sense of danger prevailed since it was gradual. In more recent years an annual rate of 10 per cent has looked desirable but it highlights an obvious danger: when is gradual inflation no longer gradual? M ost people would agree that 25 per cent per annum is too high a rate to be tolerable. But how much could be desirable? Accept inflation as a small friend and it can easily become a large and difficult enemy to deal with. The task is made more difficult by widespread disagreement over the causes of inflation. Economists of the nineteenth and early twentieth centuries were convinced that a close link existed between the amount of money circulating within an economy and the level of its prices. Increases in the quantity of money were likely to lead to increases in prices. It was expressed in the formal way by the American economist Irving Fisher, using what became known as the Fisher Equation. The modern theorists are still maintaining that the quantity of money has a direct influence upon prices. However, one of the major problems is the uncertainty surrounding the time period which elapses between an increase in money and an increase in prices. Six months to a year and a half is not accurate enough. During the years when monetarism was out of fashion, changes in the level of aggregate demand were used to explain why inflation occurred. Called demand inflation it takes place when supply cannot respond (i.e. when most of all resources are already employed) and leads to a rise in prices instead of to extra output. Cost inflation assumes that the collective upwards push of costs is sufficient to raise the general level of prices even though there has been no noticeable increase in the level of aggregate demand. In order to grasp the idea of cost inflation it is necessary to distinguish between costs in total and costs per unit of output. For example, wage rates the rates paid to each employee can rise and yet the wage element in each unit of output can still fall, provided that output per man rises. In such a situation any extra payments are provided for by extra sales. Then inflation is not fueled, since more output is forthcoming and costs per unit should not rise. However, in markets for labor resources the granting of one group often leads to demands that such deals be extended to other groups even though no extra productivity is fort hcoming. And that is a source of cost inflation. Yet another explanation for inflation, bottleneck inflation, is a close relative of both demand and cost inflation. Bottleneck inflation assumes rising costs and rising prices long before all resources are fully employed. The basis for this assumption is that specific shortages occur in some areas bottleneck areas of the economy where demand is unusually heavy. The effects of inflation can be classified at three levels: international, insular and personal. Let us examine each in turn. International Aspects of Inflation

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By definition, trading nations function within an international community. In the international field, inflation rates have to be identical between all trading partners if trading flows are to remain undisturbed. In a world where most governments are making efforts to reduce their domestic rates of inflation, the rate of inflation in a country has come to have particular international significance. The community which lives by trading in finance regards its governments record with regard to inflation rate as an indication of its ability to control the domestic economy. When inflation rates exceed the tolerances allowed for by a government, selling of that countrys currency often takes place. The currency consequently depreciates. The effect of this is to make inflation even worse, especially if the country concerned is a major importer of raw mat erials and semi-finished goods. Inflation gets worse because, when a currency floats downwards or is devalued, import prices rise. When disparate rates of inflation exist between nations, cooperation in the monetary field becomes extremely difficult. Insular Aspects of Inflation Consumers soon become accustomed to inflation. The habits of saving for consumption are soon forgotten. As far as consumers are concerned the immediate purchase of goods, especially consumer durables, is the rational course they have developed inflationary expectations. This means that they expect the present inflation to continue, and perhaps, even to get worse. In such a situation the obvious line of action is to buy now before the price rises. Of course, that only fires inflation. The other aspect is that when inflation persists it becomes increasingly difficult for bus inessmen and investors to calculate real rates of return on capital expenditures.

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Personal Aspects of Inflation Inflation influences the behavior of individuals within an economy. Those who depend upon fixed sources of income find that the real value of their income flow is diminished. But there are others who can take advantage of infl ation. In times of inflation fixed debt tends to diminish in significance. Hence those who have mortgages find that their incomes rise but the repayments do not and the real cost of borrowing diminishes. Vast numbers thus have at least some vested interest in continued inflation. Yet another way in which inflation affects the behavior of individuals is that it encourages them to find inflation-proof outlets for accumulated funds. Those commodities in fixed, or almost fixed, supply tend to increase in price ahead of the general rate. Such hedges against inflation enable a person to escape the worst rigors of an unfavorable economic climate. The above gives the impression that causes of inflation are simple to understand and easy to regulate. This is far from the truth. In practice many governments seem powerless to reduce inflation to manageable rates. This is probably because real-life inflations are caused by a variety of factors which almost by chance coincide. TAS KS I. Answer the following questions: 1. What is inflation? 2. How are prices increases measured? 3. Have rising prices always been regarded as a threat to the stability of an economy? 4. Why is inflation now a disadvantage? 5. What might be the consequences of inflation? 6. Are there no explanations for inflation? 7. Is inflation inevitable? II. Match the terms with their definitions: 1. Inflation A. the kind of inflation that is caused by rising costs of labour and materials, not by increased demand 2. Inflationary gap 3. Creeping inflation 4. Demand inflation 5. Cost inflation B. the lowering of the quality of products in general in order to prevent, and so to hide, an increase in price C. a rise in the general level of prices D. a slow rise in the level of prices of below 2 or 3 per cent per year E. inflation that would be much greater if the government were to remove controls on prices and wages

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F. that part of government spending which is not covered by taxes or borrowing from the public, but is met by issuing new paper money G. an extreme form of inflation, when the money supply is being increased very rapidly, resulting in an increase of over 20% of the price level annually H. the kind of inflation caused by an excess of demand over supply resulting in a decrease in the value of mon ey I. a state of inflation that gets worse and worse, because higher prices result in demands for higher wages; and higher wages increase costs and so cause higher prices III. Explain the following terms: 1. the level of inflation 2. the output per man 3. consumer durables 4. the governments record 5. inflationary expectations 6. inflation-proof outlets 7. hedges against inflation IV. Render the text in English: . , . , (rationing), . , . ( ) . , , , , . V. Give a summary of the text.

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BANKING Banking centers around money and financial services. Virtually any activity involving money or advice about financial matters is undertaken by all the commercial banks. The immediate service offered by the bank is the receipt for deposit of coins, notes and cheques and the cashing of cheques, through current accounts. Coins and notes in circulation have the status of legal tender that is to say they must be taken in payment of a debt although the extent to which this applies in the case of coins is deliberately restricted for the sake of convenience. The most common means of payment, particularly for significant sums of money, is a cheque since it is both safer and more convenient than using cash. However, it is not legal tender and creditors can refuse to accept it if they wish. Normally both national cheques and travelers cheques are readily negotiable if the bearer has some means of proving his identity and the creditor can be sure that the cheque will be honored. To assist the use of cheques banks now provide their customers with bankers cards which, when used in association with a cheque, will guarantee it up to a stated maximum. If a customer wishes to make payments of large amounts of money by cheque and is not known to the creditor, then he may obtain a cert ified cheque from his bank. Such a cheque is signed by the bank and therefore payment is guaranteed. Those trading overseas, or in conditions where there may be a significant time lapse between sending out goods and their receipt by the customer, may use a Bill of Exchange as a means of payment. This is really a post -dated cheque which assures the creditor payment but also gives the buyer opportunity to inspect the goods before the transaction is completed. Those whose credit standing is unknown may have to get the Bill accepted before a creditor will take it. Such a p rocess guarantees payment and most work of this kind is undertaken by the merchant banks. Because Bills are post dated creditors may have to wait some time for their money. They can overcome this problem by endorsing the Bill and then either discounting it with a Discount House or a bank or passing it on to another trader in settlement of a debt of their own. By the time it comes to maturity a Bill may have passed through several hands and on each occasion it must be endorsed. The commercial banks participate in this activity in two ways: in part by lending money to the discount houses and in part by discounting bills for their own customers. CENTRAL BANKING: AN OVERVIEW A major sector of any modern monetary system is the central banking sy stem, which is imp ortant to the functioning of the private economy and the fiscal operations of the national government. Central banking is an activity separate from ordinary commercial banking, because a central bank usually has few transactions with private customers, dealing primarily with commercial bank and with the national government. The roots of the central banking system go back more than two centuries. Nevertheless, central banks as we know them today are relatively recent development. Like electric power and the automobile, central banks are pretty much the products of the twentieth century. For example, at the turn of this century no central bank existed in any country of Western Hemisphere. The central banking

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system for the United States (Federal Reserve System) was created late in 1913, and the Bank of Canada appeared in 1934. The characteristics of the Modern Central Bank. It is difficult to give a brief definition of a central bank that is both comprehensive and accurate. The nature of a central bank depends largely on its function, which vary according to time and setting. Essentially, a modern central bank performs at least three functions: managing the nations monetary system, serving as a bankers bank, and acting as fiscal agent for the national government. Monetary control. The most important characteristic of the modern central bank is its control over the monetary system for facilitating the achievement of national economic goals. In exerting this control, the central bank regulates the supply, cost, and availability of money and credit. M onetary control is enhanced by the central banks monopoly on the banknote issue and its ability to create and destroy monetary reserves by its lending and investing activities. Since monetary control is a prerogative of the sovereign government, the central bank is a public service organization that emphasizes the national interest rather than its own profit or welfare. Bankers bank. Being a bankers bank implies that the central bank provides services to the commercial banking system similar to those that the commercial banking system performs for individuals and business firms. Commonplace services that nevertheless promote the smooth operation of the monetary and banking systems include, for example, the clearing and collecting of checks, distributing coin and paper currency to commercial banks, and providing some degree of supervision and regulation over the activities of commercial banks. Fiscal agency function. In its role as a fiscal agent, the central bank serves as a banker for the national government. Here the central bank receives, holds, transfers, and disburses funds of the central government. Central and commercial banking functions involve widely differing obje ctives and methods, and therefore these functions are kept separate. The central bank orients its policy primarily toward the attainment of national economic objectives, whereas the commercial banking system is essentially profit -motivated. TAS KS I. Answer the following questions: 1. Why is the central banking system a major sector of any monetary system? 2. How long is the history of modern central banking? 3. What are the functions of a central bank? 4. What does the nature of a central bank depend on? 5. What are the main distinctions between central and commercial banking? II. Are the following statements true or false? Correct the false ones: 1. The object of central banks in the monetary field is to support the Governments activities in other fields.

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2. Every bank issues its own notes. 3. Private individuals and businesses often deal with central banks. 4. Central bank is a bank officially appointed by law to work closely with the Government. 5. Commercial banks perform the duties of issuing and managing the countrys currency. 6. The commercial banking system is profit motivated. III. Render the text in English: 1913 . , . Fed , , . , 14- . , 4- . Fed . Fed . Fed . 12 , . , , . IV. Fill in the blanks with proper words or word combinations: board of directors maximizing profit public and private influences Federal Reserve bank public welfare top executive officers stockholders

The United States is divided into 12 Federal Reserve Districts, each containing a . A total of 25 branches serve particular areas within the various districts. Blending , the corporate organization of the Federal Reserve banks resembles that of commercial banks. Each Reserve bank is headed by a who select the . Basic differences as compared with commercial banks include the absence of powers held by in private corporations and orientation toward enhancing rather than . V. Give a summary of the text.

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LOANS IN THE UNITED KINGDOM In the process of social production there can be saved up stocks of money, that are kept in the Treasury, or funds, that can be accumulated by large insurance comp anies, banks, pension funds as well as by private savers. These stocks could be used to make different loans. Sometimes the government lends this money to various programs in education, medicine, culture, construction, to support small business, etc., the interest rate to be paid being very low. We can instance a special program called Loan Guarantee Scheme aiming at supporting small business in the United Kingdom. At 3% interest the government guarantees 70% of the money lent by the bank to a busines sman. M ore often the funds are used to earn extra profit. The interest rate is determined as the equilibrium price in the loan market, that is that part of the capital market which is concerned with the provision of medium-term and long-term loans to governments, commercial houses and industrial companies, or in the money market for very shortterm loans. Thus, a loan is money lent on condition that interest will be paid at an agreed rate and that the amount lent will be repaid at an agreed time or in an agreed manner. There exist many types of loans in UK economy and each of them has its specific features. Such loans as balloon and bullet are repaid irregularly. The balloon loan is a loan where the repayments are unevenly distributed throughout the life of the loan. The borrowers usually make larger repayments as soon as they have got a possibility to return money; the larger repayments are known as the balloons. When the borrower pays only interest during the life of the loan and then repays all the principal as the final repayment, the loan is called a bullet loan. There exist loans on mort gage of property. You will pay only interest during the period of the flat loan, the amount borrowed being repaid at the end of the period in cash or by arranging another loan. The table loan is repaid by regular monthly installments, and each consists partly of interest and partly of some of the amount borrowed. Thus at the end of the period of the loan all the interest and the whole of the amount borrowed will have been paid off. The name table relates t o the table issued by building societies stating the amount of the monthly payments at various rates of interest and for various periods of loan. A building society can make the interest-only-loan to a retired person who pays only interest, leaving the principal to be repaid when the owner sells the house or when he dies. A bank can lend money to a private person (personal loan) for the purpose of personal expenditure, such as payment of household bills or for buying consumption goods such as a motor car, boat, furniture, etc. Such loans are usually repayable by installments in less than two years and are often made without security; the rate is therefore high. The hard and the soft loan is made by one country to another on condition that the borrower repays it in the lenders currency (the hard loan) or the borrowers currency (the soft loan). There exist loan or state clubs and societies. A loan club is often a private club whose members, usually low-paid workers in a factory or office, pay regular amounts into a fund from which short-term interest-bearing loans are made to mem-

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bers who request them during the year. Fines are charged for late repayment, and interest is paid to members who deposit money with the club. On a certain date each year, usually just before Christmas, the entire fund is shared out among the members. These are only a few examples of loans made in the United Kingdom. TAS KS I. Answer the following questions: 1. What stocks of money can be used to make loans? 2. What conditions should be taken into account to make loans? 3. When is the interest rate very high and when is it very low? 4. When do you pay only interest during the life of the loan? 5. What kinds of loans are made on mort gage of property? 6. Do employees earning low wages have any opportunity to borrow money? 7. Is it beneficial for a lender to make personal loans? 1. Loan II. Match the terms with their definitions: A. the department responsible for the finances, the management of the monetary system, etc. B. the power of a business to earn profits C. a state of balance when the total demand is satisfied by the total supply D. a series of regular payments made under agreement in order to settle a debt E. an amount of money borrowed by an individual or a company F. the thing given as a security G. a charge paid to a person or organization that has lent you money H. amounts of money III. Fill in each blank with one word from the box to illustrate typi cal collocations: interest condition repayments security money society rates business loan

2. Interest 3. M ortgage 4. Funds 5. Installment 6. Treasury 7. Equilibrium

1. to support to run______ small 3. to lend to borrow_____ to deposit 5. to distribute uneven_______

2. to pay to sell_____ compound 4. to agree on to accept______ to meet 6. to arrange to make________

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monthly 7. various agreed________ interest

personal

IV. Render the text in English: , , , , , . , . (loanable-funds theory), , , , , . V. Give a summary of the text.

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MARKET RES EARCH Businesses need information if they are to make good decisions. One way of gaining that information is by carrying out market research. There are various types of market research. Businesses need to decide which market research methods are mostly likely to give them the information they need. M any businesses are product orientated. This means that they design and make a product, and then try to convince consumers to buy it. An example might be a drug company, like Glaxo, developing a product to help consumers with an illness and then advertising it. Businesses can also be market orientted. This is where they try to find out what consumers want before making the final product. In 1993 Pepsi Cola launched Pepsi M ax, a sugar free cola drink d esigned to taste like the original. Before the product was sold, Pepsi tried to find out the type of product consumers wanted. Finding out about what consumers want and need, and what makes them buy, is called market research. Businesses which are mainly product orientated risk spending a large amount of resources launching a product which proves to be a failure. Researching the market helps reduce this risk. It should focus research and design effort onto products which have a chance of success in the market place. When the product is launched, a carefully researched product stands less chance of failing. The stages of market research are: what is the question which the business wants to find an answer to? what information is needed to answer this question? what method of market research will be used? collect the data; analyze the data, draw conclusions and make recommendations. M arket research attempts to find the answers to questions a business might have about its market. For example, in 1991 the marketing department of Pepsi-Cola started with this question: would launching a new product increase total sales of its products? The market researcher must then decide what information might help answer this question. Pepsi-Cola wanted information about the existing pattern of sales in the market and how the market had changed. It hoped to be able to identify a segment of the market which it could sell to. Pepsi also wanted consumers to tell it about the sort of new product they would like to buy. The market researcher then decided how best to collect this information. There are two ways of doing this: desk research and field research. Pepsi-Cola used both. The information is then collected

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and analyzed. Finally, the business has to make a decision about what to do in the light of the information formed. Pepsi-Cola decided to launch a new product, Pepsi M ax. Desk research involves the use of secondary data. This is information which is already available, both within and outside the business. Information within the business. Businesses collect information routinely. Invoices, for instance, will tell them how much they sell and who they are selling to. Accounts will give information about the value of sales and costs of production. Pepsi knew, for instance, that sales of ordinary Pepsi were far higher t han sales of Diet Pepsi. Information from outside the business. Businesses can also collect information which is available from sources outside the business. Some of these sources are: government published statistics, such as consumer spending figures; reports such as M onopolies and M ergers Commission Reports; the media reports in newspapers, magazines, on radio and on television; trade associations; research organizations reports prepared by specialist market research organizations such as M intel or M ori; articles published in academic journals. Pepsi was able to use market research reports about the soft drink market. The results showed that both in the USA and outside North America Diet Pepsi and Regular Pepsi sales were less compared to its main rival, Coca Cola. Pepsi used this information to ask a market research question: how could Pepsi be changed so that sales increased? Field research involves the collection of primary data information which no one has yet collected. It is collected specially for the particularly piece of research. Primary data is collected through direct investigation, usually in one of three ways observation, survey and experiment. Observation. Looking at and recording what people do and how they behave can be important. For instance, a supermarket may find that sales in one aisle in the store are very poor. By observing people, it would be possible to see whether, for instance, the problem was that people were not going down the aisle at all, or whether there was reasonable traffic down the aisle but customers werent buying. However, observation cant tell the supermarket anything about why shoppers are behaving in this way.

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Survey. A survey usually involves asking question of respondents people or organizations reply to the questions asked. Pepsi surveyed consumers outside the USA about Diet Pepsi. What it found was that Diet Pepsi had two problems. Firstly, drinking Diet Pepsi left many consumers with a slightly bitter after-taste which was caused by the use of artificial sweeteners. Secondly, many consumers, particularly in Latin American countries, had a negative image of diet products. They saw them as effeminate or linked them with people who had problems such as diabetes or being overweight. There are different ways of conducting surveys. A postal survey, where questionnaires are sent through the post, or a newspaper survey, which readers are invited to fill in and return, are cheap. Telephone surveys, personal interviews and consumers panels are more expensive because an interviewer has to be employed to interview customers. However, only a fraction of customers sent a postal survey will respond. A much larger proportion of those approached will take part in telephone and personal interviews. The interviewer can also help the respondents understand what questions mean and how they should be answered.

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If the interview is in a persons home, products, packaging, etc. can also be shown so that reaction can be recorded. A consumer panel, where a group of people meet together, allows researchers to see how people react in a group situation to a product or idea. Surveys can only be useful for market research purposes if the questions asked are appropriate. For instance, the name of Pepsis new product, M ax, came from asking consumer panels in a number of countries to choose the best name out of 13 suggested (a closed question because there is a definite answer). Pepsi would have learnt less if they had simply asked the panels to invent a name (an open question because there are so many possible answers). This is because it is unlikely that two panels would have come up with the same name. Pepsi would not then have known which was the most popular. S ampling. A survey cannot ask every customer for his opinion. Only a fraction or sample of customers can be surveyed. To be useful, the sample chosen must be representative of all consumers (the population). In a random sample, every potential respondent has an equal chance of being chosen. Random numbers can be used to do this or it can be done by picking people out of a hat. A small random sa mple, however, may not be representative. This means a large sample to be taken, which is costly and takes time. To reduce the length of time, a systematic sample can be used. This is where every 100th or 1000th person on a list like a telephone directory or the electoral re gister is chosen. In a quota sample, the sample is broken down (or stratified). For instance, Pepsi might know that one out of ten people who bought diet colas were aged 0-14, seven out of ten 15-24 and the rest were over 25 years old. So out of a sample of 100, Pepsi would ask 70 people (7 out of 10) aged 15-24 to complete a survey. One problem with a quota sample is that any people who fit the description can be asked to complete the survey. So Pepsi, wanting to find seventy people aged 15-24 to complete a survey, could ask the first seventy 15-24 year olds who came out of a M cDonalds in London. This may not be very representative of all 15-24 year olds. A stratified random sample may get round this problem. It is a quota sample where all the representatives, the people being interviewed, must be chosen at random. For the sample to be random, Pepsi would have to find some way of selecting 70 young people through pure chance. Experiment. M arket researchers can use experimental techniques. To launch a new product is often very costly. Instead, products could be tested on groups of consumers to see whether they are acceptable and likely to sell well. For

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instance, Pepsi tried out its new formula diet Pepsi M ax with consumer panels. They gave a favorable response. If they hadnt, Pepsi would have gone back and produced another formula. The next stage was to test market M ax in two countries, Italy and the UK. These two countries were chosen because British and Italian consumers have different tastes. If the product was a success in both countries, then it was likely that it would be successful throughout the world. Decisions. The purpose of market research is to help a business come to a decision. Pepsi thought that there was a potentially large market for a new diet coke by looking at market sales figures. It found out what consumers didnt like about its existing product and designed a new product. Consumer trials showed t hat the new product was well liked. Finally, Pepsi decided to launch Pepsi M ax in some countries. TAS KS I. Answer the following questions: 1. What is the difference between a market orientated and product orientated bus iness? 2. What is the purpose of market research? 3. What are the stages of market research? 4. What sources of information are available to someone undertaking desk research? 5. What are field research and desk research? 6. A shopping center wants to find out how many shoppers visit the cent er. How could it gather this information? 7. What differences are there between a postal survey and personal interviews in surveys?

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8. A business wants to take a random sample of people in the Perm area. How could it do so? 9. A chocolate manufacturer wants to find out if a new bar of chocolate is going to sell well. How could it find this out without having to go to the expense of launching the product nationally? II. Match the terms with the definitions: 1. Research involving asking questions of people or organizations. 2. Information which already exists, such as accounts and sales records, government statistics, newspaper articles or reports from advertising agencies. 3. Small group out of a total population which is elected to take part in a survey. 4. Finding out information from secondary data. 5. The process of collecting primary data. 6. A person who or an organization which answers questions in a survey. 7. A business which develops products which have been researched and designed to meet the needs of consumers. 8. A list of questions to be answered by respondents, designed to give information about consumers tastes. 9. Business which develops products with little or no market research and which it hopes will prove successful in the market. 10. The process of gaining information about customers, competitors and market trends through collecting primary and secondary data. J. product oriented business I. respondent H. market research C. survey D. secondary data E. Sample F. market oriented business G. questionnaire A. desk research B. field research

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III. Fill in the gaps with the following words: characteristics, acceptance, market segment, analysis, carry out, techniques, products, surveys, observation, research, panels, questionnaires, desk: M arket research is the systematic and objective classification, collection, _______ and reporting of information about a particular marketing problem. M arket research uses a variety of ______ such as in-depth interviews and group _____ which can be used primarily for motivational _____; in addition, field studies can be undertaken using ______ and interviews, and _____ research of records and data, these being used primarily for marketing intelligence. Finally, techniques such as consumer _____, market experiments and _____ may be used to gain information about existing ____. Businesses _____ market research to enable them to identify market tends; to find out about market _____; to forecast market potential; to analyze market share; to find a _____ ______; to test consumer _____ of new and existing products. IV. Render the text in English: . , , , . , ( ), . . : , ; () , , , , ( , , , , , ). VI. Give a summary of the text.

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MARKETING The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives. or? A business function (and a function of non-business enterprises) that often includes elements of sales, advertising, product development, research, pricing and other activities i.e., organizational tasks. or? Any activity which supports the primary purpose of any organization to gain and maintain a satisfactory customer base, or more broadly, to gain and maintain the support of important stakeholder groups. or? A force within the organization that encourages socially and ethically responsible behavior in the market place. or? A management orientation that suggests the objective of an enterprise is to identify and satisfy customer values better than competitors can or will do. This characterization of marketing implies that all organizations compete for markets (customers) and/or resources and that a major objective is to favorably differentiate your organization from that of your competitors. There is little universal agreement on the best or right definition of marketing, although academics, particularly economists favor the first one, as a process. Concepts of management and organization evolve and change over time, and have more or less value depending upon a particular organizations circumstances. This is also true of marketing. From simple exchange processes that served the needs of ancient civilizations to the enormously complex processes of today, the foundation of exchange is creating or adding value for the buyer. And what is of value to a buyer is very often far from clear. There are a few rules which can help us identify marketing values, and to compete for customers more effectively. Values are derived and influenced by what buyers think they know about the economy, technology, competitive offerings, and experience if any, with our firm as a supplier. Buyers learn from experience and their values change. Think about your first home purchase, airline flight or automobile, and what was important to you then and what is important to you now as a buyer.

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The process, functions, activities and forces of marketing provide a business with an enormous (and untapped) array of weapons, tools and techniques that are potential sources of competitor advantage. In his book Marketing to Win (Harper&Row, 1999), Frank K. Sonnenherg, national director of marketing in Ernst&Youngs management-consulting group, writes about dramatic developments in the world marketplace that predicate deep changes in the way we manage and market our goods and services. The bottom line, he challenges, is if you dont change now, you may as well start filling your scrap-book with memories of today. It is unlikely you will have much to show for tomorrow. Two companies that excel in their marketing stances are Microsoft Corp. and Alcoa. Both of them recognized and mastered a leading-edge marketing mentality years ago, which propelled them into the world-class arena and to the top of their respective industries. In a truly world-class organization, marketing is a conduit through which superior processes turn out innovative products to a worldwide audience. That channel operates in two directions. Initially, it transports valuable information about market needs and deficiencies into the company, where it is translated into superior products and service. These, in turn, are released into the marketplace. The key to surviving the politically and geographically fluid markets of t omorrow is to understand that the only universal is change. Companies must be astute enough to realize that there is no one right way, and to be agile enough to respond responsibly and effectively to changing dynamics. What links companies such as M icrosoft and Alcoa, jettisoning them into the world-class elite, is their continuing tradition of exploring frontiers. Both are mavericks not content to sit complacently atop their respective kingdoms, but are driven, as overachievers, to push past the boundary of what we know, of what sells now, and of what is safe. On the face of it, M icrosoft and Alcoa appear to have little, if anything, in common. The former is an upstart pioneer and top performer in the young world of high tech. And the latter is as familiar as an old friend in a mature, heavy manufacturing industry whose byproducts have been a part of American life for as long as most of us can remember. Yet each is a dynamic industry leader and innovator, wholly responsible for nudging at the boundaries that define their businesses. It is this unique ability to grow the marketplace that makes these companies world-class marketing entities

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worthy of a closer look. To get results in the marketplace, your focus must be on positioning your firm and differentiating your services from the competition. TAS KS I. Answer the following questions: 1. What basic issues does marketing incorporate? 2. What propelled M icrosoft and Alcoa into the world-class arena and to the top of their industries? 3. How does marketing work in a truly world-class organizations? 4. What are the two primary directions marketing operates in? 5. What is the key to surviving the politically and geographically fluid markets of tomorrow? 6. Why do companies such as M icrosoft and Alcoa have much in common? 7. How would you define marketing? Why? 8. Why do you think marketing is important to a companys growth? 9. What is meant by both are mavericks? II. Paraphrase the following statements: 1. M arketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives. 2. M arketing is a business function that often includes elements of sales, advertising, product development, research, pricing and other activities. 3. M arketing is any activity which supports the primary purpose of any organization. 4. M arketing is a force within the organization that encourages behavior in the market place. 5. M arketing is a management orientation that suggests the objective of an enterprise. III. Render the text in English: . . , , , . , . , -

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. , , . IV. Give a summary of the text.

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CONS UMER CHOIC E Economics is about scarcity, about social situations, which require that choices be made. The theory of consumer behavior deals with the way in which scarcity impinges upon the individual consumer and hence deals with the way in which such an individual makes choices. This consumer may, but need not be, an individual person. Families and households also make collective consumption choices on behalf of their members. The theory takes the consumer unit as given. It therefore presents us with an important instance of how social sciences, such as sociology and social psychology, which deal, in part, with the way in which people organize themselves into household and other units, could complement economics . The theory of consumer choice has many applications. It enables us to deal with the selection of consumption patterns at a particular time and the allocation of consumption over time, and hence with saving. The individual supplying labor can be thought of as simultaneously choosing an amount of leisure time, so the same theory is relevant there as it is when we come to consider behavior in the face of risk. M oreover, in constructing a theory to deal with problems such as these, we are forced to think carefully and to define precisely, such much abused terms as real income and the cost of living, so that our theory gives us many valuable insights into matters of potentially considerable practical importance. In order to derive the model of choice-making we need to describe first of all the logical structure of the choice problem which faces any consumer. We will find it helpful to think of that structure as being made up of three components. First, we must consider the items which the consumer finds desirable, the object of choice. Secondly, since the desirability of an object does not necessarily imply that it is available to be chosen, we must consider any limitations that might be placed on the alternatives available to the consumer, the constraints upon choice. Finally, because choice necessarily involves the process of selection among alternatives, we must consider the way in which the consumer ranks the alternatives available, the consumers tastes or preferences. The objects of consumers choice are goods and services, yielding utility, which may be ordered and (in principal) measured. The consumers budget constraint shows how the upper limit on consumption (usually present disposable income) may be allocated among consumption patterns or goods at given prices. The

The social sciences, such as sociology and social psychology can compl iment the study of economics as they deal, in part, with the way in which people organize themselves into household and other units. 73

position of the budget line is determined by income and price alone. Its slope reflects only relative prices. Consumer tastes can be represented by a map of non-intersecting indifference curves. Alon g each indifference curve, utility is constant. Higher indifference curves are preferred to lower indifference curves. Since the consumer prefers more to less, indifference curves must slope downwards. To preserve a given level of utility, increases in the quantity of one good must be offset by reductions in the quantity of the good. Indifference curves reflect the principle of a diminishing marginal rate of substitution. Their slope becomes flatter as we move along them to the right. To preserve utility, consumers will sacrifice ever smaller amounts of one good to obtain successive unit increases in the amount of the other good. M aximizing consumer utility generates an equilibrium where the budget constraint and the highest possible indifference curve are t angential. At any point other that equilibrium, the consumer can substitute one good for another and increase utility. In equilibrium the marginal rate of substitution between goods is equal to their ratio of prices. Income-consumption and price-consumption curves describe how the quantity demanded of a good alters with variations in income and price. At constant prices, an increase in income leads to a parallel outward shift in the budget line. If goods are normal the quantity demanded will increase. A change in the price of one good rotates the budget line around the point at which none of that good is purchased. Such a price change has an income effect and a substitution effect. The income effect of a price increase is to reduce the quantity demanded for all normal goods. The substitution effect, induced by relative price movements alone, leads consumers to substitute away from the good whose relative price has increased. In a two-good world, a good whose quantity purchased moves together with the changes in the price of the other good is called substitute. That, whose quantity moves in opposite directions to the other goods price change is a complement. The Engel curve maps quantity demanded of one good against changes in income. The ratio of the marginal propensity to consume (slope of the Engel curve) to the average propensity to consume (ratio of quantity demanded to income) is known as the income elasticity of demand. The demand curve relates quantity demanded of one good to its own price. The own price elasticity of demand is given by the slope of the demand curve (treating quantity as the dependent variable) divided by the ratio of quantity demanded to

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price. The cross elasticity of demand measures the proportional change in the quant ity demanded of one good to a proportional price of another. Transfers in cash and kind. Cash transfers allow consumers to spend the e xtra income in any way that they desire. Transfers in kind may limit the consumers option. Where they do, The increase in consumer utility will be less than under a cash transfer of the same monetary value. Yet transfers in kind are politically pop ular. The electorate wants to know that money raised in taxation is being wisely spent. Some who favor transfers in kind will argue that the poor really do not know how to spend their money wisely. One view says that people can best choose for themselves, whereas the other says that people may not act in their own best interests. This issue is not merely one of economics but also of philosophy, involving wider questions such as liberty and paternalism. In so far as people are capable of judging their own self-interest, economic analysis is clear: people will be better off, or at least no worse off, if they are given transfers in cash rather than in kind.

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TAS KS I. Answer the following questions: 1. What does the theory of consumer goods enable us to do? 2. What are the components of the logical structure of the choice problem? 3. What is the difference between a substitute and a complement? 4. When do we have an income effect and a substitution effect? 5. How a given level of utility can be preserved? 6. How utility can be preserved? II. Match the terms with their definitions: 1. Objects of consumer A. relates quantity demanded of one good to its own choice 2. Engel curve price B. generates an equilibrium where the budget constraint and the highest possible indifference curve are tangential 3. M aximizing consumer utility 4. Consumer tastes 5. Budget constraint 6. Indifference curves C. can be represented by a map of non-intersecting indifference curves D. maps quantity demanded of one good against changes in income E. are goods and services, yielding utility which can be ordered and measured F. shows how the upper limit of consumption may be allocated among consumption patterns or goods at given prices G. reflect the principle of a diminish marginal rate of substitution

7. Demand curve

III. Fill in the gaps: 1. The position of the budget curve is determined by . 2. Consumer tastes can be represented by a map of . 3. At constant prices, an increase in income leads to a parallel outward shift in . 4. Income-consumption and curves describe how the quantity demanded of a good alters with variations in income and price.

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5. may restrain the choices a consumer can make. 6. In equilibrium substitution between goods is equal to their ratio of prices. IV. Render the text in English: 19 : , , , ? , , . , , , , . . , . , , , , , , . - , , , , , . , , .

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Part II. Review Tests TES T 1 (The S cience of Economics; Macroeconomics and Microeconomics; The Future of Economics; Economic S ystems: Two Important Distinctions) I. Match the terms with their definitions: 1. Goods A. a reduction in the level of total spending resulting in lower levels of trade, profits, and prices 2. Boom 3. Deflation B. the raw materials, tools and machines employed in the production process C. the branch of economics concerned with aggregates, such as national income, consumption, and investment D. a period of high economic growth E. commodities that are tangible, usually movable, and generally not consumed at the same time as they are produced F. an economic condition characterized by substantial unemployment, low output and investment, etc. G. the doctrine of unrestricted freedom in commerce, especially for private interests H. an institutional arrangement that fosters trade or exchange

4. M arket 5. Slump

6. M acroeconomics

7. M eans of production 8. Laissez-faire

II. Put the words in the correct order: 1. Restrictions, can, on, business, do, face, with, owners, they, cap ital, many, their, what. 2. Analysis, commodities, individual, with, decisions, microeconomic, deals, particular, about. 3. Science, of, extent, it, principles, a, economics, to, set, is, analytical, the, comprises, that, a. 4. Studies, every, for, theory, commodity, general, market, simultaneously, equilibrium, every. 5. All, aggregate, we, purchases, discuss, of, behavior, total, the, can, households, and, production, to, firms, and. 6. Needs, it, prosperity, the, know, everyone, explains, to, framework, economics, of, some, because. III. Fill in the gaps with the words or word combinations in italics: Market forces, value, depression, business activity, planning, economists, welfare, inputs, economic growth, capitalist, consumer goods, national income, macroeconomics, publicly owned, management.

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1. The central problem of in the second half of the twentieth century is the of prosperity to maximize individual . 2. look forward to a future where the stockpiling of ceases to be the major preoccupation of peoples minds. 3. In former times, the free play of was left to decide the level of , and the rate of . 4. M odern economics is the study of how is determined, and how relate to each other in production. 5. The new economics can handle the cycles of which caused such distress in the early years of the system. 6. Even in countries with rigid state , where large comp anies are , those who can afford it can own a small business. 7. In the past economy tended to grow in spiral-like movements of . IV. Are the following statements true or false? Correct the false ones: 1. Capitalism can never exist with central planning. 2. The whole economy stands or falls by what is achieved for the individual. 3. The unique feature of economics is that it studies human behavior. 4. Economics shouldnt be regarded as a set body of principles. 5. M acroeconomics in modern society is largely a study of government economics. 6. Controls over economic activity are likely to decrease in the future. 7. The outcome of any macroeconomic policy is always certain. 8. There is still disagreement about the nature and scope of economic inquiry. 9. Private ownership in a country and its reliance on free markets are equivalent features. 10. As a rule, microeconomists focus on one aspect of economic behavior in order to preserve the simplicity of the analysis. V. Translate the following sentences into Engl ish: 1. , , . 2. , . 3. . 4. , . 5. . 6. , , ., . 7. , , , .

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8. : ( ) ( ). 9. , , . 10. , , .

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TES T 2 (Labour, Unemployment) I. Match the terms with their definitions: 1. Incentive 2. Labour force 3. Unemployment rate 4. Sabotage 5. Frictional unemployment 6. M oonlighting 7. Job rotation A. the systematic shifting of employees from one job to another B. the irreducible minimum level of unemployment in a dynamic society C. working at a secondary job D. an additional payment made to employees as a means of increasing production E. work requiring little specialized training F. the total number of workers available for employment in a country G. the deliberate destruction, or damage of equipment, a public service, etc., by dissatisfied employees 8. Unskilled labour H. the percentage of people without a job but registered as being willing and available for work II. Put the words in the correct order: 1. Of, increases, labour, to, moonlighting, supply, entrepreneurs, the, available. 2. Demand, a, leads, output, in, lower, and, fall, to, employment, aggregate. 3. Difference, unemployment, and, stresses, modern, the, involuntary, analysis, between, voluntary. 4. Continuing, are, retirement, of, people, capable, age, employment, in, many, productive, of. 5. Standard, force, fully, the, raising, of, depends, living, a, labour, on, effective. 6. M otivating, and, enrichment, provide, to, advancement, job, opportunities, tends, growth, for. III. Fill in the gaps with the words or word combinations in italics: Working hours, specialization, job enlargement, take on, supply, wage rate, skilled, income, competition, quality, train, participation rate, redundant.

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1. A lot of workers may be made when an industry declines in the face of foreign . 2. In , the employee is given more things to do within the same job. 3. M ore important than the actual of labour is the of labour. 4. The is the percentage of the population of working age who declare themselves to be in the labour force. 5. Some workers prefer extra to shorter . 6. Firms are often reluctant to and older workers. 7. Some people want to work at the current but cant find jobs. 8. The most significant drawback of is monotony. IV. Are the following statements true or false? Correct the false ones: 1. M oonlighting is quite common because most people like working late. 2. Frictional unemployment can be reduced. 3. The labour force comprises all those employed or willing to find a job. 4. Where there are few incentives labour is less efficient. 5. Demand-deficient unemployment occurs when aggregate demand exceeds fullemployment aggregate demand. 6. Skilled labour tends to be more specific than semi-skilled labour. 7. Structural unemployment is created when the wage is deliberately maintained above the equilibrium wage rate. 8. Labour is the supply of human resources, both physical and mental, which are available to engage in the production of goods and services. 9. Classical unemployment is involuntary. 10. All those people who are looking for work will be automat ically included in the official statistics for the labour force, whether or not they have registered as unemployed. V. Translate the following sentences into English: 1. : , , - . 2. . 3. .

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4. , . 5. , , . 6. . 7. , . 8. . 9. . 10. , , , .

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TES T 3 (Wants and Utilities, Supply and Demand) I. Match the terms with their definition: 1. marginal utility 2. price 3. wants 4. total utility 5. effective demand 6. supply A. is decided by the interaction of supply and demand B. are the basic needs of mankind C. describes the behaviour of sellers D. is the desire to buy supported by the ability to pay E. is the utility of one unit of a good or service F. is the satisfaction we receive from possessing one extra unit of a commodity

II. Put the words in the correct order: 1. wants, satisfy, which, purpose, economy, to creat e, mankinds, the, of, an, is, utilities, will. 2. is, varies, changing, demand, not, but, with, fixed, conditions. 3. the, the, of, of, of, effects, price, enterprise, an, commodity, prospects, profitability. 4. wants, wants, even, we, these, when, ot her, present, more, themselves, have, basic, advanced. 5. are, our, by, which, services, attention, intangible, personal, utilities, needs, satisfy. III. Fill in the gaps with the words in italics: Scale, commodity, goods, price, requirements, scale, substitutes, services, purchasers, competitor. 1. An increased demand raises . 2. When the price of a rises the quantity that is supplied will be increased. 3. are tangible items which either satisfy the basic of human life or make that life fuller and richer. 4. Scale of preferences is an arrangement of things in ones own mind with the most preferred items towards the top of the . 5. Demand is the quantity of goods and which are prepared to buy at a given price in a given period of time. 6. If the goods are close for one another, the price of one will be seriously affected by a lower price of its .

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IV. Are the statements true or false? Correct the false ones: 1. M ans wants and demands are unlimited. 2. Demand is set. 3. Total utility usually rises while marginal utility always falls. 4. When the price of a commodity rises the quantity that is demanded will be increased. 5. Suppliers dont vary in their ability to supply. 6. A progressive system of taxation strengthens the purchasing power of consumers. 7. If there is an alternative to a commodity, then it is no longer a necessity. 8. A decreased supply lowers market price. V. Translate the following terms into English: 1. 2. 3. 4. 5. 6. 7. 8. () 9. 10.

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TES T 4 (Market, Markets and Monopolies) I. Match the terms with their definitions: 1. Equilibrium 2. Prevailing price A. prices now current in the market B. a state of balance when all the economic forces present in a situation have an equal influence and there is no tendency to change C. something which encourages one to greater activity D. a market with single buyer who has some influence over the price of his output E. protection from being copied or sold by those who do not have a right to do so F. factors which prevent the entry of new firms into an industry G. privileges I. a market consisting of two sellers J. a situation when a single firm can serve a particular market at lower cost than any combination of two or more firms II. Match the two parts of the sentences: 1. Natural monopoly arises out of . 2. M onopoly is a situation where . 3. M onopolies can only continue to exist if . 4. When there are only a few buyers, . 5. An oligopoly is a market characterized by a small number of firms . 6. Oligopoly is distinguished from perfect competition because . 7. When all firms are of (roughly) equal size, . 8. A market is simply a mechanism, . A. which allows individuals or organizations to trade with each other B. the properties of productive technology C. who realize they are independent in their pricing and out p olices D. the oligopoly is said to be symmetric E. each firm in an oligopoly has to take into account their independence

3. Patent 4. Barriers to entry 5. Incentive 6. Franchise 7. M onopsony 8. Natural monopoly 9. Duopoly

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F. there is a single seller in the market G. the market is defined as an oligopsony H. there are barriers to entry III. Fill in the blanks with the words or word combinations in italics: Aggregate supply, geographic areas, scope, aggregate demand, buyers, transacted, dimensions, actual, sellers, products, potential 1. M arkets can be in equilibrium or disequilibrium depending on whether or not equals at the prevailing price. 2. M arkets may be local, regional, national or international in and do not necessarily require and to meet or communicate directly with each other. 3. Business may be through the use of intermediaries as well. 4. There are two fundamental of market definition: the product market, that is, where group together and the geographic market, that is, where group together. 5. M arket definition generally includes and sellers. IV. Are the following statements true or false? Correct the false ones: 1. When a market functions properly, the quantity of goods and services demanded and supplied must be equal at some given price. 2. M arkets are similar in scope. There are only local markets where buyers and sellers must meet and communicate directly with each other. 3. To define a relevant market all you need is to identify the number of companies and products available in the market. 4. M onopolists, being largely immune from competitive pressures, do not have the appropriate incentives to minimize costs or undertake technological change. 5. An oligopoly is a market characterized by a large number of firms who realize they are dependent in their pricing and output polices.

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V. Translate the following sentences into English: 1. , , . 2. , , , , , , , . 3. , , , . 4. . 5. , , . 6. . 7. .

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TES T 5 (Money, Pricing, The Problem of Inflation) I. Match the terms with their definitions: 1. Penetration pricing 2. Creaming (skimming) 3. Legal tender 4. Demand inflation 5. Token money 6. Price discrimination 7. Cost inflation 8. Bank deposit 9. Barter A. selling a product at a high price, sacrificing high sales in order to earn high profits B. the quantity of goods or services that money will buy at a certain time C. the banks liabilities to its customers D. selling a different price for the same product in different segments of the market E. the kind of inflation that is caused by rising costs of labour and materials F. coins in which the metallic content is less valuable than the face value G. selling an initial low price for a new product so that it is attractive to customers H. the form of money in which a person has a right by law to pay a debt I. the kind of inflation caused by an excess of demand over supply resulting in a decrease in the value of money 10. Value of money J. exchange of goods for goods

II. Put the words in the correct order: 1. system, trade, until, has, is, full, a, usually, by, on, carried, barter, developed, money, been. 2. charged, any, needs, carefully, the, by, to think, price, rivals, business, about. 3. be, the, price, must, general, a, form, level, average, of, therefore. 4. acceptable, to be, it, if, tender, is not, legal, generally, will, then, money, cease. 5. is, would, once, in, business, the, a, established, product, raise, its, market, the, price. 6. of, index, the, price, normal, of, method, is, the, calculation, by, use. III. Fill in the gaps with the words or word combinations in italics:

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Money, creaming, value, cost inflation, losses, demand inflation, increases, barter, legal tender, price 1. is setting a high price for a product initially and lowering it later on. 2. M oney is only a claim against the real goods that have . 3. assumes that the collective upwards push of costs is sufficient to raise the general level of prices. 4. Charging a price similar to competitors is one way to set prices but it might lead to . 5. in the quantity of money were likely to lead to increases in prices. 6. If is not generally acceptable then it will cease to be money. 7. is one element of the marketing mix. 8. is of no use unless the wealth is being created. 9. takes place when supply cannot respond (i.e. when most of all resources are already employed) and leads to a rise in prices instead of to extra output. 10. entails the necessity of a double coincidence of wants. IV. Are the following statements true or false? Correct the false ones: 1. Paper money is convertible into gold. 2. Bank deposits, which are money, are not legal tender. 3. A fall in prices means that the value of money has risen. 4. The value of money changes proportionally with changes in the price level. 5. The price of similar competitive products does not influence pricing. 6. When the price covers both the average fixed and variable costs of the product, the business is said to be full-cost pricing. 7. The measurement of the inflation does not depend upon the general price level. 8. The selling of the countrys currency often takes place when infl ation rates exceed the tolerances allowed for by the government. V. Translate the following terms into English: 1. 2. 3. 4. 5. 6. 7. 8.

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9. () 10.

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TES T 6 (Banking, Central Banking, Loans in the UK) I. Match the terms with their definitions: 1. Legal tender A. a bank officially appointed by law to work closely with the government 2. Central bank 3. The balloon loan 4. Commercial bank 5. Fund 6. Loan B. a joint stock bank C. the form of money in which a person has a right by law to pay a debt D. a loan where the repayments are unevenly distributed throughout the life of the loan E. an amount of money borrowed by an individual or a company F. amounts of money

II. Put the words in the correct order: 1. The, of, on, to, and, a, its, nature bank, setting, largely, which, according, function, time, vary, central, depends. 2. Loans, as, and, are, irregularly, such, balloon, bullet, repaid. 3. Rate, as, loan, interest, the, is, the, the, in, market, determined, price, equilibrium. 4. Legal tender, coins, of, the, in, and, status, notes, have, circulation. 5. M ethods, central, banking, objectives, and, widely, commercial, differing, involve, and, functions. III. Fill in the gaps with the words or word combinations in italics: Transactions, customer, certified, loan, cheque, cash, cheque, currency, balloon 1. The most common means of payment, particularly for significant sums of money, is the since it is both safer and more convenient than using . 2. Central banking is an activity separate from ordinary banking, because a central bank usually has few with private customers, dealing primarily with commercial bank and with the national government. 3. If a wishes to make payments of large amounts of money by and is not known to the creditor, then he may obtain a cheque from the bank. 4. The hard and the soft is given by one country to another on condition that the borrower repays it in the lenders or the borrowers currency.

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5. The loan is a loan where the repayments are unevenly distributed throughout the life of the loan. IV. Are the following statements true or false? Correct the false ones: 1. Paper money consists of notes issued by commercial banks. 2. Coins and bills of every denomination are called legal tender. 3. Central bank is a bank officially appointed by law to work closely with the government. 4. Commercial banking system is profit motivated. 5. Functions of commercial banks are unlimited. 6. Certified cheques are always guaranteed by a bank. 7. Bills of exchange are now used mainly in foreign trade. 8. The interest rate cant be determined as the equilibrium price in the loan market. V. Translate the following terms into English: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

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TES T 7 (Market Research, Marketing, Consumer Choice) I. Match the terms with their definitions: 1. M arket research 2. Secondary data A. relates quantity demanded of one good to its own price B. the process of gaining information about customers, competitors and market trends through collecting primary and secondary data 3. Engel curve 4. Objects of consumer 5. Desk research 6. Consumer tastes 7. Field research 8. Demand curve 9. M arketing C. maps quantity demanded of one good against changes in income D. finding out information from secondary data choice E. information which already exists F. goods and services, yielding utility which can be ordered and measured G. the process of collecting primary data H. can be represented by a map of non-intersecting indifference curves I. the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives. II. Put the words in the correct order: 1. Prefers, since, the, more, consumer, to, indifference, less, must, downwards, curves, slope. 2. Sale, in, every, a, random, respondent, an, potential, has, of, chance, chosen, equal, being. 3. Reflect, curves, the, indifference, of, principle, a, marginal, diminishing, of, substitution, rate. 4. Can, information, business, which, collect, is, from, sources, available, the, outside, business.

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5. Are, goods, if, the, quantity, normal, will, demanded, increase. 6. M ay, data, collected, primary, be, observation, survey, through, experiment , and. III. Fill in the gaps with the words or word combinations in italics: Substitute, accounts, tastes of preferences, equilibrium, budget constraint, primary data, observation, marketing, force, market research 1. The way in which the consumer ranks the alternatives available is called the consumers . 2. The consumers shows how the upper limit on consumption may be allocated among consumption patterns or goods at given prices. 3. M arketing is a within the organization that encourages socially and ethically responsible behaviour in the market place. 4. There is little universal agreement on the best or right definition of . 5. Finding out about what consumers want and need, and what makes them buy, is called . 6. will give information about the value of sales and costs of production. 7. are collected through direct investigation. 8. In a two-good world, a good whose quantity purchased moves t ogether with the changes in the price of the other good is called . 9. M aximizing consumer utility generates an where the budget constraint and the highest possible indifference curve are tangential. 10. cant tell the supermarket anything about why shoppers are behaving in this or that way. IV. Are the following statements true or false? Correct the false ones: 1. When the product is launched, a carefully researched product stands less chance of failing. 2. Surveys cannot be useful for market research purposes if the questions asked are appropriate. 3. Research involving asking questions of people or organizations is called a questionnaire. 4. Product oriented business develops products which have been researched and designed to meet the needs of consumers. 5. In equilibrium the marginal rate of substitution between goods is equal to their ratio of prices. 6. The cross elasticity of demand measures the proportional change in the quantity demanded of one good to a proportional price of another.

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7. The foundation of exchange is creating or adding value for the buyer. 8. To launch a new product is never very costly. V. Translate the following terms into English: 1. 2. 3. 4. 5. 6. 7. 8.

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Part III. Resource Tests ALTERN ATIVE MARKET S TRUCTURES I. Read the text. Some parts of the text have been taken out. These e xtracts are listed below. Complete each gap with the appropriate extract. One se ntence does not belong in any of the gaps. a) The collective conduct of all the firms in the industry will affect the whole industrys performance. b) Some industries tend more to the competitive extreme, and thus their performance corresponds to some extend to perfect comp etition. c) The price they face is that determined by the interaction of demand and supply in the whole market. d) The market structure under which a firm operates will determine its behaviour. e) Each firm is so small relative to the whole industry that it has no power to influence price. It is traditional to divide industries into categories according to the degree of competition that exists between the firms within the industry. There are four such categories. At one extreme is perfect competition, where there are very many firms competing. ___ (1) It is a price taker. At the other extreme is monopoly, where there is just one firm in the industry, and hence no competition from within the industry. In the middle comes monopolistic competition, where there are quite a lot of firms competing and where there is freedom for new firms to enter the industry, and oligopoly, where there are only a few firms and where entry for new firms is restricted. ___ (2) Firms under perfect competition will behave quite differently from firms that are monopolists, which will behave differently again from firms under oligopoly and monopolistic competition. This behaviour (or conduct) will in turn affect the firms performance: its prices, profits, efficiency, etc. In many cases it will also affect other firms performance: their prices, profits, efficiency, etc. ___ (3) Economists thus see a causal chain running from market structure to the performance of that industry. Structure Conduct Performance First, we shall look at the two extreme market structures: perfect competition and monopoly. Then we shall turn to look at the two intermediate cases of monop olistic competition and oligopoly.

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These two intermediate cases are sometimes referred to collectively as i mperfect competition. The vast majority of firms in the real world operate under imperfect competition. It is still worth studying the two extreme cases, however, because they provide the framework within which to understand the real world. ___ (4) Other industries tend more to the other extreme: for example, when there is one dominant firm and a few much smaller firms. In such cases, their performance corresponds more to monopoly. II. For each question 1-4, mark one for the answer you choose. 1. Perfect competition is a market structure A. where each firm produces a differentiated product. B. where there is freedom of entry to the industry. C. in which there are a few firms. 2. M onopoly is a market structure A. where a unique product is produced. B. where the firm is a price taker. C. where there are no restrictions to the entry of new firms. 3. M onopolistic competition is a market structure A. where there are a few firms. B. where each firm produces a homogeneous product. C. where each firm has some control over its price. 4. Oligopoly is a market structure A. where there are a lot of firms. B. where there are no barriers to the entry of new firms. C. where firms produce either an undifferentiated product or a differentiated one.

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FREE-MARKET MED ICIN E IN RUS S IA Is the Patient Recovering? I. Read the text. Some parts of the text have been taken out. These extracts are listed below. Complete each gap with the appropriate extract. One se ntence does not belong in any of the gaps. a) No longer will the state guarantee employment and a moderate standard of living for all. b) M any commentators began to wonder whether the economy could escape the slide into hyperinflation when money would become virtually worthless. c) With the virtual abandonment of price controls, prices soared and by the end of 1992 inflation had reached a massive 1354 per cent. d) Consumer choice decreased, too. e) Such an impressive reduction in inflation was due largely to government successfully capping its spending. 1. Reforming the old Soviet Union was never going to be easy. To replace central planning with free-markets and enterprise would involve a radical transformation of economic life. But following the rise to power of Boris Yeltsin in Russia in 1991, this is just what was attempted. The following policies were adopted in early 1992: Price controls on 90 per cent of items were abolished. But with shortages of most goods, it was hardly surprising that prices rose dramatically. Business was given easier access to foreign exchange, and foreign comp anies were encouraged to invest in Russia. The largest privatisation programme in the world was launched. In many of the new private companies, workers were to become the principal shareholders. These reforms represented a massive shock to the old system. ___ (1) These huge price increases led to falling demand, but the disruption to the economy also led to falling supply. In 1992 output fell by nearly 20 per cent and the purchasing power of wages fell by 40 per cent.

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2. The governments budget deficit (the excess of government spending over government tax receipts) rose from 1.5 per cent of national income in the first quarter of 1992 to 15 per cent by the final quarter. Perhaps most significantly, the money supply rose nearly 600 per cent between January and October. ___ (2) 3. Critics argued that the costs of reform were intolerably high. The Russian economy, inherently weak and resistant to change, was unprepared for the radical nature of the policy and as such the reform programme could not be sustained. They highlighted the following weaknesses inherited from the old system: M any Russian companies are virtual monopoly producers. If they run into trouble, as many have done, this leads to huge shortages throughout the economy. Industry, being used to taking orders from above, has been slow to adapt to economic change and the rigours of the marketplace. M uch of it is highly inefficient and wasteful, making a poor use of very scarce resources. Est imates suggest that in 1992 Russia used 15 times as much steel and 6 times as much energy as the USA per unit of national output. With the freeing of prices, many firms in a monopoly position simply raised prices and reduced output. That way they could increase profits but with less effort. Supporters of reform recognised these weaknesses, but maintained that they only strengthened the arguments for changing the old system. In addition, they argued that the reform package of 1991/2 did not go far enough. Price controls on certain goods remained. Price markups in state shops were limited to 25 per cent, oil prices were controlled and imports were subject to a 20 per cent tariff (customs duty). 4. Some supporters of reform argued that an economic slump was the medicine required to drive the old sickness out of the system. It would force inefficient producers out of the market, and the competition for survival would lead to greater productivity and ultimately to long-term prosperity. 5. Four years on, it appeared that the supporters of reform may have been right in their judgements. The Russian economy seemed to have turned the corner. By mid-1996, annual inflation had fallen to 80 per cent. ___ (3) The governments budget deficit was now well within the limits agreed with the International M onetary Fund. The rouble, after a disastrous collapse in 1994, seemed to have stabilised on the foreign exchange market. Output, however, was still falling. In 1995 output fell by 4 per cent. Nevertheless forecasters were predicting growth of upwards of 4 per cent for 1997 onwards.

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6. Critics of reform, even in the light of such real gains, still point to the hardship experienced by many Russians. Official unemployment stands at around 8 per cent, with an estimated additional 6 per cent hidden unemployment. In a fifth of all Russian regions, unemployment is over 30 per cent, and in a few over 50 per cent. Those in work have not fared much better. The average real wage fell by some 37 per cent between 1994 and 1996. M any Russians today are faced with severe hardship. 7. Some, the New Russians, have become very wealthy -some legitimately, but some through criminal activities (the rise of the Russian M afia has been a disturbing development). The rise of the wealthy further serves to highlight the growing divide between rich and poor. 8. The old certainties have gone. ___ (4) Todays market sy stem in Russia is one where the strong gain and the weak lose. II. Look at statements 1-3. In each statement, which phrase or sentence is correct? 1. Imports were subject to a 20 per cent tariff. A. Prices were controlled. B. Government set up a 20 per cent tariff. C. Customs duty was 20 per cent. 2. In a fifth of all Russian regions, unemployment is over 30 per cent. A. In every fifth region unemployment is 30 per cent. B. In 20 per cent of all Russian regions unemployment rate exceeded 30 per cent. C. In a few Russian regions unemployment grew up to 50 per cent. 3. Foreign companies were encouraged to invest in Russia. A. M any new private companies stimulated investment. B. Business was given easier access to foreign exchange. C. The special policy was adopted in early 1992. III. For each question 1-4, mark one for the answer you choose. 1. It was hardly surprising that prices rose dramatically because A. 90 per cent of items price were abolished. B. the purchasing power of wages fell. C. economy was short of most goods. 2. Price mark-ups in state shops A. could not exceed 25 per cent. B. was limited to 20 per cent.

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C. equaled 25 per cent. 3. In hyperinflation money A. would be practically worthless. B. supply would rise dramatically. C. is inherently weak for the radical nature of the policy. 4. Some of the New Russians have become very wealthy A. with the rise of the Russian M afia. B. either legally or illegally. C. to highlight the growing divide between rich and poor. IV. Match each of these statements with one of the paragraphs numbered 1-8. A. Free-market economy is a medication for central planning system B. Introduction of reform policies and their effects C. Counter-arguments against the transformation programme D. The turning point in the economic disaster V. Are sentences below Right or Wrong? If there is not enough i nformation to answer, choose Doesnt say. 1. Critics of reform ignored its real gains. A. Right B. Wrong C. Doesnt say 2. The governments budget deficit rose by 13.5 p er cent of national income throughout 1992. A. Right B. Wrong C. Doesnt say

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3. Critics argued that the cost of reform was too high because of the negative comparison with USA national output of steel and energy. A. Right B. Wrong C. Doesnt say C. Doesnt say 4. IMF agreed with the governments budget deficit. A. Right B. Wrong price controls and enforce competitive producers. A. Right B. Wrong VI. Complete the following table: A. President at power in 1991 B. Inflation rate in mid-1996 C. Predicted growth for 1997 onwards D. Average real wage between 1994 and 1996 E. M aximum inflation rate/when F. Unofficial unemployment rate VII. The mistakes in the sentences below have been underlined. Write the corrections in the spaces provided. 1. In 1995 out put had fallen by 4 per cent. 2. In many of the new private companies, principal workers became a shareholders. 3. Four years on, the Russian economy seemed to have being turning the corner. 4. Critics of reform, though in the light of such real gains, still point to the hardship. 5. Such an impressive reduction in inflation was of largely government successfully capped its spending. 1. _____________________________________________ 2. _____________________________________________ 3. _____________________________________________ 4. _____________________________________________ 5. _____________________________________________

5. Reform supporters strengthened the arguments by requiring to abolish the rest of C. Doesnt say

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S HOULD HEALTH CARE PROVIS ION BE LEFT TO THE MARKET? 1. When you go shopping you may well pay a visit to the chemist and buy a bottle of paracetamol, some sticking plasters or a tube of ointment. These healthcare products are being sold through the market syst em in much the same way as other everyday goods and services such as food, household items and petrol. But many health-care services and products are not allocated through the market in this way. In the UK, the National Health Service provides free hospital treatment, a free general practitioner service and free prescriptions for certain cat egories of people (such as pensioners and children). Their marginal cost to the patient is thus zero. Of course, these services use resources and they thus have to be paid for out of taxes. In this sense they are not free. (Have you heard the famous saying Theres no such thing as a free lunch?) But why are these services not sold directly to the patient, thereby saving the taxpayer money? Why is considered that certain types of health care should be provided free, whereas food should not? After all, they could both be considered as basic necessities of life. The advocates of free health-care provision argue that there are a number of fundamental objections to relying on a market system of allocation of health care, many of which do not apply in the case of food, clothing, etc. So what are the reasons why a free market would fail to provide the optimum amount of health care? 2. There is a problem connected with the distribution of income. Because income is unevenly distributed, some people will be able to afford better treatment than others, and the poorest people may not be able to afford treatment at all. On the grounds of equity, therefore, it is argued that health care should be provided free at least for poor people. The concept of equity that is usually applied to health care is that of treatment according to medical need rather than according to the ability to pay. 3. If you were suddenly taken ill and required a m ajor operation, or maybe even several, it could be very expensive indeed for you if you had to pay. On the other hand, you may go through life requiring very little if any medical treatment. In other words, there is great uncertainty about your future medical needs. As a result it would be very difficult to plan your finances and budget for possible future medical expenses if you had to pay for treatment. M edical insurance is a possible solution to this problem, but there is still a problem of equity. Would the chronically sick or very old be able to obtain cover, and if so, would the premiums be very high? Would

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the poor be able to afford the premiums? Also would insurance cover be comprehensive? 4. There is also the problem of externalities. If you are cured of an infectious disease, for example, it is not just you who benefits but also others, since you will not infect them. Also your family and friends benefit from seeing you well; and if you have a job you will be able to get back to work, thus reducing the disruption there. These external benefits of health care could be quite large. If the sick have to pay the cost of their treatment, they may decide not to be treated especially if they are poor. They may not take into account the effect that their illness has on other people. The market, by equating private benefits and costs, would produce too little health care. 5. M arkets only function well to serve consumer wishes if the consumer has the information to make informed decisions. If you are to buy the right things, you must know what you want and whether the goods you buy meet these wants. In practice, consumers do have pretty good knowledge about the things they buy. For example, when you go to the supermarket you will already have tried most of the items you that buy, and will therefore know how much you like them. Even with new products, provided they are the sort you buy more than once, you can learn from any mistakes. In the case of health care, consumers (i.e. patients) may have very poor knowledge. If you have a pain in your chest, it may be simple muscular strain, or it may be a symptom of heart disease. You rely on the doctor (the supplier of the treatment) to give you the information: to diagnose your condition. Two problems could arise here if there were a market system of allocation health care. The first is that unscrupulous doctors might advise more e xpensive treatment than is necessary, or drugs companies might persuade you to buy a more expensive branded product rather than an identical cheaper version. The second is that patients suffering from the early stages of a serious disease might not consult their doctor until the symptoms become acute, by which time it might be too late to treat the disease, or very expensive to do so. With a free health service, however, there is likely to be an earlier diagnosis of serious conditions. On the other hand, some patients might consult their doctors over trivial complaints. 6. If doctors and hospitals operated in the free market as profit maximisers, it is possible that they would collude to fix standard prices for treatment, so as to protect their incomes. Even if doctors did compete openly, it is unlikely that consumers would

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have the information to enable them to shop around for the best value. Doctor A may charge less than doctor B, but is the quality of service the same? Simple bedside manner the thing that may most influence a patients choice may be a poor indicator of the doctors skill and judgment. 7. To argue that the market system will fail to provide an optimal allocation of health-care resources does not in itself prove that free provision is the best alternative. In the USA there is much more reliance on private medical insurance. Only the very poor get free treatment. Alternatively, the government may simply subsidise the provision of health care, so as to make it cheaper rather than free. This is the case with prescriptions and dental treatment in the UK, where many people have to pay part of the cost of treatment. Also the government can regulate the behaviour of the providers of health care, so as to prevent exploitation of the patient. Thus only people with certain qualifications are allowed to operate as doctors, nurses, pharmacists, etc. I. Match each of these statements with one of the parts numbered 1-7: A. Health care generates a number of benefits external to the patient. B. There are alternative policies open to a government to tackle market failings. C. It is difficult for people to predict their future medical needs. D. Patients might be at a disadvantage because of their ignorance. E. It is unlikely that competition would drive down prices charged by doctors and hospitals. F. People may not be able to afford treatment. G. It is important to make a distinction between health care and other products and services allocated through the market. II. S ay whether the following sentences are Right or Wrong. If there is not enough information to answer, choose Doesnt say. 1. The National Health Service provides free medicines for everyone. A. Right B. Wrong C. Doesnt say 2. Health insurance could solve the problem of planning future medical expenses. A. Right B. Wrong C. Doesnt say 3. The market would fail to produce sufficient health care by equating public bene-

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fits and costs. A. Right

B. Wrong

C. Doesnt say

4. With a free health service, more people would consult their doctor at the early stages of a disease. A. Right B. Wrong C. Doesnt say 5. The US government subsidises the provision of health care. A. Right B. Wrong C. Doesnt say III. For each question 1-5, mark one for the answer you choose. 1. The concept of equity applied to health care implies A. treatment according to the ability to pay. B. treatment according to social status. C. treatment according to medical need. 2. The problem with medical insurance is that A. the poor might not be able to obtain cover. B. the premiums might be too high for the poor. C. it might make it difficult for people to plan their budget. 3. If there were a market system of allocating health care, A. doctors and drugs companies would probably take advantage of patient ignorance. B. patients would be better informed. C. patients would be more willing to buy expensive branded products. 4. In the free market A. doctors fees would be reduced by competition. B. doctors might charge standard prices for treatment. C. price would be an indicator of the doctors skill. 5. According to the writer, a free health service A. is sure to provide an optimal allocation of health-care resources. B. should be restricted to the very poor. C. is not necessarily the best alternative.

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CAN THE MARKET PROVID E AD EQUATE PROTECTION FOR THE EN VIRONMENT? ___ (1) In recent years people have become acutely aware of the damage being done to the environment pollution. But if the tipping of chemicals and sewage into the rivers and seas and the spewing of toxic gases into the atmosphere cause so much damage, why does it continue? If we all suffer from these activities, both consumers and producers alike, then why will a pure market system not deal with the problem? After all, a market should respond to peoples interests. ___ (2) The reason is that the costs of pollution are largely external costs. They are borne by society at large and only very slightly (if at all) by the polluter. If, for example, 10 000 people suffer from the smoke from a factory (including the factory owner) then that owner will only bear approximately 1/10 000 of the suffering. That personal cost may be quite insignificant when the owner is deciding whether the factory is profitable. And if the owner lives far away, the personal cost of the pollution will be zero. Thus the social costs of polluting activities exceed the private costs. If people behave selfishly and only take into account the effect their actions have on themselves, there will be an overproduction of polluting activities. Thus it is argued that governments must intervene to prevent or regulate pollution, or alternatively to tax the polluting activities or subsidise measures to reduce the pollution. ___ (3) But if people are purely selfish, why do they buy green products? Why do they buy, for, example, ozone-friendly aerosols? After all, the amount of damage done to the ozone layer from their own personal use of non-friendly aerosols would be absolutely minute. The answer is that many people have a social conscience. They do sometimes take into account the effect their actions have on other people. They are not totally selfish. They like to do their own litt le bit, however small, towards protecting the environment. Nevertheless to rely on peoples consciences may be a very unsatisfactory method of controlling pollution. In a market environment where people are all the time being encouraged to consume more and more goods and where materialism is the religion of the age, there would have to be a massive shift towards green thinking if the market were to be a sufficient answer to the problem of pollution.

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___ (4) Certain types of environment problem may get high priority in the media, like acid rain, the greenhouse effect, damage to the ozone layer and brain damage to children from leaded petrol. However, the sheer range of polluting activities makes reliance on peoples awareness of the problems and their social consciences far too arbitrary. I. Which text reports on these items? A. M edia priority of the environmental problems. B. Costs of pollution. C. A market response to the environmental problem. D. Peoples selfishness and social responsibility. II. For each question 1-4, mark one for the answer you choose. 1. A market system should deal with the problem of pollution because A. consumers suffer from producers activities. B. people have become acutely aware of the problem. C. it should react to peoples interests. 2. The costs of pollution A. are mostly suffered by society. B. are borne by the polluter. C. are personal costs of the factory owner. 3. People buy green products and ozone-friendly aerosols because A. they are totally selfish. B. they are aware of the damage they do to the ozone layer from their personal use of non-friendly goods. C. being socially responsible they take into consideration the possible impact of their actions on other people.

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4. A very unsuitable way of controlling pollution could be A. encouraging people to buy more and more goods. B. organizing green thinking propaganda. C. relying on peoples being socially conscious. III. The mistakes in the sentences below have been underlined. Write the corrections in the spaces provided. 1. Recently people became aware of the damage being done to the environment by pollution. 2. Personal costs may be quite insignificantly when the owner is deciding whether the factory is profitable. 3. People take into account the effect their actions have to themselves. 4. They like to do their own little bit, otherwise small, towards protecting the environment. 5. To rely on peoples conscious may be a very unsatisfactory method of controlling pollution. 1. _____________________________________________ 2. _____________________________________________ 3. _____________________________________________ 4. _____________________________________________ 5. _____________________________________________

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S TRATEGIC TRAD E THEORY An argument for protection? I. Read the text. S ome parts of the text have been taken out. These extracts are listed below. Complete each gap with the appropriate extract. One sentence does not belong in any of the gaps. a) Governments frequently adopt trade protection because it is an easy option politically. b) These policies include quotas, exchange controls, import licensing, export taxes, tariffs. c) Infra-industry occurs because of scale economies and consumer demand for diversity. d) Reasons for restricting trade that have some validity in a world context include some arguments. e) Although international trade can benefit the world as a whole, some countries will lose out until the gainers compensate the losers. 1. Lester Thurow is Dean of the Sloan School of management at the M assachusetts Institute of Technology (MIT). He is also one of the USAs best -known and most articulate advocates of managed trade. 2. Thurow (and others) have been worried by the growing p enetration of U S markets by imports from Japan, Europe and many developing countries. Their response is to call for a carefully worked-out strategy of protection for US industries. ___ (1) The strategic trade theory that they support argues that the real world is complex. It is wrong, they claim, to rely on free trade and existing comparative advantage. Particular industries will require particular policies of protection or promotion tailored to their particular needs: ___ (2) 3. Some industries will require protection against unfair competition from abroad not just to protect the industries themselves, but also to protect the consumer from the oligopolistic power that the foreign companies will gain if they succeed in driving the domestic producers out of business. Other industries will need special support in the form of subsidies to enable them to modernize and compete effectively with imports. New industries may require protection to enable them to get established to achieve economics of scale and build a comparative advantage. If a particular foreign country protects or promotes its own industries, it may be desirable to retaliate in order to persuade the country to change its mind. 4. Thurow claims that Japan has been following a policy of managed trade for years and look how successful it has been! 5. But, despite the enthusiasm of the strategic trade theorists, their views have come in for concerted criticism from economic liberals. If the USA is protected from cheap Japanese imports, they claim, all that will be achieved is a huge increase in consumer prices. The car, steel, telecommunications and electrical goods industries might find their profits bolstered, but this is hardly likely to encourage them to be more efficient.

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6. Another criticism of managed trade is the difficulty of identifying just which industries need protection, and how much and for how long. Governments do not have perfect knowledge. What is more, the political lobbyists from various interested groups are likely to use all sorts of tactics legal and illegal to persuade the government to look favourably on them. In the face of such pressure will the government remain objective? No, say the liberals. ___ (3) 7. So how do the strategic trade theorists reply? If it works for Japan, they say, it can work for the USA. What is needed is a change in attitudes. ___ (4) Rather than industry looking on the government as either an enemy to be outwitted or a potential benefactor to be wooed, and government looking on industry as a source of votes or tax revenues, both sides should try to develop a partnership a partnership from which the whole country can gain. 8. But whether sensible, constructive managed trade is possible in the US democratic system, or the UK for that matter, is a highly debatable point. Sensible managed trade, say the liberals, is just pie in the sky. II. For each statement 1-3, mark one for the answer you choose. 1. M anaged trade relies on: A. free market. B. existing comparative advantage. C. government intervention. 2. Industries might find their profit bolstered because: A. They are protected from export. B. They are protected from importation of cheap goods. C. They are very efficient. 3. The liberals are convinced that sensible constructive managed trade is: A. possible in the US democratic system. B. possible in the UK. C. hardly possible. III. Are sentences below right or wrong? If there is not enough i nformation to answer, choose Doesnt say. 1. Advocates of managed trade claim that governments may intervene in trade. A. Right B. Wrong C. Doesnt say 2. Economic liberals argue that free trade may allow the importation of harmful goods. A. Right B. Wrong C. Doesnt say 3. Supporters of managed trade insist on legal and administrative barriers. A. Right B. Wrong C. Doesnt say 4. Critics of free trade dont believe in sensible, constructive managed trade. A. Right B. Wrong C. Doesnt say

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5. The argument for restricting trade is the danger of the establishment of a foreignbased monopoly. A. Right B. Wrong C. Doesnt say IV. Match each of these statements with one of the paragraphs numbered 1-8. A. Although there are many circumstances in which international trade can make countries better off, international trade can also carry costs. B. Countries may also promote their own industries by subsidies. C. The government cant remain objective in the face of political lobbyists. D. M anaged trade is a debating point.

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CONCENTRATION RATIOS Measuring the degree of competition We can get some indication of how competitive a market is by observing the number of firms: the more the firms, the more competitive the market would seem to be. However, this does not tell us anything about how concentrated the market might be. There may be many firms (suggesting a situation of perfect competition or monopolistic competition), but the largest two firms might produce 95 per cent of total output. This would make these two firms more like oligopolists. Thus even though a large number of producers may make the market seem highly competitive, this could be deceiving. Another approach, therefore, to measuring the degree of competition is to focus on the level of concentration of firms. The simplest measure of industrial concentration involves adding together the market share of the largest so many firms: e.g. the largest three or the largest five. This would give what is known as the 3-firm or 5-firm concentration ratio. The table (Fig. 1) shows the 5-firm concentration ratios of selected industries in the UK. As you can see, there is an enormous variation in the degree of concentration from one industry to another. One of the main reasons for this is difference in the percentage of total industry output at which economies of scale are exhausted. If this occurs at a low level of output, there will be room for several firms in the industry which are all benefiting from the maximum economies of scale. Differences in the economies of scale are not the only cause of differences in concentration. The degree of concentration will also depend on the barriers to entry of other firms into the industry and on various factors such as transport costs and historical accident. It will also depend on how varied the products are within any one industrial category. For example, in categories as large as clothing and toys and sports goods there is room for many firms, each producing a specialized range of products. Within each sub-category, e.g. tennis racquets, there may be relatively few firms producing. So is the degree of concentration a good guide to the degree of competitiveness of the industry? The answer is that it is some guide, but on its own it can be misleading. In particular it ignores the degree of competition from abroad, and from other areas within the country. Thus the five largest UK motor vehicle manufacturers may produce 82.9 per cent of UK vehicle output, but these manufacturers face considerable competition from imported cars and lorries. On the ot her hand, the five largest water suppliers may account for only 49.7 per cent of UK output, but within their own regions of the country they have a monopoly. Figure 1 Industry Tobacco products Iron and steel Asbestos goods M otor vehicles and engines Cement, lime and plaster Grain milling 5-firm concentration ratio 99.5 95.3 89.8 82.9 77.7 62.3

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Water supply Footwear Bread, biscuits, etc. Carpets Clothing Bolts, nuts and springs Processing of plastics

49.7 48.2 47.0 21.8 20.7 11.4 8.8

I. Are the sentences below Right or Wrong? If there is not enough information to answer, choose Doesnt say. 1. The more the firms, the more concentrated the market is. A. Right B. Wrong C. Doesnt say 2. The simplest measure of industrial concentration involves summing up the market share of the largest companies existing on the market. A. Right B. Wrong C. Doesnt say 3. The degree of concentration only varies from one industry to another because of the differences in the extent of economies of scale. A. Right B. Wrong C. Doesnt say 4. In such categories as clothing and toys and sports goods there is not much room for many firms. A. Right B. Wrong C. Doesnt say 5. The degree of concentration on its own cant reflect the situation in the market. A. Right B. Wrong C. Doesnt say II. For each question, mark one for the answer you choose. 1. We can get some indication of how competitive a market is by A. observing the number of firms. B. analyzing activities of the companies in the market. C. measuring the degree of competition. 2. The degree of concentration doesnt depend on A. barriers to entry of other firms into the industry. B. transport costs. C. history of the company. 3. Within each industrial sub-category A. the number of companies increases. B. there may be fewer companies producing similar goods. C. there is enough space for many companies. III. In most of the lines below there is one extra word. It is either grammatically incorrect or doesnt fit in with the sense of the text. S ome lines, how-

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ever, are correct. If there is an extra word, write it out in CAPITAL LETTERS . 00 So is the degree of firm concentration a good guide to 01 the degree of competitiveness of the industry? The 02 answer is that it is some guide, but on its own it can be 03 misleading. In some particular it ignores the degree of compet ition 04 from abroad, and from others areas within the 05 country. Thus the five largest UK motor car vehicle manufacturers 06 may have produce 82.9 per cent of UK vehicle output, 07 but these manufacturers may face much considerable compet ition 08 from imported cars and lorries. On the other hand, the 09 five largest water suppliers may to account for only 49.7 10 per cent of UK production output, but with their own regions of the 11 country they should have a monopoly.

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COMPETITIVE ADVANTAGE AND THE S MALL FIRM S ECTOR The fact that many small businesses do survive, and some manage to grow, suggests that they must have some edge over their larger rivals. The following have been found to be the key competitive advantages that small firms might hold. ___ (1) Small firms are more able to respond to changes in market conditions and to meet customer requirements effectively. For example, they may be able to develop or adapt products for specific needs. Small firms may also be able to make decis ions quickly, avoiding the bureaucrat ic and formal decis ion -making processes that typify many larger companies. Quality of serv ice. Small firms are more able to deal wit h cust omers in a personal manner and offer a more effective after-sales service. Production efficiency and low overhead costs. Small firms can avoid some of the diseconomies of scale that beset large companies. A small firm can benefit from: management that avoids waste; good labour relations; the employment of a skilled and motivated workforce; lower accommodation costs. Product development. As we have seen, many small businesses operate in niche markers, offering specialist goods or s ervices. The distinctiveness of such products gives the small firm a crucial advantage over its larger rivals. A successful small business strategy, therefore, would be to produce products that are clearly differentiated from those of large firms in the market, thereby avoiding head-on competition competition which the s mall firm would probably not be able to survive. ___ (2) Small businesses, especially those located in high-technology markets, are frequently product or process innovators. Such business es, usually through entrepreneurial vis ion, manage successfully to mat ch s uch innovat ions to changing market needs. M any small bus iness es are, in this respect , path breakers or market leaders. Small businesses do, how ever, suffer from a number of s ignificant limit ations. Problems facing small businesses The following points have been found to hinder the success of small firms. ___ (3) Small firms face many problems in selling and marketing their products, especially overs eas. Small firms are perceived by their customers to be less stable and reliable than their larger rivals. This lack of credibility is likely to hinder their ability to trade. This is a particular problem for new small firms which have not had long enough to est ablish a s ound reputation. Funding R&D. G iven the specialist nature of many small firms, their longrun survival may depend upon developing new products and process es in order

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to keep pace with changing market needs. Such developments may require s ignificant R&D investment. However, the ability of small firms to attract finance is limited, as many of them have virtually no collateral and they are frequently perceived by banks as a highly risky investment. ___ (4) A crucial element in ensuring that small businesses not only survive but grow is the quality of management. If key management skills, such as being able to market a product effectively, are limited, then this will limit the success of the business. ___ (5) Small firms will have fewer opportunities and scope to gain economies of scale, and hence their costs are likely to be som ewhat higher than their larger rivals. This will obviously limit their ability to compete on price. I. Match each of these headlines with one of the texts above. A. Innovation B. M anagement skills C. Flexibility D. Economies of scale E. Selling and marketing _______________ _______________ _______________ _______________ _______________

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II. Look at statements 1-3. In each statement, which phrase or sentence is correct? 1. Small firms must have some edge over their larger rivals. A. Small firms are far ahead of their large rivals. B. Small firms have to be better than their large rivals to compete with them. C. All small firms will soon fail. 2. Small firms are perceived by their customers to be less stable and reliable than their larger rivals. A. Small firms are less reliable than their large rivals. B. Small firms cant find their customers. C. Customers think that small firms are less reliable than their large rivals. 3. This lack of credibility is likely to hinder their ability to trade. A. Customers faith in small firms is low which limits their sales. B. Customers of small firms are lucky. C. Customers will stop small firms from getting credits. III. Are sentences below Right or Wrong? If there is not enough i nformation to answer, choose Doesnt say. 1. Small firms offer better maintenance support. A. Right B. Wrong C. Doesnt say C. Doesnt say C. Doesnt say C. Doesnt say 2. A small firm can benefit from lower prices. A. Right B. Wrong 3. Small firms have less problems selling abroad. A. Right A. Right B. Wrong B. Wrong 4. Small firms are unable to get credits in the bank.

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GROWTH THRO UGH D IVERS IFIC ATION I. Read the text. S ome parts of the text have been taken out. These e xtracts are listed below. Complete each gap with the appropriate extract. One sentence does not belong in any of the gaps. a) There are three principal factors which might encourage a business to diversify. b) Alternatively, the business might be in a market where demand is stagnant or declining. c) Such products need not cover similar activities. d) As a result, control over market share is becoming even more crucial. e) Diversification therefore enables the business to spread risk. Diversification is the process whereby a firm shifts from b eing a singleproduct to a multiproduct producer. ___ (1) We can in fact identity four directions in which diversification might he undertaken: Using the existing technological base and market area. Using the existing technological base and new market area. Using a new technological base and existing market area. Using a new technological base and new market area. Categorising the strategies in this way would suggest that the direction of diversification is largely dependent upon both the nature of technology and the market opportunities open to the firm. But the ability to capitalise on these features depends on the experience, skills and market knowledge of the managers of the business. In general, diversification is likely to occur in areas where the business can use and adapt existing technology and knowledge to its advantage. The diversification of Amstrad, the personal computer manufacturer, into the mobile telephone market is a good example of where a businesss current technology and market knowledge are being applied to a distinct new product. Why diversification? ___ (2) Stability. So long as a business produces a single product in a single market, it is vulnerable to changes in that markets conditions. If a farmer produces nothing but potatoes, and the potato harvest fails, the farmer is ruined. If however, the farmer produces a whole range of vegetable products, or even diversifies into livestock, then he or she is less subject to the forces of nature and the unpredictability of the market. ___ (3) Maintaining profitability. Businesses might also be encouraged to diversify if they wish to protect existing profit levels. It may be that the market in which a business is currently located is saturated and that current profitability is perceived to be at a maximum. ___ (4) In such cases the business is likely to see a greater return on its investment by diversifying into new product ranges located in dynamic expanding markets. Growth. If the current market is saturated, stagnant or in decline, diversific ation might be the only avenue open to the business if it wishes to maintain a high

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growth performance. In other words, it is not only the level of profits that may be limited in the current market, but also the growth of sales. II. The mistakes in the sentences below have been underlined. Correct them. 1. Diversification is the process whereby a firm shifts to being a single-producer. 2. Although a business produces a single product in a single market, it depends on that market. 3. Diversification enable the business to spread risk. 4. Businesses might also have encouraged to spread risk. 5. In other words, it is not only the current markets that may be limited in the level of profits, but also the growth of sales. 1. 2. 3. 4. 5.

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THE FIRM AS A LEGAL ENTITY The legal structure of the firm is likely to have a significant impact on its conduct, and subsequent performance, within the market place. There are several types of firm, each with a distinct legal status. ___ (1) This is where the business is owned by just one person. Usually such bus inesses are small, with only a few employees. Retailing, building and farming are typical areas to find sole proprietorships. Such businesses are easy to set up and may require only a relatively small initial capital investment. They may well flourish if the owner is highly committed to the business, and they can be very flexible to changing market conditions. They suffer two main disadvantages, however: Limited scope for expansion. Finance is limited to what the owner can raise personally. Also there is a limit to the size of an organisation that one person can effectively control. Unlimited liability. The owner is personally liable for any losses that the business might make. It could result in the owners house, car and other assets being seized to pay off any outstanding debts. ___ (2) This is where two or more people own the business. In most partnerships there is a legal limit of 20 partners. Partnerships are common in the same fields as sole-proprietorships. They are also common in the professions: solicitors, accountants, surveyors, etc. With more owners, there is more scope for expansion. M ore finance can be raised and the partners can each specialise in one aspect of the business. Partners, however, still have unlimited liability. This problem could be very serious. The mistakes of one partner could jeopardise the personal assets of all the other partners. Where large amounts of capital are required and/or when the risks of business failure are relatively high, partnerships are not an appropriate form of organisation. In such cases it is best to form a company (or joint -stock company to give it its full title).

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___ (3) A company is legally separate from its owners. This means that it can enter into contracts and own property. Any debts are its debts, not the owners. Each owner has a share in the company. The size of their share holdings will vary from one shareholder to another and will depend on the amount they invest. Each shareholder will receive his or her share of the companys distributed profit. The payments to shareholders are called dividends. The owners have only limited liability. This means that, if the company goes bankrupt, the owners will lose the amount of money they have invested in the company, but no more. Their personal assets cannot be seized. This has the advantage of encouraging people to become shareholders, and indeed large companies may have thousands of shareholders some with very small holdings and others, including institutional shareholders such as pension funds, with very large holdings. Without the protection of limited liability, many of these investors would never put their money into any company that involved even the slightest risk. Shareholders often take no part in the running of the firm. They may elect a board of directors which decides broad issues of company policy. The board of directors in turn appoints managers who make the day -to-day decisions. There are two types of companies: public and private. Public limited companies. Dont be confused by the title. A public limited company is still a private enterprise: it is not a nationalised industry. It is public because it can offer new shares publicly: by issuing a prospectus, it can invite the public to subscribe to a new share issue. In addition, many public limited companies are quoted on the Stock Exchange. This means that existing shareholders can sell some or all of their shares on the Stock Exchange. The prices of these shares will be determined by demand and supply. A public limited company must hold an annual shareholders meeting. Private limited companies. Private limited companies cannot offer their shares publicly. Shares have to be sold privately. This makes it more difficult for private limited companies to raise finance, and consequently they tend to be smaller than public companies. They are, however, easier to set up than public companies. ___ (4) It is common, especially in large civil engineering projects that involve very high risks, for many firms to work together as a consortium. The Channel Tunnel and Thames Barrier are products of this form of business organisation. Within the consortium one firm may act as the managing contractor, while the other members may provide specialist services. Alternatively, management may be more equally shared. I. Match each of these headlines with one of the texts above. A. Consortia of firms ________________ B. The sole proprietor ________________ C. The partnership ________________

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D. Companies

________________

II. Which text reports on these items? A. Personal liability for all losses ________________ B. Companys distributed profit C. High risk projects D. Jeopardy of personal assets ________________ ________________ ________________

III. In most of the lines below there is one extra word. It is either grammatically incorrect or does not fit in with the sense of the text. S ome lines, however, are correct. If there is an extra word in the line, write out the extra word in CAPITAL LETTERS . 00 Co-operatives. These are of two types. 01 Consumer co-operatives. These, like the old high street Co-ops, are 02 officially owned by the consumers. Consumers in a fact play no part in 03 the running of these co-ops. They are run by various professional 04 the managers. 05 Producer co-operatives. These are firms that are owned by their workers, 06 who share in the firms profit according to some agreed formula. They are 07 sometimes formed by people in the same trade coming together: in 08 example, producers of handicraft goods. At an other times they are formed 09 by workers buying out their factory from the owners; this is most likely if 10 it is due to close, with a resultant loss of jobs. Producer co-operatives, 11 although still relatively few in number, have grown in recent years.

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IV. Choose the best answer to complete each gap in the text. Public corporations These are state-owned enterprises such as the BBC, the Bank of England and nationalised industries. They have a legal identity separate ___ (1) the government. The corporation is run ___ (2) a board, but the members of the board are ___ (3) by the relevant government minister. The boards have to act within various ___ (4) of reference laid down by Act of Parliament. Profits of public corporations that are not reinvested accrue to the ___ (5). Since 1980 many public corporations have been privatised: that is, they have been sold directly to other firms in the ___ (6) sector (such as Austin Rover to British Aerospace) or to the general public through a public issue of shares (such as British Gas). 1. a) in 2. a) with 3. a) appointed 4. a) terms 5. a) Central Bank 6. a) industry b) from b) that b) managed b) conditions b) Foreign Office b) commerce c) away c) those c) controlled c) items c) Treasury c) private d) out of d) by d) run d) notes d) Cabinet d) manufacturing

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S HOULD CENTRAL BANK BE INDEPEND ENT OF GOVERNMENT? I. Read the text. Some parts of the text have been taken out. These e xtracts are listed below. Complete each gap with the appropriate extract. One se ntence does not belong in any of the gaps. a) An independent central bank is free from political manipulation. b) But the Bundesbank was concerned to dampen the inflationary pressures caused by German reunification. c) The advocates of independence frequently cite the experience of Germ any. d) Technology provides both opportunities and threats to the banking co mmunity. e) But with an independent central bank committed to monetary st ability, it may be difficult for the government to achieve such economic policy goals. In recent years there has been much discussion among both economists and politicians as to whether the Bank of England should be independent. ___ (1). The Bundesbank, Germanys central bank, is fiercely independent, and is credited with being instrumental in Germanys economic success. The Bundesbanks philosophy is simple: M onetary and price stability are of overriding importance in the pursuit of growth. Inflation should be tightly controlled at all times. The arguments in favour of an independent central bank are strong. ___ (2) It can devote itself to attaining long-run economic goals, rather than to helping politicians achieve short-run success in time for the next election. Independence may strengthen the credibility of monetary policy. This may then play an important part in shaping expect ations: workers may put in moderate wage demands and businesses may be more willing to invest. An independent central bank has a clear legal status and set of responsibilities. It is the protector of the currency and as such it is not subordinate to government. This is important given the political nature of economic policy making in both a domestic and an international context. The Bundesbanks policy concerning the ERM (European M onetary System) is a good example. In 1992, international pressure mounted on Germany to cut interest rates as other ERM members faced a deeping recession. ___ (3). It stuck firmly to its statutory obligations and refused to cut interest rates, except when the domestic economy allowed.

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The statistics show that the greater the independence of a countrys central bank, the lower and more stable is its rate of inflation. If this is the goal of economic policy, it seems that more rather than less independence is desirable. One of the major arguments against having an independent central bank is that it makes it more difficult to integrate monetary management into wider economic objectives. On some occasions it may be desirable to accept a higher rate of inflation if this were the consequence of a growth stimulus aimed at reducing unemployment. ___ (4). II. Are sentences below Right or Wrong? If there is not enough information to answer, choose Doesnt say. 1. M onetary policy does not influence the economic growth. A. Right B. Wrong C. Doesnt say 2. The trustworthiness of monetary policy often depends on the level of independence of a central bank. A. Right ernments. A. Right ernment. A. Right B. Wrong C. Doesnt say

3. M onetarists believe that controlling money is the only essential function of govB. Wrong C. Doesnt say

4. An independent bank should have a clearly set of objectives defined by the govB. Wrong C. Doesnt say

5. There might be situations when a sustained rise in the average prices of goods could lead to reduced unemployment. A. Right B. Wrong C. Doesnt say

6. It should be noted that central banks ordinarily do not provide commercial banking services for the general public. A. Right B. Wrong C. Doesnt say

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III. The mistakes in the sentences below have been underlined. Write the corrections in the spaces provided. 1. To achieve such goals may be difficult with a central bank committing to monetary stability. 2. In the early 1990s international pressure has mounted on the country. 3. Recently it has been much discussion of this issue. 4. The Bundesbank is crediting with being helpful in Germanys success. 5. The greater the independence of a countrys central bank, lower and more stable is the rate of inflation. 1. _____________________________________________ 2. _____________________________________________ 3. _____________________________________________ 4. _____________________________________________ 5. _____________________________________________

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ARE THE DAYS OF CAS H NUMBERED? EFTPOS versus ATMs I. Read the text. Some parts of the texts have been taken out. These extracts are listed below. Complete each gap with the appropriate extract. One sentence does not belong in any of the gaps. a) But under some circumstances cheques are more efficient than cash. b) Subsequently your account will be automatically debited and the retai lers account automatically credited. c) So are we using more cash or less cash? d) So are we moving towards a cashless society? Probably not. e) This is where you pay for goods in the shops by means of a card either a credit card (like Access or Visa) or a debit card (like Switch or Connect). f) Banking is becoming increasingly automated, with computer debiting and crediting of accounts replacing the moving around of pieces of paper. ___ (1) What was once done by a bank clerk is often now done by computer. One possible outcome of this replacement of labour by computers is the gradual elimination of cash from the economy or so some commentators have claimed. The most dramatic example of computerisation in recent years has been EFTPOS (electronic funds transfer at the point of sale). ___ (2) The card is simply swiped across a machine at the till which may then require you to enter your PIN (personal identification number). The details of the transaction (the amount, the retailer and your card number) are then transmitted down the line to the EFTPOS UK processing centre. If necessary, the information is then directed down the line to the card issuer for authorisation. If the card is valid and the transaction acceptable, then within seconds the machine will issue a slip for you to sign and the purchase is complete. ___ (3) The advantage of this system is that it does away with the processing by hand of pieces of paper. In particular it does away with the need for (a) credit -card slips when used in conjunction with credit cards and (b) cheques. Both cheques and credit-card slips have to be physically moved around and then read and processed by people. If this EFTPOS system were to become widely used for small transactions, it could well reduce the need for cash. But reducing the need for cash is not the prime purpose of EFTPOS. Its prime purpose is to do away with cheques and credit -card slips. ____ (4) Cash is still the simplest and most efficient way of paying for a host of items, from your bus ticket to a newspaper to a packet of mints. What is more, another technical innovation is moving us in the direction of using more cash, not less! This is the cash machine or ATM (automated teller machine), to give it its official title. ____ (5) The evidence suggests a gradual decline in cash in circulation as a proportion of GDP. It fell from just over 5 per cent of GDP in 1980 to just over 2% per cent in 1997.

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But although the effects of EFTPOS and ATMs may be quite different in terms of the use of cash, they both have the same advantage to banks: they reduce the need for bank staff and thereby reduce costs. II. Look at statements 1-4. In each statement, which phrase or sentence is correct? 1. One possible outcome of the replacement of labour by computers is the gradual elimination of cash from the economy or so some commentators have claimed. A. It is suggested that cash should be removed from the economy. B. It is supposed that computers will deal with cash rather than people. C. It is stated that the economy might get rid of cash as a result of computerisation. 2. If necessary, the information is then directed down the line to the card issuer for authorisation. A. If there is a need the card issuer is addressed for user identification. B. If necessary, local authorities are addressed to confirm the information. C. Every time the card is used, it should be checked by the card issuer. 3. The advantage of this system is that it does away with the processing by hand of pieces of paper. A. The system has stopped the processing by hand of pieces of paper and this is its advantage. B. There is not much paperwork with the introduction of the system. C. The system has the advantage of completing manual processing of pieces of p aper. 4. If this EFTPOS system were to become widely used for small transactions, it could well reduce the need for cash. A. The application of the EFTPOS system to a greater number of small transactions is likely to reduce the need for cash. B. Cash will no longer exist, if the EFTPOS system is used for small transactions. C. M aking small transactions people would avoid using cash if the EFTPOS system were introduced. III. Choose the best answer to complete each gap in the text. The ___ (1) of cash machines to virtually ___ (2) bank and building society branch and to many larger stores has been ___ (3) in recent years. The sheer simplicity of ___ (4) cash at all hours from these machines, not only from your ___ (5) account but also on your credit card, is obviously a huge encouragement to the use of cash. 1. a) use 2. a) each 3. a) intermediate 4. a) achieving 5. a) current b) development b) every b) rapid b) reaching b) every day c) spread c) either c) instantaneous c) accepting c) daily d) set-up d) all d) temporary d) obtaining d) flow

IV. Are sentences below Right or Wrong? If there is not enough information to answer, choose Doesnt say.

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1. In practice people use a cheque when they want to give a direction to a bank to pay money on demand to a named person or organization. A. Right B. Wrong C. Doesnt say 2. Every time you pay by means of a card you should enter your PIN. A. Right B. Wrong C. Doesnt say 3. Though there are several purposes of the EFTPOS system, the main one is elimination of cheques and credit-card slips. A. Right B. Wrong C. Doesnt say 4. Cash still is used to pay for various items and its use has even grown. A. Right B. Wrong C. Doesnt say 5. Both EFTPOS and ATM s despite their differences might make the activity of banks more economical. A. Right B. Wrong C. Doesnt say

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REGULATION US -S TYLE In the USA, utilities such as electricity, gas, water and telecommunications have for the most part always been private companies (although a few are state owned). To prevent the abuse of monopoly power, the utilities are regulated by federal or state governments through regulatory commissions. Unlike in the UK, where prices are regulated according to an RPI minus X formula, the prime focus of US regulation is the companys rate of return (i.e. its rate of profit). The system involves limiting prices to a level which will give a normal rate of profit. In other words, the company will be allowed to charge a price equal to the average cost of production, where average cost includes a fair rate of return on capital. The actual calculations are normally done using total revenue and total cost according to the following formula: TR = TVC + K, where TR is the maximum permitted total revenue for that year (known as the revenue requirement), TVC is total variable costs (known as operating expenses), K is the total replacement cost of capital (known as the rate base) and is the permitted annual rate of return, as a percentage of the rate base. To give an example: if a firms variable costs (TVC) were $4 million, the rate base (K) were $20 million and a normal rate of return ( ) were judged by the regulatory commission to be 10 per cent, then according to the formula, the firm would be permitted to charge a price that would yield a revenue requirement (TR ) of: $4m + 0.1($20m) = $6m. There has been growing concern in the USA over the effects of using rateof-return regulation. The argument is that it encourages inefficiency. First there is the problem of allocative inefficiency. The US system will entail the company setting a price equal to long-run average cost. The socially efficient position, however, is where price equals long-run marginal cost. Then there is the potentially more serious problem of productive or technical inefficiency (not using factors in the way that maximises output) and X inefficiency (lack of motivation to cut wasteful expenditure and to introduce cost-cutting measures). What is the incentive for a regulated firm to produce at a lower cost? If it introduces new technology or improved working practices that have the effect of increasing profit, the regulator will insist on a lower revenue requirement and hence a lower price. The extra profit will simply be taken away. In fact, there is an incentive for the firms to let costs rise. The costs of higher salaries and more luxurious offices, for example, can simply be passed on to the consumer in higher prices! With unregulated monopolies, at least there is pressure from shareholders for the firms to be efficient. There is also competition on the market for corporate control: managers are afraid that if their firm is inefficient, other firms may mount a takeover bid. With the regulated utilities in the USA, however, these pressures are absent. Shareholders have nothing to gain from increased efficiency if profits are not allowed to increase as a result. Also there is no benefit to other firms in mounting a takeover bid. If they were successful, they would merely find themselves the subject of regulation.

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Then there is the problem of regulatory lag. In periods of rapidly rising costs, it may take some time before the regulatory commission sanctions a price increase (through a higher revenue requirement). In the meantime the firm may be forced to operate at a loss. I. For each question 1-5, mark one for the answer you choose. 1. Utilities in the USA are regulated in order to A. improve their efficiency. B. raise their profits. C. restrict monopoly power. 2. Rate-of-return regulation suggests that A. companies are likely to be in a socially efficient position. B. resources are used in the way that maximizes output. C. there is no incentive for companies to cut expenditure. 3. If a regulated company introduced advanced technology or better working practices, A. its profit would go up. B. it would make no extra profit. C. the revenue requirement would be higher. 4. The regulated utilities in the USA A. are under pressure from shareholders. B. are not exposed to competitive pressures. C. are often taken over by other firms. 5. The regulatory lag leads to A. delays in setting higher prices. B. rapidly rising costs. C. an increase in the revenue requirement. II. Are sentence below Right or Wrong? If there is not enough i nformation to answer, choose Doesnt say. 1. State owned utilities in the USA are regulated. A. Right B. Wrong C. Doesnt say 2. Rate-of-return regulation induces companies to set a price equal to long-run marginal cost. A. Right B. Wrong C. Doesnt say 3. Regulated companies are not encouraged to maximise output. A. Right B. Wrong C. Doesnt say 4. Competition in the market for corporate control has increased. A. Right B. Wrong C. Doesnt say 5. Firms may have to operate at a loss due to bureaucratic intervention. A. Right B. Wrong C. Doesnt say III. Find the mistakes in the sentences below and write the corrections in the spaces provided: 1. M ost of the utilities in the USA had been private companies.

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2. The actual calculations are usually used total revenue and total cost. 3. There has been growing concern in the USA on the effects of rate-of-return regulation. 4. If a company will pay higher salaries, its costs can simply be passed on to the consumer. 5. The firm may be forced to operate for a loss. 1. ___________________________________________ 2. ___________________________________________ 3. ___________________________________________ 4. ___________________________________________ 5. ___________________________________________

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THE POLITIC AL BUS INES S CYCLE I. Read the text. Some parts of the text have been taken out. These e xtracts are listed below. Complete each gap with the appropriate extract. One sentence does not belong in any of the gaps. a) It is less easy in countries like the USA where elections are at fixed times. b) That would not help the governments election prospects. c) Inflation takes a time to build up. d) This is a reduction in frictional unemployment. e) This window of opportunity for the government is in the middle of phase 2 the period of rapid expansion. f) It can then claim to the electorate that its economic policies have been a success. g) A recession is likely to follow. Any governments standing for re-election would like the economy to look as healthy as possible. ___ (1) Governments are able to engineer booms and recessions by the use of d emand-side policies (fiscal and monetary). For example, by cutting taxes and/or increasing government expenditure, and by cutting interest rates, they can generate a period of economic expansion. But how is this of any use politically, if the improvement in two of the objectives is at the cost of a deterioration in the other two? ___ (2) The answer is that there is one point in the business cycle where all four objectives are likely to be looking good. ___ (3) At this point, growth is at its highest and unemployment is falling most rapidly. In fact, falling unemployment is probably more popular with the electorate than simply a low level of unemployment. Three million unemployed but falling will win more votes than one million and rising rapidly! But what about the other two objectives? Surely, in the middle of phas e 2, inflation and the balance of payments will be deteriorating? The answer is that they will probably not yet have become a serious problem. ___ (4) It will probably only really start to rise rapidly as the peak of the business cycle is approached and shortages and bottlenecks occur. As far as the balance of payments is concerned, this tends only to become a serious political issue when the current account deficit gets really severe, or if the exchange rate starts to plummet. In the middle of phase 2, it is unlikely that this stage will yet have been reached. By careful economic management, then, the government can get the four objectives to look good at the time of the election. Of course, economic management is not perfect and policies may take longer (or shorter) to work than the government had anticipated. Things are made easier for governments in countries like the UK, however, where the government can choose when to call an election. ___ (5) Once a government has won an election it can then deflate an economy in order to remove inflationary pressures and improve the balance of payments. ___ (6) This will probably be highly unpopular with the electorate. But no matter: the government, having created sufficient slack in the economy, can then reflate the economy again in time for the next general election!

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It is thus possible to observe a political business cycle. Recessions follow elections. Rapid growth precedes elections. II. For each question 1-4, mark one for the answer you choose. 1. The period of economic expansion is characterized by A. a high level of unemployment. B. increased government expenditure. C. shortages and bottlenecks. 2. Governments are able to engineer booms and recessions by A. raising taxes. B. decreasing government expenditure. C. cutting interest rates. 3. The balance of payments will not probably become a serious problem if A. the current account deficit gets severe. B. the exchange rate starts to plummet. C. it is improved by the government. 4. In the middle of phase 2 inflation will be deteriorating because A. there are no bottlenecks. B. the peak of the business cycle is approached. C. shortages do not occur. III. There is one mistake in each of the following sentences (either an underlined word or a phrase); you are to find it. 1. As far as unemployment concerned, it is rapidly falling. a b c 2. In the middle of the phase 2, inflation and the balance of payments a b will be deteriorating. c 3. By careful economic management the government can get the a economy to look as healthy as possibly. b c 4. In the USA the government cannot choose when to call an elections. a b 5. Once a government has c

won an election it can then deflate an a economy, thus a recession will likely to follow. b c 6. A political business cycle include recessions following elections a b and rapid growth preceding elections. c

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MANAGERS AND OWNERS : High Salaries and Corporate Goals I. Read the text. Some parts of the text have been taken out. These e xtracts are listed below. Complete each gap with the appropriate extract. One se ntence does not belong in any of the gaps. a) If the share value goes above this level, the manager makes the difference. b) Increasingly there has been greater reliance on payouts of shares and share options, rather than on salaries and short-term bonuses. c) But in doing this, they will fail to embark on projects which could potentially be very profitable (albeit risky) and thereby fail to add value to investors shares. d) Share option schemes are becoming less popular. e) High rewards are likely to motivate not only top executives, but also those below them. In 1995, Jack Welch, chief executive of General Electric, the American conglomerate, received earnings of $22 million, making him the highest -paid chief executive in the USA. The high pay awards given to many top managers in both the USA and the UK has, in recent years, met with a storm of protest. M any have argued that such pay awards have been excessive, esp ecially when many of the companies they work for have been cutting their workforce in a process of rationalization and workers pay has been capped or has risen only slowly. How can such high pay awards to top executives be justified? The two main arguments put forward to justify such generosity are as follows: The best cost money. Failure to offer high rewards may encourage the top executives within an industry to move elsewhere. High rewards motivate. ___ (1) M anagers, especially those in the middle of the business hierarchy, will compete for promotion and seek to do well with such high rewards on offer. In addition to using high salaries to motivate managers, shareholders, who ultimately determine the pay of top executives, have been keen to modify the manner in which top executives receive their rewards, in order to provide additional incentives. ___ (2) The justification for such a move is that giving rewards in the form of shares links an environment, a rational reward-maximising manager will always be seeking to enhance share value, and this will be linked to the companys success. As such, the need for monitoring managerial activity diminishes. The drawback of simply giving shares (as opposed to share options) to top managers concerns how they might respond to risk. They might be risk averse and seek to protect the value of their shares, preferring to avoid risky ventures that might jeopardize profits and cause share prices to fall. ___ (3) Because of this, the giving of share options to top managers has become more prevalent. Share options give top managers the right to buy shares at a set price. ___ (4) If the share price falls below this level, the manager can exercise the option not to buy. In such

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circumstances, top managers are shielded from the risks of failure, but encouraged to do as well as possible. It was estimated that, in the UK in 1994, the directors and senior executives of PowerGen and National Power had share options valued at 23 million. The chief executive of PowerGen alone made a profit of 1.2 million by exercising his option to buy the shares. II. Complete the following table: A. The giving of share options to top managers allows them B. In order to provide additional incentives shareholders C. High rewards are likely to motivate managers in the middle of the business hierarchy because III. The mistakes in the sentences below have been underlined. Write the corrections in the spaces provided. 1. M any argue that such a pay awards have been excessive. 2. If the share value will go above this level, the manager makes difference. 3. Failure to offer high rewards may encourage the top executives within an industry moving elsewhere. 4. The justification for such a move is what giving rewards in the form of shares link the interests of managers, owners and investors. 1. _________________________________________________ 2. _________________________________________________ 3. _________________________________________________ 4. _________________________________________________

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INEQUALITY AND POVERTY I. Read the text. Some parts of the text have been taken out. These e xtracts are listed below. Complete each gap with the appropriate extract. One se ntence does not belong in any of the gaps. a) The definition is based on judgments, made by each particular society, as to what is considered a reasonable and acceptable standard of living, according to the conventions of the day. b) Poverty as a social phenomenon should be eliminated. c) A truly socialist society would be a much more equal society. d) Nevertheless economists do have a major role to play in the analysis of inequality. e) This may mean that some people are poor, and most on the right argue in favour of government measures to alleviate poverty. Inequality is one of the most contentious issues in the world of economics and politics. The political right argues that a certain amount of inequality and poverty is the inevitable price paid for an efficient, growing economy. People need the incentives of high incomes to encourage them to work, train, invest and take risks. ___ (1) Nevertheless they worry that any significant redistribution from rich to poor may seriously reduce growth and efficiency by undermining incentives. People on the right also argue from a moral standpoint that the freedom to own property and to pass it on to children, and the freedom to keep the bulk of the income from that property, are fundamental rights. The left, not surprisingly, disagrees. A fundamental tenet of socialism is t hat the distribution of income should be based on need, rather than on private property ownership and the workings of the market. ___ (2) M ost socialists nevertheless do accept that there will have to be incentives for an economy to function, and that therefore there will have to be some minimum level of inequality. Whether the current distribution of income is desirable or not is a normative question. Economists therefore cannot settle the debate between left and right over how much the government should redistribute incomes from rich to poor. ___ (3) They can do the following: Identify the extent of inequality and analyse how it has changed over time. Explain why a particular level of income distribution occurs and what causes inequality to grow or to lessen. Examine the relationship between equality and other economic objectives such as efficiency. Identify various government policies to deal with problems of inequality and poverty. Examine the effects of these policies, both on inequality itself and on other questions such as efficiency, inflation and unemployment. In attempting to solve a social problem such as poverty, it is normal for the policy-making body to adopt the following four-stage approach: The problem is defined.

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The problem is measured. The problems causes are identified. Alternative policies are considered to cure the problem. The importance of defining the problem of poverty correctly is that it determines the subsequent stages: the number of poor, possible causes of poverty and ways of tackling the problem. There are two ways of looking at poverty. Absolute poverty (or subsistence poverty). As its name suggests, this definition involves identifying a poverty line measured in terms of those basic items considered essential to life: items such as adequate clothing, food and shelter. By defining poverty in absolute terms, it is assumed that all individuals have similar minimum requirements, and that those whose means fall below the required minimum are poor. Attempts have been made to include minimum social/cultural needs in such definitions: for example, adequate leisure and recreation, education and security. Relative poverty ___ (4) Hence an individual who is unable to attain this reasonable and acceptable standard is considered poor. For example, if fridges, TVs and videos are considered part of civilised existence, then without them you are considered poor! The standard of living considered to be acceptable by society will differ over time, and from one society to another. II. Are sentences below Right or Wrong? If there is not enough i nformation to answer, choose Doesnt say. 1. The political right is sure that a certain amount of inequality and poverty is the inevitable price paid for an efficient growing economy. A. Right B. Wrong C. Doesnt say 2. Economists have a major role to play in the analysis of inequality. A. Right B. Wrong C. Doesnt say 3. Relative poverty is a far more stable concept. A. Right B. Wrong C. Doesnt say

III. The mistakes in the sentences below have been underlined. Write the corrections in the spaces provided. 1. Economists therefore cannot to settle the debate between left and right. 2. The standard of living considered be acceptable of society will differ over time. 3. Inequality is one of most contentious issues in world of economics and politics. 4. Hence an individual what is unable to attain this reasonable and acceptable standard is considering poor. 1. _____________________________________________

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2. _____________________________________________ 3. _____________________________________________ 4. _____________________________________________

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TECHNOLOGY AND EMPLOYMENT Does Technological Progress Create or Destroy Jobs? 1. Does technological progress destroy jobs? The obvious answer may seem to be yes. After all, new technology often involves machines taking over jobs that were previously done by people. 2. There is another view, however. This argues that a failure to introduce new technology and ultimately to remain competitive will offer an even worse longterm employment problem. M arkets, and hence employment, will be lost to more efficient competitors. 3. The relative merits of each of these views are difficult to assess, since they depend greatly upon the type of technology, its organisation in the workplace and the market within which it is located. The diagram isolates four stages in the effects of new technology on jobs. (3) Servicing (4) M arket expansion

Emp loy ment increase

(1) Design and installation

Time Emp loy ment decrease (2) Imp lementation

Four effects of new technology on employment Source: A. Rajan and G. Cooke. The impact of IT on employment. (National Westminster Bank Quarterly Review. August 1986). Stage (1) Design and installation Here labour requirements grow as first designers and then construction workers are employed. As construction/installation is completed, employment from this source will then disappear. Stage (2) Implementation Here labour requirements decline, especially if the technology is concerned with improving existing processes rather than creating new products. Stage (3) Servicing Maintenance and repair may have positive employment effects. This may gradually decrease over time as teething troubles are eliminated, or it may increase as the stock of initially new machines begins to grow older. Stage (4) M arket expansion This represents the long-term impact of technology on employment levels as the improved and/or cheaper products lead to more sales.

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4. The optimistic view holds that, historically, technology has generated more jobs than it has destroyed. Total employment today is much higher than a hundred years ago, and yet technological progress has allowed many goods and services to be produced with far fewer workers. What has happened is that increased output has more than compensated for the growth in labour productivity. There is no reason, say the optimists, why this process should not continue. 5. The pessimists, however, are less certain about the potential employment benefits of new technology. Even in growth industries, such as pharmaceuticals, electronics, optical technology and high-value plastics, there has been a decline in employment. Except in a few parts of the world where a rapid growth in exports has allowed a huge expansion of output (e.g. certain south-east Asian countries), output growth in high-tech industries has not kept pace with the growth in labour productivity. I. Which part of the text reports on these items? A. The outcome of new technology is risky. B. The negative influence of technological race on employment. C. Technological changes improve the potential employment benefits. D. Technology failure and the nature of employment. E. How are new technology and jobs shapingtheir dependence? II. Choose the best answer to complete each gap in the text. The impact of technology not only on the ___ (1) of business, but on the economy in general is ___ (2) illustrated by the development and use of the Internet. By 1997, ___ (3) some 40 million people and 25 000 firms used the Internet, and this figure was rising ___ (4) over 10 per cent per month. The commercial possibilities of the Internet ___ (5) from the selling of information and services, to global forms of cat alogue shopping where you can ___ (6) through a businesss product range (or surf the net) and use your credit card number to pay. The Internet is just one example of how technology and technological change are ___ (7) the whole structure and organisation of business, the ___ (8) of work for the worker, and the ___ (9) of business and hence the competitive ___ (10) of national economies. 1. a) practise 2. a) brightly 3. a) worldly 4. a) by 5. a) change 6. a) examine 7. a) drawing 8. a) experiment 9. a) product 10. a) performance b) need b) vividly b) everywhere b) to b) fluctuation b) see b) finding b) nature b) productivity b) work c) necessity c) probably c) elsewhere c) for c) range c) follow c) becoming c) experience c) production c) acting d) practice d) evidently d) worldwide d) on d) drive d) browse d) shaping d) ideas d) productiveness d) action

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III. In most of the lines below there is one extra word. It is either grammatically incorrect or does not fit in with the sense of the text. S ome lines, however, are correct. If there is an extra word in the line, write out the extra word in CAPITAL LETTERS . 01 Can workers who are displaced from high-tech 02 industries not as simply find jobs in other parts of the 03 economy? There are two problems over here. The first is 04 that of a structural unemployment. Displaced workers 05 may not have the skills to take up its work elsewhere. 06 Clearly up what is needed is a system of retraining that 07 enables only workers to move to alternative jobs. The 08 second is that of income distribution. If the only 09 alternative jobs are more relatively low-skilled ones in the 10 service sector (cleaners, porters, shelf p ackers, 11 checkout assistants, etc.), the displaced workers may 12 have to accept for a considerable cut in wages.

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DO PEOPLE VOLUNTEER TO BE UN EMPLOYED The distinction between voluntary and involuntary unemployment I. Read the text. Some parts of the texts have been taken out. These extracts are listed below. Complete each gap with the appropriate extract. One sentence does not belong in any of the gaps. a) Voluntary unemployment tends to imply that the blame for unemployment lies with the unemployed person and not with market forces or with inadequate government policies. b) Workers want to work at the current wage, but there are not enough jobs available. c) It occurs when the demand for certain types of labour fluctuates with the seasons of the year. d) Workers can hardly be said to have volunteered for these changes in d emand. e) According to these economists, then, only demand-deficient unemployment would be classed as involuntary. A distinction made by some economists is that between voluntary and involuntary unemployment. M any economists would regard equilibrium unemployment as voluntary. If people choose not to accept a job at the going wage, even though there are jobs available, then in a sense they could be said to have voluntarily chosen to be unemployed. Disequilibrium unemployment, according to these economists, would be classed as invo luntary. ___ (1) Some economists would also include classical unemployment as voluntary. If people, through their unions, have chosen to demand a higher wage t han the equilibrium wage, then they could be said to have collectively volunteered to make themselves unemployed. ___ (2) Some economists go even further and argue that all unemployment should be classed as voluntary. If the cause of disequilibrium unemployment is a downward stickiness in real wage rates, then workers, either individually or collectively, are choosing not to accept work at a lower wage. Other economists would go to the other extreme and claim that all disequil ibrium unemployment and most equilibrium unemployment is involuntary. Structural unemployment, for example, results from changes in demand and/or supply patterns in the economy and a resulting mismatching of unemployed workers skills to the person specifications of vacant jobs. ___ (3) True, people can be retrained, but retraining takes time, and in the meantime they will be unemployed. Similarly with frictional unemployment, if the cause of some people being unemployed is initial ignorance of job opportunities and hence the time it t akes to search for a job, they cannot be said to have volunteered to be initially poorly informed. The terms voluntary and involuntary unemployment are not only ambiguous, they are also unfortunate because they have strong normative overtones. ___ (4) While in one sense, at a low enough wage rate there would probably be a job for vir-

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tually any unemployed person, the unemployed cannot be said to be voluntarily unemployed if they are choosing to turn down jobs at pitifully low wages. Although the concepts of voluntary and involuntary unemployment are commonly used, for the above reasons we shall avoid them. II. For each question 1-4, mark one for the answer you choose. 1. According to some economists involuntary unemployment takes place when workers A. choose to work at the equilibrium wage but cant find a job. B. cant accept work at the current wage. C. are encouraged by their unions to resign because of low wage. 2. One of the extreme viewpoints on unemployment is that A. any unemployment can be classified voluntary and involuntary at the same time. B. all unemployment can be considered as involuntary. C. in cases workers make their own decisions if to accept work or not. 3. Some economists claim that A. changes in demand can lead to involuntary unemploy ment. B. retraining of people cause voluntary unemployment. C. if people are initially poorly informed of job opportunities and become unemployed, they are sure to have done it voluntarily. 4. It is stated that the difference between voluntary and involuntary unemployment A. is subtle. B. is obvious. C. is senseless. III. Choose the best answer to complete each gap in the text. Structural unemployment is ___ (1) the structure of the economy changes. Employment in some industries may ___ (2) while in others it contracts. There are two main reasons ___ (3) this. A change in the pattern of demand. Some industries ___ (4) declining demand. This may be ___ (5) to a change in consumer tastes. Certain goods may go ___ (6) fashion. Or it may ___ (7) competition from other industries. For example, consumer demand may ___ (8) from coal and to other fuels. A change in the methods of production. New techniques of production often allow the ___ (9) level of output to be produced with fewer workers. Unless output expands sufficiently to absorb the surplus labour, people will be ___ (10) redundant. 1. a) there 2. a) expand 3. a) for 4 a) practice 5. a) thank 6. a) out of 7. a) result in 8. a) be carried 9. a) similar b) what b) extend b) of b) undertake b) through b) away from b) be caused by b) shift away b) compatibl c) where c) decrease c) to c) take up c) due c) out from c) be called by c) be turned down c) equal d) how d) reduce d) in d) experience d) because d) of d) be result from d) reject away d) same

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10. a) done

b) held

c) dismissed

d) made

IV. In most of the lines below there is one extra word. It is either grammatically incorrect or does not fit in with the sense of the text. S ome lines, howe ver, are correct. If there is an extra word in the line, wri te out the extra word in CAPITAL LETTERS . 01. There are two broad approaches to the tackling structural unemployment: 02. market-orientated or interventionist. 03. The first one involves encouraging people to look more active for jobs, if necessary in 04. the other parts of the country, involves encouraging people to adopt 05. a more willing attitude on retraining, and if necessary 06. to accept some reduction in wages. 07. An interventionist approach involves direct government action to match jobs to the unemployed. 08. Two examples are providing grants to firms to set back in areas 09. of high unemployment (regional policy), 10. and government-funded trained schemes.

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Part IV. Fundamentals of Translation , . , , . to be, to have. . , , ( , ), , , , . . ( ) () . , , . , , . -, . : -s , Present Simple:

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Profit plays an important role in determining the allocation of resources.

. - .

-ed Past Simple: The classical economists regarded money as no more than a medium of exchange.

to be, to have (am, is, are, was, were, have, has, had), , : Sales are not increasing at the moment. .

( Present Continuous) In many countries economic development has led to periods of rapid population growth. ( Present Perfect) Changes in the rate of interest had a great effect on share prices. ( ) We had to replace this piece of equipment. ( ) will, would, shall, should, : When population is growing fast the proportion of the people of the younger age will be increasing. , . . . .

( Future Simple) can, could, must, may, might: All shareholders must receive an

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invitation to the meeting. ( )

( ). , , , , . , , . An increase in price usually means that the production will become . more profitable. (An increase ). . , . , ing- . . . Competition between firms will lead to the elimination of noncompetitive ones . ( the elimination ). , .. . , / . . . . , , . . , , , . Last year the results were not pleasing . (Last , year). , ( ). , ( ), . .

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This can be easily done. This method is very difficult. In his report he presented a new way of this problem solving.

. . .

, . , . , . - : Simple Continuous Perfect. Perfect continuous. , . Simple , : They appraise their employees once a year. . Continuous , . ( : ?): Economic conditions are changing all the time. . Perfect , . ( ?): Turnover has increased by 5% 5%. this year. to be, to have. , , . : 1. , , ; 2. Perfect (to have) Continuous (to be), to be. 3. must ( ).

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1 (, ) , , : , () , . . . , , : This mistake we observed in this article. .

this mistake, , , . , , . , (), ( it is that, do). : 1. . . ) ( ) . ( ). In the article was a new example. . there there to be.

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) -, , , I, II . - ( be) , ( ) . -, be. ( ), be. Important for this method is decision-making strategy () . 2. - it is that ( that which, who, when). , , it is that, ( ). it is , that, who, which , . ( ) , , , , . It is this last category that is of interest to us. . It was not until 1970 that he 1970 published. . 3. do. do . do to , . , , .. The value does seem high in the light of this observation. It did cause some difficulties. . .

1 Exercise 1. Translate the sentences, paying attention to the inversion. 1. It was in this country that a large scale of production of synthetic rubber was first organized.

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2. It is countries with relatively high wage rates which make the most use of laboursaving machinery. 3. It is the act of spending which influences the prices. 4. It is for this reason that the balance of payments figures is subjected to revision in the months following their original publication. 5. It is because the fixed exchange rate puts the official reserves at risk that most governments favour some more flexible system. 6. It is governmental policies that will help keep interest rates from sinking very far, say bankers here. 7. It is precisely the unreported holdings that have probably been diversified most. 8. It was then that the industrial economies were hit by the first massive price increase.

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2 . , . (Passive voice) (Active) to be II be + Participle II (-ed, 3- ). be , , ( , ). II , be. ( ) , ( ), ( , ): M icrosoft was founded by William H. Gates in 1975. . 1975 .

, by. , , .. , , , : He did the work well. . The work was done by him well. . . : 1. - , - - : . : - :

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to account for to agree upon to arrive at to depend on to dispose of to insist on to laugh at to listen to to look at to provide for to refer to to speak of to send for to take care of to lose sight

- ,

, . The book is often referred to. . - . , . The book was much spoken about by the economists. .

2. : ( ), , to give, to pay, to order, to tell, to show . , . The company offered him a job (job , him ). : A job was offered to him by the company.

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He was offered a job by the company. : - ( ): He was offered a job. . ( ): He was offered a job by the . company. 3. , , : to enter a room to join a society to follow the man to attend a meeting : 1. - ( by): The product was launched. . 2. ( ): The product was launched by our . rivals , . 1. , , .. ( ): This decision was made by CEO. . . 3. - : Sales representatives were asked

2. , -, (-):

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to render an account.

4. ( ): These values are influenced by buyers experience. .

. 2 Exercise 1: Translate into Russian. 1. M ost government securities are marketable and may be bought and sold on the Stock Exchange. 2. The precious metals were first used as money on the basis of weight. 3. This question was raised at the last meeting and no conclusion was reached then. 4. These products have been designed by a special team. 5. Based on the total figure, it appears that an error was made in the budget. 6. The price of a product is determined by the interaction of demand and supply. 7. Raw materials and agricultural products are usually sold in open markets, where the influence of cost on supply is much less pronounced. 8. An industry which is being increasingly mechanised may be employing less labour but increasing its output. 9. The gradual trend towards larger enterprises has not been confined to manufacturing industry. 10. Each individual firm may obtain its components and other requirements at relatively low cost because they are being mass produced for the industry. 11. Units of production are officially referred to as establishment. 12. The ordinary share capital of a company is usually referred to as the equity of the company. 13. The output of agricultural products is seriously affected by variations in weather conditions. 14. The management knew what prices were being asked for the commodity in every part of the market.

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3 , (, ), , . , , , - , . . , , - . : The contract must have been signed , , . , - . Can 1. - : ) : The plan can be realized now. (, ). ) ( , .. ). 2. () -: can/could + / . Can/could it really have happened? ( ; / ) ? The agreement can be ratified now. 3. , () -: cant/couldnt have happened. This cant/couldnt have happened. ( ; , -

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; ), . May 1. - . The prices may rise again within two weeks. (; , ; ), .

2. , . M ay/might + . This proposal may prove to be a solution. ( , ; ; ; ; ) .

Have to 1. (). Have to + . The contract has to be revised. ( , ; ; ; ).

: have got + , got + . The agreement has got to be approved. .

, have to . You have to look at the current pric es to see the present trend in the , monetary supply. . To be to , (to be + ). This contract is to be signed early next week. .

to be , . The conference was to have started , as planned but ,

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Must 1. - (must + ). You mustnt enter a joint venture unless both parties benefit from the deal. .

2. (): must + . The amendment must have been already approved. , , (; ; ; ).

to be sure (certain) + , , ( ), : will + / . You will have heard the latest results, I believe. , , ( ), .

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3 Exercise 1: Translate into Eng lish, paying attention to modal verbs. 1. Whats more, Americans may have to endure the squeeze of yet another round of interest rate hikes. 2. Borrowers, he warns, are unlikely to be surprised if the prime rate for commercial firm, falls as low as 15 per cent. 3. The highly visible financial problems of M exico have called into question the stability of other countries and brought to the fore-front a fear that IM F and World Bank may not be financially equipped to deal with a crises of this kind. 4. Finance ministers from Britain, West Germany, France, Japan and the US are to discuss with the IM F managing director the coordination of their economic policies. 5. The crisis in the Eurocredit market was mitigated by prospect that it may be some time before debt service arrears now exceeding $26 bn can be reduced to manageable proportions. 6. There may still be room for further cuts, and there was some optimism in the City yesterday that further falls may be close, but the banks seem unlikely to take early action. 7. The effect of the latest issue is to lift the banks gearing from about 12 per cent to 20 per cent well within the international ceiling. 8. It will be readily appreciated that this practice in bound to cause frustration among German exporters and banks that cannot be without consequences in the long run. 9. But they (banks) will, more than at present, have to get closer to the realities of the economic world and take calculated risks. 10. Countries with heavy foreign debt must be able to export if they are to service their debt without cutting back. 11. The US officials had repeatedly predicted that US interest rates were likely to climb back to their record levels of about 20 per cent.

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4 - ; - - , , . - , . . - . , : 1. mine, ours, his, hers, theirs, yours , : Our procedure is more practical than theirs (their procedure). , ().

2. that, those , , that, those ( of), ( Participle II), , , , that, those . This point of view is that of a ma thematician rather than an econo, . mist. These results are more reliable than those received by our rivals. , , .

3. this, these . . - . , , , , ..

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These were some successive changes in price. This confirms our earlier suggestion.

. (, ) .

4. one (ones) , . . . ones. Among the disadvantages the following ones can be mentioned. ().

5. the former the latter - ( ) ( ). , : The latter procedure is much more complicated than the former one. ( ) , .

- . , ( ) , , . In this paper, we shall take the for mer approach. . This latter case is considerably more difficult to represent. . - -. 1. Do , . . , , , -, . . 2. . , , . , , -, : We will consider the ways to control business activity as Keynesian economics did. As science has evolved so has its meaning. , .

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3. so. , , , , - ( ) so. . : These data are very important for theory, and less so for practice .

4 Exercise 1: Translate into Russian the following sentences. Mind the difference in the meaning of the word one. 1. In a small country like the UK where there are strong trade unions, one should not expect to find any very great differences in regional wage rates. 2. One cannot draw any conclusions about the effect of a price change unless one knows the cause of the price change. 3. One can see that a fall in price may be associated with an increase or decrease in quantity demanded it all depends upon what caused the price change. 4. Normally, this period will be a very short one. 5. An increase in the demand for wool by one industry will raise the price and affect the prices of all the other commodities made from wool. 6. Lead and zinc are found in the same ore so that the extraction of one leads to the extraction of the other. 7. One very important example of his relationship is to be found in the transport industry. 8. Where commodities are in joint supply an increase in the demand for one of them will cause a fall in the price of the other. 9. In a perfect market, there will be one and only one market price which is beyond the control of any one buyer or any one seller. 10. At one time most of worlds nickel was obtained from a certain area in the Rockies. 11. One often hears complains from workers in different industries that they have lost out in recent wage settlements. 12. As one should expect, total output is much greater when the countries specialize. 13. According to many employers older workers are more reliable and loyal than younger ones. Exercise 2: Translate the following sentences, paying attention to the words that/those. 1. Although there are more male births than female births, the number of females in total population exceeds that of males. 2. These rates are higher than those in most Western European countries. 3. The most widely used indicator of monopoly power is that of the market share. 4. Unofficial strikes are those which do not have full support of trade union. 5. The rate of savings in rich countries is much higher than that in poor countries. 6. The aim of monetary policy are the same as those of economic policy generally.

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7. This is due to the greatest element of risk and the fact that administrative cost of small loans are proportionally greater than those for larger loans. 8. The most common definition of an industry is that used in official statistics which groups firms into industries according to physical and technical properties of their principle products. 9. The selling costs of the larger firm will be much greater than those of smaller firm. 10. Internal economies of scale are those which arise from the growth of the firm independently of what is happening to other firms. 11. The separation of ownership and control in the modern corporation results in p otential conflicts between owners and managers since the objectives of management may differ from those of the shareholders.

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5 : I, , . . . Present participle (Participle I) , -: Discussing the problem of unemployment in this region they understood that it was not the main problem. -: Having launched the product, the company realized that it was not properly tested. , , . , , .

Perfect participle (Participle II) ,

. 1. , Continuous ( to be) . The advertising campaign is being discussed now. . The acting business must pay taxes. . .

2. -

3. ( ). .

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The article contains several chapters discussing this problem.

) , . ) , .

4. , . : , while when, . : ) ; ) ; ) . (While) discussing their new project they found a lot of ways for its implementation. ) , . ) . ) , . . . : ) ; ) . Knowing the complexity of this theory, we discussed its main points with the experts. ) , . ) , .

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. . They managed to gain this information carrying out market research. , .

5 Exercise 1: Translate, paying attention to Participle I and absolute participle construction. 1. Increasing concern has been expressed about the continued growth in world population. 2. Loan capital is more appropriate to firms operating in stable market. 3. Industries producing steel, paper and chemicals require very large quantities of water and tend to be found near rivers. 4. With increasing numbers entering the working population, expanding industries will have little trouble in recruiting labour. 5. In advanced capitalist societies, advertising is a powerful instrument affecting demand in many markets. 6. Although most of the major money centre banks have emer ged from the first phase of the liquidity crisis facing developing countries like M exico in reasonable shape, the shadow, and some of the risks, remain. 7. Having explored the possible relationship between capacity and expected output, we now examine the behaviour of costs as actual output changes. 8. Having examined the relationships between outputs and costs, we now show how the behaviour of cost may be reflected in the supply curve.

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6 II. II (Past Participle, III ) : -, -; -, -, -. : given , ; taken , . II , . Perfect Passive. , II, , : 1. . ; : The described method is widely used in economics. .

, , .. . : We used all the methods recommended. , .

2. (.. ) : ) ; ) . A firm is composed of different parts called departments ) , . ) , . 3. . II ( ).

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Considered separately wasnt difficult, this question.

II when if. . 4. . II be have ( , , ) : a) Passive be, : Information was collected from internal sources. .

b) Perfect II have, , : M arket researchers have used experimental techniques. .

6 Exercise 1: Translate, paying special attention to rendering Partic iple II: 1. The quantity of labour derived from a given stock of population depends upon several factors. 2. Put simply, a business process is the set of activities performed to serve a customer. 3. The information obtained is very valuable. 4. Despite their philosophical commitment to private ownership, most of the bankers interviewed applauded the nationalization as a much-needed step to bolster international confidence in M exicos banking system. 5. Even when particularly favourable interest rates are arranged, the bank will regularly feel the terms offered are unacceptably high. 6. Foreign trade authorities have not infrequently observed prudent moderation in arriving at decisions observed more or less uniformly throughout the economic community.

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7. This is (the answer to the problem) the switching of capital to the US from other parts of the world prompted by concern about the possibility of an international banking collapse. 8. Such interest rates, when combined with falling commodity prices and economic recession in the industrial world, spell serious trouble for developing countries. 9. Already the number of countries forced to ask banks to reschedule their debts is expected to grow. 10. The hoped-for consumer boom, promised by the President, hasnt materialized yet.

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7 : I II c , . , , , ( ) - ( ). , , , . The idea can be pronounced true if tested by experience. When speaking about the new projects the manager demonstrated different figures. , . , .

, if, as, when, unless c II . , it as it was mentioned, if it is desired, unless it is stated, it is. If desired the method of survey may be used together with observation. As mentioned above the experiment was a success. , . , .

, , , . , : ) ; ) (Complex Object); ) (Complex Subject).

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. (Absolute Participle Construction). , , , . : ) : ( ) , . ) : , . ) , , , , , . , . The stages of research having been defined, the problem was solved. ) ( ) , . ) , . Almost all stages of market research are expensive, personal interviews and consumers panels being the most expensive of all. ) , .

. with, . , . With the model reconstructed we may start rethinking of the whole , process. . , , , , , , , :

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. . : 1. (Participle I, Participle II): to see, to feel, to hear, to watch, to notice, to find. We found the results of random sampling being very curious. , .

2. (P articiple II): to make, to get, to like, to want, to have. The company got the information tested. .

3. (Participle II): to think, to consider, to know, to understand. Pepsi considered this design been the best. () .

, , ( it, him, her, them, us, me). , . We know him working at this problem since 2000. , 2000 .

as ( I II) , . , . , to have. , They thought the problem of wage increase as being of the importance. . , . We have the concept approved. .

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. . , , , . , (. 11), I II, as . ( -) ; , , , , . as, , . - . Values are considered changing as buyers get more experience. , .

7 Exercise 1: Translate the sentences, paying attention to Absolute Participle Construction. 1. Other things being equal, an increase in wage rates will increase the cost of labour relative to the costs of the other factors. 2. In order to simplify the analysis we can consider two firms, one being represent ative of high-cost producers and the other of low-cost producers. 3. M ost industries make use of a variety of machines, each m achine carrying out a different operation. 4. The selling price must relate to the production cost, which in turn, depends on the quantity sold, this quantity being dependent upon the sales price. 5. It being too late, they decided to stop working. 6. Other things being equal, the demand for commodity will tend to vary directly as the price of its substitute. 7. The installation was atomised last year, its capacity rising by 20 per cent. 8. All the problems having been solved, they went home. 9. The goods having been loaded, the dockworkers left the port . 10. M ember nations are required to subscribe to the capital stock of the World Bank, each being given a quota which is related to the members national income and position in the world trade.

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Exercise 2: Translate the following sentences, paying attention to Complex Subject construction. 1. In the industrial nations which account for just under 80 per cent of the oil consumption in the Western world, the savings in the national oil bills can be expected contracting loan demand. 2. Interest rates for long-term bonds are expected being volatile, even the uncertain outlook for a long-term slow-down in inflation. 3. The new administration appears unlikely getting the early upturn in tax revenues, and that means it faces further headaches in balancing the federal budget. 4. M eanwhile the Federal Reserve is understood having told Brazil there is no prospect of a bilateral bridging loan from the US, at least for the time being. 5. But Germany is known being opposed to any idea of extending the scope of embargo provisions. 6. The reference to mutual interest is intended making it clear that when the obligations and burdens on both sides have been considered, both parties must clearly stand to benefit in equal measure from the arrangements. 7. And Delors (Finance M inister), for one, appears being resisting the talk of treating banking as a public service.

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8 (the gerund) , , , . . . . I , . : 1. : M arketing is the process of planning and executing the conception. 2. I: Planning and executing the conception we use marketing. , . . .

3. : The planning and the executing of the conception is effected by means of marketing.

. I, . Simple Perfect Active writing having written Passive being written having being written

( Simple) , , , - . We intend using the results of marketing research defining the main concept of management. .

, -.

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I know of his having discussed the items of the agreement with the board of directors.

, .

. : ; ; ; ; . , , . 1. : Choosing the market research strategy is a difficult task. 2. : Information from outside the business is used for collecting data. 3. : Their aim was collecting necessary data. Some companies have the power of taking over smaller firms. , . . . , .

4. ( ):

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5. : : ) ; ) ; ) : After finishing the experiment we discussed its results.

) , . ) . ) , .

8 Exercise 1: Translate these sentences into Russian, paying attention to the functions of Gerund. 1. Discounting is the process of buying a security for less than its face value. 2. We discussed opening a new business. 3. He risks losing all his money. 4. His taking part in the development of the new system was a great help to us. 5. We knew nothing about his being sent to London. 6. We knew nothing about his having been sent to London. 7. The control of the money supply is probably one of the most important instruments for regulating total demand in an economy. 8. By increasing the minimum deposit and reducing the period allowed for repayment, the government has a quick-acting method of reducing the demand for consumer durables. 9. The increase in government spending and borrowing will have some effect on the rate of interest. 10. We have succeeded in entering a new competitive market.

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9 ( ) , , ( ) . : . , ( ) , . , . , , , . , , . This method differs from that one by , having other parameters. . , , : By , Of , To , In , In addition to , In spite of , Besides , Owing to , Due to , , , ( ), , . . , . , , : There is unmistakable proof of Gates having been right. , .

181

( ), , , : His having made this experiment is a known fact. , , .

, , , , : We know of their having been satisfied with CEOs explanations of the discrepancies. , , .

, : To start, to begin To continue, to go on To stop, to give up To aid in To aim at To account for To avoid , ,

To insist on (upon ) To object to To be responsible for , To prevent from To succeed in , (- )

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9 Exercise 1: Translate these sentences, paying attention to rendering gerundial constructions. 1. No lasting success can be achieved in the fight against inflation without restraining the trend towards growth in the money supply. 2. The mechanism of wage indexation has prevented workers from shouldering part of the real costs produced by higher energy prices. 3. The monetarists recommended slowing down and stabilizing money supply growth in order to restrain inflation. 4. But since the OPEC nations will undoubtedly attempt to offset their revenue losses at least in part by reducing their imports, the current account shortfall should be considered lower in actual fact. 5. Although in the early 80s a certain degree of tightening up in the personnel sector was effected, the basic positive outlook is still unchanged. 6. The large volume of private placements doesnt seem, however, to be the only, or even the most important reason for the restraint on the part of some investors in subscribing to new issues. 7. Only on receiving slightly more positive interest rate signals from the US financial markets in the second half of the month did activity on the market begin to pick up. 8. To an increasing extent, borrowing is done not for development purposes but for servicing debts and for financing heavy trade deficits caused by unequal terms of trade with big capitalist countries. 9. Business, far from investing, is cutting back plans for expansion. 10. The Euromarket provides an opportunity of raising substantial loans on favourable terms without the credit facility being linked to individual projects. 11. The commission of experts is in favor of maintaining the Swiss banking secrecy law.

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10 . . , ( ) , : ? ? to. , , . , , , , . , , , , . , . , . , , . Indefinite , -. , , , , . They wanted to introduce a new system. () .

Perfect , -, . He was expected to have done his , work. . . 1. . . To think otherwise would be a mistake. To account for these variations is in principle straightforward. - . .

2. . . We try to minimize the old disadvantages. .

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3. . . , . . , , in order to, so as, , , . , , too, enough, sufficiently, sufficient. In order to do a work well one must learn. The term production is too complex to be explained in one paragraph. 4. . , . , Indefinite , , , . There are many considerations to be , taken into account in determining marketing strategy. . 5. . , , . To sum up, we shall present the table of results. ( ), . - , . , .

. to . 1. to:

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) - be, , , , : Our task is to launch this product in time. , () .

) be have, must , , . The question of the procedure is yet to be settled. () .

2. to : ) . All such attempts will fail. ( ).

) . This would give rise to economic problem. It is necessary that the model adequately represent the problem situation. . , .

186

) . Let us avoid unnecessary complications. ) . A decision maker must evaluate the research and its results. , , . .

10 Exercise 1: Translate the following sentences, paying attention to the fun ctions of the infinitive. 1. The purpose of each business process is to offer each customer the right product or service. 2. M ore than 200 years ago, the economist Adam Smith formulated a theory to describe industrial practices that were already centuries old. 3. There are nation-wide schemes to encourage industrial investment. 4. To obtain a Stock Exchange listing, a company must have at least 25% of its shares held by public. 5. In order to create a supply of loans, people with the necessary financial resources have to be persuaded to loan. 6. Efforts to increase the productive capacity of poorer nations will only be effective if these nations are able to increase their exports. 7. At the last moment they decided not to continue with the negotiations. 8. It is important to carry out these changes as quickly as possible. 9. To encourage our employers to develop their skill is one of the prime concerns of management. 10. We have decided not to advertise this position, but recruit internally. 11. It is impossible for us to accept these terms. 12. The sales director claimed to have found three new customers. 13. After the acquisition they didnt dare to replace the whole management team immediately.

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11 . , , , , . I remembered to have studied the causes of this firms failure. , , .

, , , , ( ). We know F.H. Sonnenberg to have written a famous book M arketing to win. , .. .

() . , : , , ( , ). , . We asked him to help us, the work to be done in a week. with . We shall make the experiment (with) the sample to be taken from another country. , . , .. .

, , -

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(Complex object). . : ) ( to): see, hear, feel, watch, perceive, notice, observe. We noticed him be the most experienced manager in this company. , .

. ) , , ( to): want, wish, like, hate, desire, intend. They wanted Pepsi to get potentially large market with launching that new product Pepsi M ax. , .

) ( to): know, believe, think, consider, expect. We believe the market research to have helped the business to come to a decision. , .

) ( to): ask, order, command, allow. The head of the department allowed him to have continued that project. to): let, make, have, get (to). She made him solve this problem. , .

) , ( .

(Complex subject). , , . ,

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, : ) , , , : say, report, announce, know, believe, think, find, suppose, see, hear, make. He is known to be the most experienced manager in this company. ) , . ) , , . ) , happen, seem, appear, prove, chance, turn out. He seems to know our business plan in details. , -.

) , - likely, unlikely, sure, certain. He is unlikely to know our business plan in details. , - .

For + + Infinitive. , , , for. ( ), , : For this approach to be valuable it must be improved. There is a tendency for the method to be used in all the experiments. , . , .

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11 Exercise 1. Translate into Russian, paying attention to the objective infinitive construction. 1. I dont consider him to be a good manager. 2. The manager considers the results to be unsatisfactory. 3. We expected John to be elected. 4. We expect interest rates to rise next week. 5. We assume the market share of these brewing companies not to have increased. 6. The experts find the demand to turn out to be greater than expected. 7. They proved the demand to have been highly elastic when the market was depressed. 8. We show the small firm to specialize in one product. 9. They believe the larger firms to be able to employ buyers who are experienced in buying particular products. 10. The scientists know the ownership of labour to be highly unpop ular politically. Exercise 2. Translate into Russian, paying attention to the subjective infin itive construction. 1. The free market economy is said to be more flexible. 2. The strike is expected to end soon. 3. Complimentarity is said to exist when an increase in the demand of another product. 4. Consumers are assumed to wish to maximize their utility of satisfaction. 5. Firms are assumed to maximize their short-run profits. 6. When an increase in the scale of production yields a more than proportionate increase in output, the enterprise is said to be exp eriencing economies of scale. 7. The company is said to be losing a lot of money. 8. Goods which are close substitutes for one another are said to be in competitive demand. 9. A good is said to be in composite demand when it is demanded for several different uses. 10. The capitalist system is said to be based upon the principle of competition.

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12 - . . - , , . . 1. , , . : sections subsections , chapters articles clauses, items, points, counts, paragraphs

, clause, item, point, count, paragraph, , . , ), ), ), d) . , . 2. , , . , , , : The USA The United Stated of America 3. , , - : The terms and conditions Within the framework

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The contracting parties Within prejudice to

4. - , . , , . . 5. , , - shall 2- 3- . , , , . 6. , , - , . , . : Aforesaid Abovementioned Herein , Hereinafter named , therein, therewith, there at, there of, there to, . 7. , , . Ad hoc Bona fide Condition sine qua non En bloc Fait accompli Inter a lia

Ipso facto M utatis mutandis M odus vivendi Per capita Pro tempore Etc. ..

193

, , , . . : Status qvo Quorum Persona (non) grate () Tabula rasa Casus belli A priori De facto - Force majeure - 8. .

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12 Exercise 1: Translate, paying attention to rendering archaic word. 1. The Banks grant to the Borrower upon the terms and subject to the conditions hereof a loan facility in the aggregate amount of or the equivalent thereof in Deutsche M ark. 2. The Facility is made available severally by each Bank in the amount of its Commitment. The failure of any Bank to carry out its obligations hereunder shall not relieve any other Bank, the Agent or the Borrow of any Bank be liable for the obligations of any other Bank hereunder. 3. The Facility is available to the Borrower only during the Availability Period. Any part of the Facility which remains undrawn and uncancelled on the Termination Date shall be automatically cancelled at the close of business on that date. 4. CONDITIONS PRECEDENT Notwithstanding anything to the contrary contained or implied in this Agreement, the Borrower shall not be entitled to give notice of its intention to draw any Advance hereunder until all the documents listed in the Second Schedule have been received by the Agent and in from and substance satisfactory to the Agent. 5. The agent shall be under the same obligations and be ent itled to the same rights and powers in relation to any sums advanced by it hereunder in its capacity as a Bank as if it were not the Agent nor shall it be obliged by reason of its position as Agent or otherwise to account to any other Bank for any sum received by it for its own account hereunder or for the profit element thereof. 6. It shall not be a defence to a claim by any Bank under this Clause that any increased cost, reduction or payment therein referred to could have been avoided by such Bank. 7. The Borrow will, within forty -five days of the date hereof, pay to the Agent for account of the M anagers a management fee in accordance with the terms of the letter dated 8th October, 1975 sent by the Borrower to the M anagers. 8. The Borrower may not give any notice of its intention to make a drawing hereunder until all documents listed in the Second Schedule hereto have been in the possession of the Agent in sufficient copies for the Agent and each Bank and in from and substance satisfactory to the Agent for at least five Business Days. Exercise 2: Translate, paying attention to rendering Latin cliches. 1. Any payment by the Borrower of its obligations under any Note shall discharge pro tanto the Borrowers obligations under this Agreement and upon due payment or

195

satisfaction by the Borrower of all its obligations under the Notes, or of the corresponding obligations in this Agreement, the same shall be cancelled and forthwith returned to the Borrower. 2. B) Any prepayment of the proportion of any Advance lent by any Bank persuant to Clause 12, 13, or 14 shall reduce pro rata the Borrowers obligation to repay such Advance under Clause 9 on each subsequent Repayment Date. 3. Its obligations hereunder are and will be direct, unconditional and general obligations of the Borrower and will rank at least pari passu with all other indebtedness and contingent liabilities of he Borrower. 4. Provided, that it shall not be an Event of Default if the Borrower conducts a bona fide dispute in respect of any such indebtedness to settle such dispute.

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GLOSS ARY Aggregate demand Aggregate supply the proportion of the total demand (for a product) that is supplied by a particular manufacturer or brand the total amount of goods and services resulting from adding together all the spending power of people in the complete economy of a country actors which prevent the entry of new firms into an industry trade by direct exchange of goods for other goods without using money a written order telling one person to pay a certain sum of money to a named person on demand or at a certain time in the future the amount of goods and services that money can buy at a given time accumulated wealth or property, used in the production of further wealth, i.e. one of the factors of production, the others being land and labor legally, a bill of exchange drawn on a balance payable on demand an economy where the government makes all decisions about production and consumption any article (a good or a service) that can be bought or sold setting a price based on the prices charged by competitors for similar products a firm that is engaged in a number of unrelated productive activities, e.g. car assembly and the production of bread a merger between firms in unrelated business, e.g. between an automobile manufacturer and a food processing firm

Barriers to entry Barter Bill of exchange

Buying power Capital

Cheque Command economy Commodity Competition based pricing Conglomerate firm

Conglomerate merger

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Consumer goods Cost inflation Costing estimating Cost plus pricing Creeping inflation Demand

goods that satisfy personal needs rather than those required for the production of other goods the kind of inflation that is caused by rising costs of labor and materials, not by increased demand the cost of making goods or fixing the prices they should be sold at to make a profit fixing a price by adding a percentage profit margin to the cost of production of the good or service a slow rise in the level of prices of below 2 or 3 per cent a year the quantity of goods or services which purchasers are prepared to buy at a given price in a given p eriod of time the kind of inflation caused by an excess of demand over supply resulting in a decrease in the value of money a class or unit based on quantity, value or measure investment by companies domiciled in one country in companies a domiciled in another; it usually entails investor control and managerial involvement a sum of money allowed for immediate payment of a sum due to a later date a commercial banking firm that discounts bills of e xchange which have been accepted by accepting houses a person who has become depressed about the prospects of ever finding a job and decides to stop even trying the arrangements and activities needed for getting goods from the manufacturer or importer to the consumer through the channels of distribution which are usually the wholesalers and retailers a market consisting of two sellers the activity relating to commerce and industry the percentage annual charge in the national income of a country or a group of countries that part of the study of economics that examines and explains the working of an economic system and how it is influenced by human behavior, by the natural forces of the world and by man-made institutions such as markets, laws and governments

Demand inflation

Denomination Direct foreign investment Discount Discount House Discouraged worker

Distribution

Duopoly Economic activity Economic growth Economic theory

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Economies of scale Economics

the long run reduction in average costs that occurs as the scale of the firms output is increased a social science studying human behavior within the context of markets, the study of the natural laws governing the production, distribution and consumption of wealth a social scientist with special knowledge of economics, such as a teacher or a writer on the subject or a person who is employed by a business organization to forecast movements in prices and in the market demand for various products and services the use of labor and capital to produce goods and services a person who works for another person or a business, especially for money a person or company that hires workers and provides work a person, usually the owner, who organizes, finances and manages a commercial or industrial business in the expectation of making a profit a business organization a state of balance when all the economic forces present in a situation have an equal influence and there is no tendency to change the process of giving and receiving the rising and falling or changing of prices, numbers, rates or amounts an economy in which supply and demand regulates prices, wages, etc., rather than government policy amounts of money the lowering of the quality of products in general in order to prevent, and so to hide, an increase in price a merger between firms that produce and sell the same products, i.e. between competing firms a group of individuals whose economic decisionmaking is interrelated. They enter the market place as buyers or consumers of goods and services produced by firms. They provide factor inputs to firms in order to produce those goods and services

Economist

Employment Employee Employer Entrepreneur

Enterprise Equilibrium

Exchange Fluctuation Free market economy Funds Hidden inflation Horizontal merger Household

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Hyper-inflation

an extreme form of inflation, when the money supply is being increased very rapidly, resulting in an increase of over 20% of the price level annually the money of all kinds coming in regularly, especially to a person, family, or organization, such as salary or wages from employment, rent from property, profits from business and fees for professional services a rise in the general level of prices that part of government spending which is not covered by taxes or borrowing from the public, but is met by issuing new paper money a state of inflation that gets worse and worse, because higher prices result in demands for higher wages; and higher wages increase costs and so cause higher prices practical application of an idea that has already been discovered but is only now to be exploited the relation between the payment received by a lender of money and the amount of money lent, expressed as a percentage per period of time an individual acting as a link between persons or companies 1) the total number of people employed by a firm or some other organization to produce goods and servi ces; 2) the total number of people in an economy available to produce goods and services loose-rein supervision the form of money in which a person has a right by law to pay a debt and which the creditor must by law accept in settlement of the debt the debt owed by a business to its creditors and to its owner an amount of money borrowed by an individual or a company part of economic study considering the whole economy from a national point of view

Income

Inflation Inflationary gap

Inflationary spiral

Innovation Interest rate

Intermediary Labor force or workforce

Laissez-fair Legal tender

Liabilities Loan Macroeconomics

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Market oriented business Mainstream economics Marginal utility Market Market share Market oriented pricing Marketing

a business which develops products which have been researched and designed to meet the needs of customers the study of how market works the utility of one unit of a commodity an institutional arrangement that promotes trade or exchange of goods the amount of an economic good that will be offered for sale in the market at a certain price or time setting a price based on an analysis of the market the action of identifying, satisfying and increasing the buyers demand for a companys products by means such as advertising, sales promotion, pricing, carrying out market research and developing and testing new products 1) the systematic and objective classification, colle ction, analysis and reporting of information about a particular marketing problem; 2) the process of gaining information about customers, competitors and market trends through collecting primary and secondary data in business, especially regarding bills of exchange or insurance in policies, to become due for payment or repayment an amalgamation or joining of two or more firms into an existing firm or to form a new company part of economic study oferring a detailed treatment of one aspect of economic behaviour ignoring interactions with the rest of the economy the control, by the government, of a countrys currency and its system for lending and borrowing money, esp ecially through the supply of money permanently fixed exchange rates within the union, free capital movements and a single monetary authority setting the unions money supply

Market research

Mature

Merger Microeconomics

Monetary policy

Monetary union

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Money Monopoly Mortgage

any article or commodity that is generally acceptable by law and custom as a means of payment a market with a single buyer who has some influence over the price of his input the advance of a loan to a person or business (the borrower/mortgagor) by other persons or businesses; the thing given as a security A firm that owns production, sales and other revenuegenerating assets in a number of countries denotes the phenomenon whereby some initial increase (or decrease) in the rate of spending will bring about a more than proportionate increase (or decrease) in national income a market with a single firm which can serve that market at lower cost than any combination of two or more firms the rate of unemployment when the labour market is in equilibrium differences in national regulations or practices which prevent free movement of goods, services and factors across countries a market with a small number of sellers the percentage of the population of working age who declare themselves to be in the labour force a transfer of funds in any form between two parties now current in the market the money value of a unit of a good, service, financial security or assets which a buyer is required to pay a seller to purchase the item the application of controls on prices and incomes (particularly wages) in order to stop or slow down inflation in an economy decision-making process involved in setting a price for a good or a service

Multinational enterprise Multiplier effect

Natural monopoly

Natural rate of unemployment Non-tariff barriers

Oligopoly Participation rate Payment Prevailing price prices Price

Prices and incomes policy Pricing

202

Primary data

information which has been gathered for a specific purpose through direct investigation such as observation, surveys and through experiment a business which develops products with little or no market research and which it hopes will prove successful in the market the extra which is added to the cost of a product to cover the profit to be made the making of useful goods and services which are scarce and have a price a particular method of combining inputs to make outputs a policy concerned with removing significant imba lances between the regions of an economy in respect of unemployment rates and levels of income per head a form of structural unemployment associated with the decline of certain industrial activities the money received by a firm from selling its output of goods or services, or money received by government from taxation a list or complete description of who does what and who gets what an arrangement of things in ones own mind with the most preferred items towards the top of the scale information which already exists, such as accounts and sales records, government statistics, newspaper articles or reports from advertising agencies the individuals and institutions who contribute funds to finance a joint-stock company in return for shares in that company any goods or services that are considered to be economically interchangable by buyers the total quantity of a good or a service available to the general public inflation that would be much greater if the government

Product oriented business Profit margin Production Production technique Regional policy

Regional unemployment Revenue

Resource allocation Scale of preferences Secondary data

Shareholders

Substitute products Supply Suppressed inflation

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were to remove controls on prices and wages Takeover Total utility Trade Transaction Treasury Unemployment rate Utility Vertical merger the acquisition of control of one company by another or occasionally by an individual or group of investors total satisfaction derived from the possession of a commodity the business of buying and selling goods for money or of exchanging goods for goods a business deal, especially a sale or a purchase, by business the department responsible for the finances, the management of the monetary system, etc. the percentage of the labour force without a job but registered as being willing and available for work the ability to satisfy wants a merger between firms operating at different stages of production, e.g. from raw materials to finished products to distribution the money paid, usually in cash each week, to a worker for work done the basic needs of people a stock of goods that are useful, scarce and can be e xchanged for a money price

Wage Wants Wealth

204

BIBLIOGRAPHY 1. W. D. Barndt, Jr. M arketing. The Hartford Graduate Center. School of M anagement, 1991. 2. T. E. Benson. Beyond Niche M arketing. Industry Week, Sept. 17, 1990. 3. Business and Economics for GCSE. Harper Collins Publishers Ltd, 1996. 4. Economic Analysis. A Workbook. Department of Social Sciences and Languages. Sunderland Polytechnic. London Butterworths, 1971. 5. Economics, Business: Students Book. Nuffield, Longman group Ltd, 1994. 6. K. Hoyle, G. Whitehead. Business, Economics: M ade Simple. 1970. 7. G. Whitehead. Economics: M ade Simple. W. H. Allen&Co. Ltd, 1970. 8. .., .., .. English grammar. Reference and practice. ., 2001. 357 . 9. .. .. I . ., 1989. 62 . 10. .. Economics: . .: 1998. 303 .

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