PART 1:

UNIT 1 . ECONOMIC ACTIVITY

Text A
Most people work in order to earn their living. They produce goods and services. Goods are
either produced on farms, like maize and milk or in factories, like cars and paper. Services are
provided by such things as schools, hospitals and shops. Some people provide goods; some
provide services. Other people provide both goods and services. For example, in the same
garage, a man may buy a car, or he may buy some service which helps him to maintain his car.
The work which people do is called their economic activity. Economic activities make up the
economic system. The economic system is the sum-total of, what people do and what they want.
The work which people undertake either provides what they need or provides them money.
People buy essential commodities with money.

Exercises
1. Here are some questions about the passage. Answer them.
a. Why do most people work?
b. What do they produce?
c. Where are goods produced?
d. What do schools, hospitals and shops provide?
e. What two different things can a man buy in, for example, a garage?
f. What do we call the work which people do?
g. What is an economic system the sum-total of?
h. What two things can work provide for the worker?
i. What can people buy with money?

2. Combine these pairs of sentences as in the example

EXAMPLE The services are useful
The workers provide the services.
⇒ The services which the workers provide are useful

a. The goods are essential.

They need the goods.
b. The schools and hospitals are essential.
They provide the schools and hospitals.
c. The goods are valuable.
He buys the goods.
d. The money buys essential commodities.
People earn this money.
e. The goods and services are very useful.
People produce these goods and services.
f. The work is called economic activity.
We do this work.
g. The work provides them with money.
People do this work.
h. The economic activities make up the economic system.
People undertake these economic activities.
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3. Change these sentences in the same way as the example. Both sentences refer to
future possibilities.

EXAMPLE Perhaps he will come

⇒ He may come
a. Perhaps he will buy a car.
b. Perhaps we shall want some more fruit tomorrow.
c. Perhaps they will get the essential commodities soon.
d. Perhaps the service will stop next month.
e. Perhaps the garage will not sell that car to him.
f. Perhaps the economic system belongs to a city, a whole country or the whole world.
g. Perhaps the car does not belong to those people.
h. Perhaps he will buy some service which will help him to maintains his car.
i. Perhaps he will see the car when he comes tomorrow.
j. Perhaps he will provide what they need when he comes back.

Text B
Most people work to earn a living, and produce goods and services.
Goods are either agricultural (like maize and milk) or manufactured
(like cars and paper). Services are such things as education, medicine
and commerce. Some people provide goods; some provide services.
Other people provide both goods and services. For example, in the 5
same garage, a man may buy a car or some service which helps him to
maintain his car.
The work people do is called economic activity. All economic
activities together make up the economic system of a town, a city, a
country or the world. Such an economic system is the sum-total of, 10
what people do and what they what. The work people undertake
either provides what they need or provides the money with which they
can buy essential commodities. Of course, most people hope to earn
enough money to buy commodities and services which are non-
essential but which provide some particular personal satisfaction, like 15
toys for children, visits to the cinema and books.

Exercises
1. Say whether these statements are true (T) or false (F), and if they are false say why.
a. (  ) Most people produce either goods or services.
b. (  ) Services are either agricultural or manufactured.
c. (  ) Education and medicine are provided by schools and hospitals.
d. (  ) Cars and paper are agricultural goods.
e. (  ) Paper is a non-agricultural commodity.
f. (  ) The work which people do is called an economic system.
g. (  ) A city has its own economic system.
h. (  ) Economic activity is the sum-total of what people do and what they want.
i. (  ) The work people undertake provides them with money, or with what they need.
j. (  ) Most people do not want to buy non-essential commodities and services

2. In each of these sentences a word is missing. Provide a word from Text B, from the
lines given in brackets.

a. Transport systems like railways, buses and aeroplane provide the public with important
______________s. (2-4)
b. They told him to look at the ______________ (4-6) and then do the exercises.
c. There is usually a lot of ______________ (8) at any railway station or airport that handles a
lot of traffic.
d. He decided to ______________ (11-12) the work in order to make some money.
e. It was ______________ (11-14) for him to go to the city as soon as possible.
f. They had ______________ (12-15) money to buy most of the things they needed.
g. It was a ______________ (13-16) matter and he did not wish to tell anyone else about it.

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Supplement
Most people work in order to earn their living, and they produce goods and services. This
fact can be shown as a diagram;

products

goods services

below are 20 kinds of people. Ten of them produce goods; ten produce services. Make a
diagram like this one and list the people under goods and services.

cattle-breeder coal-miner musician farmer

pilot teacher doctor banker
shoemaker steelworker nurse fruit-grower
horse-breeder shopkeeper cook fisherman
builder electrician policeman iron-ore miner

UNIT 2. THE SCIENCE OF ECONOMICS

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Text A
Economic is a science. This science is based upon the facts of our everyday lives. Economists
study our everyday lives. They study the system which affects our lives. The economists tries to
describe the facts of the economy in which we live. He tries to explain how the system works.
His methods should be objective and scientific.
We need food, clothes and shelter. If we could get food, clothes and shelter without working,
we probably would not work. But even when we have these essential things, we may want other
things. If we had them, these other things (like radios, books and toys for the children) might
make life more enjoyable.
The science of economics is concerned with all our material needs and wants. It is not just
concerned with basic needs like food, clothes and shelter.

1. Answer these questions, basing your answers on the text.

a) What is economics?
b) What is it based upon ?
c) What two things do economists study?
d) What do they try to do?
e) What do they try to explain?
f) What should the methods of the economists be like?
g) What three essential things do we need?
h) What would happen if we could get these essentials without working?
i) What might make life more enjoyable?
j) What is economists concerned with?

2. Study the example. It shows how a conditional sentence is organized. Do the same
with the pairs of sentence which follow.

EXAMPLE X = We have money

Y = We can buy food
If X,Y = If we have money, we can buy food.

a. X = We have a radio
Y = We can listen to the programmers
b. X = We have food, shelter and clothes
Y = We have the basic necessities of life.
c. X = You want to get new clothes.
Y = You must earn some money.
d. X = The economic system of a country is strong.
Y = The people will be able to satisfy their wants.
e. X = He wants to become an economist
Y = He must study economics books.

3. Now turn the sentences of Exercise 2 completely round.

EXAMPLE X = We can buy food
Y = We have money
If X,Y = we can buy food, if we have money.

4. Punctuate the following passage. Provide capital letters, commas, full stops, brackets,
colon etc., where applicable.

most people must work to earn their living they produce goods and services this is called
economic activity all economic activities together make up the economic system this system
is very complex economists study the economic system and try to describe and explain it
they study the work we do and the needs we have if you wish to learn about the science of
economics you must study both books and people.

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5. You have now used the three words economics, economic and economist. There are
also in this set the words economical, economically and economy. In a diagram we can
show them like this:

y
ics
Econom
ic al ly Each word has a different use. Try to put the right word
ist in the blanks in these sentences:

a. Marx and Keynes are two famous _____________s.

b. Those people are studying the science of _____________
c. We sometimes call a person’s work _____________ activity.
d. People should be very _____________ with the money they earn.
e. The economic system of a country is usually called the national _____________.
f. The people in that town live very _____________.

TEXT B
The science of economics is based upon the facts of our everyday lives. Economists study our
everyday lives and the general life of our communities in order to understand the whole
economic system of which we are part. They try to describe the facts of the economy in which
we live, and to explain how it all works. The economist’s methods should of course be strictly
objective and scientific.
We need food, clothes and shelter. We probably would not go to work if we could satisfy
these basic needs without working. But even when we have satisfied such basic needs, we may
still want other things. Our lives might be more enjoyable if we had such things as radios, books
and toys for the children. Human beings certainly have a wide and very complex range of wants.
The science of economics is concerned with all our material needs: it is concerned with the
desire to have a radio as well as the basic necessity of having enough food to eat.

Exercises
1. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) Economics is a scientific study.
b. ( ) Economics try to understand only part of the economic system.
c. ( ) If we could satisfy our basic needs without working, we would still work.
d. ( ) Radios, books and toys are basic commodities.
e. ( ) The range of human wants is very complex.
f. ( ) Clothes and shelter are non essential human needs.
g. ( ) Economics studies are essentially non-scientific.
h. ( ) Economists study the general life our communities.

2. Combine these pairs of sentences and make them conditional. You must decide
whether if goes at the beginning of the first sentence or the second.

a. He must study.
He wants to become an economists.

b. People work.
They will earn money.
c. You will make more money.
You work regularlyand rapidly.
d. You work together building that house.
You will finish the whole thing more rapidly.
e. Men study the economic system of a countrry scientifically.
We call them economists.

3. Change these phrases in order to use the possesive apostrophe.

EXAMPLE the work of the economist ⇒ the economist’s work.
the work of the economists ⇒ the economists’ work

a. the work of the farmer

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 b. the work of the farmers
c. the nedds of the scientist
d. the nedds of the scientists
e. the life of the man
f. the life of the men
g. the toy of the child
h. the toy of the children
i. the need of the cattle-breeders
j. the education of the son of the farmer
k. the education of the sons of the farmers
l. the work of the farmers and fishermen.

Supplement

Supply the missing articles (the or a or an) in these sentences. Follow the examples exactly. In
each case, the first sentence is always general, while the second is always specific.
EXAMPLE This is __________ school
__________ school is open.
= This is a school. The school is open.

a. This is __________ car. __________ car is new.

b. He has __________ house. __________ house is old.
c. The child has __________toy. __________ toy is green and red.
d. This is __________ piece of coal. __________ piece of coal is burning.
e. This is __________ book. __________ book is about economics.
f. He has __________radio. He listens to __________ radio everyday.
g. That is __________ garage. __________ garage contains three cars.
h. That is __________ factory. __________ factory produces cars.
i. That man is __________ farmer. __________ farmer used to breed cattle but now he breeds pigs.
j. Each country has __________economic system. __________ economic system is the sum-total of
all __________ activities in that country.

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UNIT 3. DIFFERENT ECONOMIC SYSTEMS

Text A
Not all economic systems are the same. The economic system of the United States is very
different from the economic system of the Union of Soviet Socialist Republics.
The American system is based on private enterprise. The Russian system is based on the
principles of Karl Marx.
Karl Marx was a political economist who lived in the 19th century. The American system is
capitalistic. The economic ideologies of these two nations differ very much from each other.
The economic system of Britain is similar to the American system. Britain has an economic
system based on private enterprise and private supplies of capital. Property in Britain and the
United States can be owned by indivdual citizens.
The economic freedom of the citizens of Britain and America is not complete freedom. Citizen
must obey the law, but otherwise they can use their time, money and effort as they wish.

Exercises
1. Answer these questions, basing your answers on the text.
a. What does the economic system of the United States differ from?
b. What is the American system based on ?
c. What is the Russian system based on ?
d. When did Karl Marx live ?
e. What economic system is the British system similar to ?
f. On what two things is the British system based ?
g. Who can own property in the United States and Britain ?
h. What must British and American citizens obey?
i. What three things can Britons and Americans use as they wish ?

2. Make these sentences passive, as in the example.

EXAMPLE Most people produce goods and services.
⇒ Goods and services are produced by most people.

a. Some people provide both goods and services.

b. Economists study the economic system.
c. That man owns the house.
d. They will provide shelter and clothes.
e. Economic changes affect our lives.
f. They will maintain his car.
g. The economists explained the economic system.
h. They explained the methods.
i. He told me how the Russian system works.
j. Economists describe how capital is used in business.

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3. Combine these pairs of sentences as in the example, making them conditional and
using may.

EXAMPLE (if) He comes tomorrow.

Perhaps he will see you.
⇒ If he comes tomorrow, he may see you.
a. (if) The people work regularly and well.
Perhaps they will earn more money.
b. ( ) The man buys his car at the garage
Perhaps the garage-owner will provide some extra services.
c. ( ) We buy these commodities today.
Perhaps we will be able to sell them tomorrow.
d. ( ) The farmers try to produce more.
Perhaps they will have some goods to sell as well as to use themselves.
e. Perhaps life will be more enjoyable.
( ) We have a radio and toys for the children.

4. Here are two lists. The first list contains adjectives. The second list contains nouns
and noun phrases. Arrange the words in each list so that the adjectives match the
nouns in ways which relate to the text. The first two are done for you.

capitalistic satisfaction
economic russian system
private necessities
communistic enterprise
political commodities
scientific methods
basic american system
complex economist
essential ideologist
personal range

5. From new words from the words listed below.

EXAMPLE capital ⇒ capitalism ⇒ capitalist ⇒ capitalistic
Note: The suffix - ism = system (noun)
- ist = person (noun)
- istic = about the system or person (adjective)

a. commune b. social c. national d. real e. Individual

TEXT B
Not all economic systems are the same. The economic system of the USA differs greatly from the
system of the USSR. The American system is based on private enterprise with private ownership
of the means of production, while the Russian system is communistic and is based upon the
principles of Karl Marx, the 19th century political economist. The economic ideologies of these
two nations contrast very strongly.
Britain is similar to the USA, It has an economic system based on private enterprise and
private supplies of capital, which can be defined as surplus income available for investment in
new business activities. Property in both the US and Britain can be owned by individual citizens
and these citizens exercise considerable economic freedom of choice. They can choose what
they want to do and horv they want to earn their living, but are not of course entirely free to do
as they wish.

Exercises
1. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) The economic systems of the United States and the Soviet Union are the same.
b. ( ) In the United States the means of production are privately owned.
c. ( ) Karl Marx was an eighteenth century economic thinker.

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 d. ( ) The British system is based on the principles of Karl Marx.
e. ( ) Because Britain has a system of private enterprise, we can say that its economy is
similar to the American economy.
f. ( ) Capital is essentially surplus income used for new business activities.
g. ( ) Individual citizens in Britain and the United States have complete economic
freedom.
h. ( ) British citizens can choose what they want to do as long as they obey the law.

2. Make these sentences passive and omit the agent phrase in the same way as in the
example.

EXAMPLE They based the economics system on Marx.

⇒ i The economic system was based on Marx by them
⇒ ii The economic system was based on Marx.

a. They provided all ttre necessary goods and services.

b. He will supply all the essential commodities.
c. The farmer undertook the work last week, and has just finished it.
d. The men satisfied the economist that they would do the work rapidly.
e. The economists described the whole economic system in a strictly scientific way.
f. The economic system affected the people's lives in many ways.
g. They studied the supply of both essential and non-essential commodities.
h. The people enjoy a strong economy in that country.
i. The citizens exercise a considerable amount of economic freedom.
j. They must obey the law.

3. Arrange these sentences in order to make a logical paragraph about the American
and Russian oconomies.

A. This system was founded by the l9th century political economist Karl Marx
B. Capitalism is based on the idea of individual citizens owning property and privately
conducting their own business.
C. Whereas the American is capitalistic, the Russian system is communistic.
D. Communism however is based on the idea of property belonging to the State and all
businesses being public rather than private.
E. The American and Russian ideologies are very different.

4. (i) Find single words in the first paragraph of the text for which these words
could be substituted :

a. founded b. possession c. main teachings d. Countries

(ii) Find single words in the second paragraph,ot tne text for which these words
could be substituted :

a. stores b. described c. extra d. Single

e. have and use f. Selection g. Pick h. Completely
i. follow j. physical power

5. In the text there are two adjectives of nationality: American and Russian, Below is
a list of countries (nations). Study the example and then do the same for the listed
words.
EXAMPLE Britain: That man is British; he is a Briton.
Holland: That man is Dutch; he is a Dutchman.
India: That man is Indian; he is an Indian.

a. Germany: That man is ________;he is a ________.

b. Italy : That man is ________;he is a ________.
c. Spain: That man is ________;he is a ________.

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 Do the same for the following:
d. Greece e. Brazil f. Sweden g. Portugal
h. France i. Malaysia j. China k. Japan
l. Scotland m. Canada n. Mexico o. Norway
p. Pakistan q. Indonesia r. Iran s. Turkey
t. Egypt u. Ghana v. England w. Ireland
x. USA y. Zambia

Supplement
ln geography and economics we often refer to parts of the world rather than list countries by
name, e.g. The Middle East. Below are 25 countries. List them under these five headings: (a)
Latin-,American; (b) North African; (c) Balkan; (d) South-East Asian; (e) others.

Libya France Brazil Malawi

Greece Argentina Mauritania Albania
THailand Yugoslavia Canada Morocco
Bulgaria Mexico Pakistan Cambodia
Japan Norway Malaysia Egypt
Rumania Peru Algeria Nicaragua
Philippines

UNIT 4. THE LIMITS ON ECONOMIC FREEDOM

10
Text A

A person is economically free, if he can do what he wishes with his

own property, time andd effort.
In all communities, of course, linrits are set upon this personal
Freedom.
In some countries the limits are complex; in others they are 5
relatively simple.
All individual citizens are required to conform to the laws made by
their governments.
Complete economic freedom of action can cause great difficulties,
because the freedoms of various individuals will conflict. 10
If citizens were completely free, some landowners might build
factories in unsuitabie places.
If there was no system of control, factory-owners might make their
employees work too long each day.
If they were completely free, workers might stop working when 15
they got their first pay, and come back to do more work only when
they needed more money.
Such economic freedom could create a very unstable economy.
Laws related to economic conditions are sometimes concerned with
workers' health, wages and pensions. 20
They are sometimes concerned with contracts between employers
and employees.
They are sometimes concerned with the location of places of work.
Sometimes they help the employers; sometimes they protect the 25
Interest of the workers.

Exercises
1. Answer these questions basing your answer on the text.
a. Under what conditions is a person economically free ?
b. What is the opposite of ‘simple'?
c. What are all citizens required to do?
d. Why does complete economic freedom of action cause great difficulties ?
e. What three things might happen if citizens were completely free ?
f. What kind of economy might complete economic freedom ?
g. What three workers' needs are sometimes the concern of the law ?
h. Between whom are contracts arranged ?
i. What else might the laws relate to, besides workers' needs and work contracts ?
j. What other important point should we note about laws related to economic
conditions?

2. Change the following sentences by inserting can.

EXAMPLE He does the work easily.
⇒ He can do the work easily.

a. He earns a lot of money. He can earn a lot of money

b. They (can) work very rapidly in that factory.
c. The breeders (can) sell a lot of horses and cattle.

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 d. The miners (can) provide coal at an economic price.
e. A man with a good education usually (can) earns (without s) a lot of money.
f. People (can) satisfy their needs only if they earn money.
g. The citizens (can) choose what they want to do.
h. People (can) use their time and money as they wish.

3. Exercise 2 has provided you with eight sentences using can, Change can to could
in this way:
EXAMPLE He can do the work easily
⇒ In those days he could do the work easily, but not now.

4. Combine some of the words in these sentences in order to make new compound
nouns:
EXAMPLE (a) He owns a house
⇒ He is a house-owner
(b) They breed pigs.
⇒ They are pig-breeders.

a. He owns a car.
b. That man owns some land.
c. They breed horses.
d. Some capitalists own factories.
e. That man earns his wages.
f. Those men mine for coal.
g. Those women grow fruit.
h. Mr. Smith makes shoes.
i. Mr. Jones works with steel.
j. Mr. Brown packs meat in that factory.

5. Make these adjectives negative by adding the prefix un-

EXAMPLE stable ⇒ un + stable ⇒ unstable
a. economic b. economical c. satisfactory d. systematic
e. necessary f. scientific g. enjoyable h. available
i. suitable j. equal k. productive l. conditional
m. important n. usual o. desirable

Use the appropriate adjectives in their negative forms in these sentences. The letters
in brackets at the end refer to the list of adjectives above.

1) People do not'like working in ___________ conditions (c).

2) The employers decided to close that factory because it was ___________ (k).
3) Complete economic freedom is an ___________ (o).
4) Compared with our need for food, clothes and shelter, some of our wants are quite
___________ (m)
5) We say that goods are sold at ___________ prices, when the price is less than the cost of
producing them (a).
6) The goods which he wanted were ___________ at the price he was willing to pay (h).

TEXT B
If a person can do what he wishes with his own property, time, and
energy, then economist say that he is 'economically free''. In all
communities, of course, limits are imposed upon the personal free-
dom of their citizens and these limits are in some cases very complex
but in others relatively simple. All individuals are required to conform 5
to the laws made by their governments.
Complete economic freedom of action can create great difficulties,
because the freedom exercised by various individuals often conflict.
If citizens were completely free, some landowners might build factories
in unsuitable places, while some factory-owners might make their 10

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employees work too long each day. If they were completely free,
workers might stop working, when they got their first pay, and come
back only when they needed more money. Such economic anarchy
could cause instability (unemployment; loss of production etc,)
in the whole economy of a country. 15
Laws related to economic conditions are sometimes concerned
with contracts between employers and employees. Sometimes they
are concerned with workers' health, wages and sometimes
with the location of places of work. Sometimes they protect the
interests principally of the workers, while at other times they may be 20
beneficial towards the employers. The government policy towards
both employees and employers will depend very much upon the
political and economic ideology adopted by the government, and may
be biassed towards employers and capital on the one hand, or workers
and the problems of labour on the other hand. 25

Exercises
1. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) Economists say that a man is economically free if he can do what he wishes with his
own property, time and energy.
b. ( )Government usually require all individuals to conform to the laws which they make.
c. ( )Complete economic freedom of action does not create many difficulties.
d. ( )If citizens were completely free, some landowners and factory-owners might act in
unsatisfactory ways.
e. ( )Complete economic freedom could lead to economic anarchy.
f. ( )Anarchy is a satisfactory and desirable thing in any economic system.
g. ( )Laws related to economic conditions are sometimes concerned with the health of the
employers.
h. ( )These laws usually protect the interests of the workers and not the employers.
i. ( )Government policy does not depend on the political and economic ideology of the
government.
j. ( )Some ideologies are biassed towards labour and others towards capital.

2. Make each pair of sentences into a new conditionar sentence, changing may to might,
and changing the tense:
EXAMPLE (if) Citizens are completely free
Factory-owners may make their employees work too long each
day.
⇒ If citizens were completely free, factory-owners might make their
employees work too long each day.
a. (if) There is no system of control
Landowners may build factories in unsuitable places.
b. ( ) They are completely free.
Workers may work only when they need money badly.
c. ( ) They have all the money they need.
They may not work.
d. ( ) The government want to improve the general conditions of work.
They may make new laws.
e. ( ) Employees anticipate new and better working conditions.
They may increase their productivity.
f. ( ) You regularly provide essential services.
You may get more business,
g. ( ) They undertake to replace the old school with a new one.
We may provide some of the money.

3. Punctuate the following passage. Provide capital letters, commas, full stops, brackets,
colons etc,, whero applicable.

britain and the u s a have similar economic systems both being based on private enterprise
property and capiral the russians however do not have such a system they follow a
communistic system based on the work of the nineteenth century economist marx his
system is non capitalistic and does not permit private individuals to own property in a
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 completely communist society we can say that the two types of economy contrast very
strongly this is a simple and brief statement of a complex subject the differences between
the russian and the anglo american systems.

4. Find words in the text for which these words could be substituted.
a. society (lines 3-5)
b. cause (7-9)
c. enjoyed (7-9)
d. frequently (8-10)
e. unsatisfactory (9-11)
f. lawlessness (12-15)
g. written agreements (16-19)
h. regular pay in old age (17-19)
i. mainly (17-21)

5. Make these words negative by adding the prefix in-

EXAMPLE stability ⇒ in + stability ⇒ instability

a. active b. activity c. secure d. security

e. organic f. sufficient g. definite h. adequate
i. distinct j. complete k. solvent l. expert
m. frequent n. conclusive o. dependent

Use the appropriate words in their negative forms in these sentences. The tetters in
brackets at the end refer to the list of adjectives above.

1) Metals are _________ substances . (e)

2) Most nations like to be economically _________ (o)
3) The services which they provided were quite _________ (h)
4) If an economy becomes unstable, people begin to feel _________ (c)
5) The men were rather _________ at the kind of work which they had been asked to do. (l)

Supplement

1. Decide which suffix is necessary to change these words from activies etc. to the end
refer to the people who engage in them.

EXAMPLE (a) banking ⇒ banker

(b) economics ⇒ economist
(c) politics ⇒ politician

a. teaching b. working c. labouring

d. statistics e. mathematics f. driving
g. electric (repairs) h. music i. technical (work)
j. mining k. farming l. chemistry
m. ecology n. science o. agronomy

2. Mark the main stress in ecah of these pairs of word.

EXAMPLE economy ⇢ economic
ideology ⇢ ideological

a. organ – organic b. active – activity

c. mobile – mobility d. rapid – rapidity
e. commerce – commercial f. complex – complexity
g. commune – community h. necessary – necessity
i. productive – productivity

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15
UNIT. 5 CENTRAL CONTROL OF THE ECONOMY

Text A
In states which have a communistic system, private property and private enterprise are
greatly reduced. They are reduced to a minimum. They still exist, but are limited to a small
area in the economy.
Karl Marx imagined world in which there would be no private property at all. In theory,
Communism demands that all property should belong to the State. In practice, the citizens of
states like the USSR are permitted to have personal property.
The important thing about the Communist system is central planning. The State organizes the
whole effort of the people who comprise the nation. A central authority with complete power
decides what goods and services will be produced.
The authority decides what quantities of goods will be produced. It also controls the quality
of the goods, and decides how they will be distributed. It decides what prices will be charged
for them.
The State provides all (or most of) the services which the citizens require. It is responsible for
the economy and is concerned with methods of production as well as with quality and quantity.
The central authority must plan the national economy over a number of years.

Exercises

1. Answers theses questions, basing your answer on the text.

a. What two things are greatly reduced in a communistic system ?
b. What area do they occupy in the economy ?
c. What did Karl Marx Propose about private property?
d. What is the theoretical communist view on property?
e. What is the position in practice ?
f. What does the Statc do in the communist system of central planning ?
g. What two decisions does the central authority make?
h. What does the authority control ?
i. What can the authority do about prices?
j. What is the State responsible for and what must it do ?

2. Make these sentences passive, omitting the agent phrase.

EXAMPLE The government reduced private property to a minimum.
⇒ Private property was reduced to a minimum.

a. The government limited private enterprise to a small area in the economy.

b. They permit the citizens to have personal property.
c. The workers will produce only essential commodities.
d. That factory produced a large quantity of'shoes last year.
e. You will charge more money for these services.
f. The central authority must plant the economy over a number of years.
g. The authorities provided large numbers of workers for the ten new factories.
h. The government reduced the quantity of shoes produced in that factory.
i. The State organized the whole economic effort of the nation.
j. The central authority has planned the whole economic programme for the next five
years.

16
3. Combine these pairs of sentences, using what and would
EXAMPLE This quantity of goods will be produced.
The planners decide it.
⇒ The planners decided what quantity of goods would be produced.

a. These goods and services will be produced.

The central authorities decided it.
b. These prices will be charged for the goods.
The planners discussed it.
c. This quality will be the most suitable.
The government considered it.
d. This commercial activity will be useful in the next few years.
The planning authority decide it.
e. These changes will be made in the organization of the factory.
The employers and employees discussed it.
f. These conditions will affect the national economy in the next twenty years.
The economists considered the matter.

4. Chane the listed adjectives into adverbs (-ly or -ally as necessary) and put one
adverb in each sentence in order to make sense. Some adverbs can operate
successfully in more than one sentence, but each has a letter to indicate the best
choice.
EXAMPLE great ⇒ greatly
Their private proverty was ______ reduced.
⇒ Their private proverty was greatly reduced.
careful (b) scientific (e) considerable (h)
rapid (a) systematic (c) regular (i)
clear (f) probable (g) usual (j)
complete (d)

a. The new government worked _________ to change the laws.

b. The central authority _________ controls the quality and quantity of goods.
c. The State _________ plans the economic effort of its citizens.
d. The economic system changed _________ over the thirty year period.
e. Work in economics should always be done _________.
f. Their economic system is _________ capitalistic.
g. The employers will _________ discuss the use of new machines in the factory.
h. The city has changed _________ in the last few years.
i. These men work _________ from nine o'clock till five every day.
j. In a free economy there is _________ very litile central planning.

5. Put prepositions in the blanks of these sentences.

EXAMPLE The central authority is concerned _____ methods of production.

⇒ The central authority is concerned with methods of production.

a. His capital was finally reduced _______ nothing.

b. They charged quite a lot of money _______ that commodity.
c. The goverment is usually responsible _______ the people _______ the condition of the
national economy.
d. Citizens are required to conform _______ the la w.
e. He agreed _______ the other economists that the system was unusual.
f. He was paid well _______ the government _______ the work he did.
g. The people hoped _______ a reduction in the price _______ essential goods.
h. That man subscribed _______ a number of important news-papers and magazines
containing information _______economics.
i. The consumption _______ coal and steel has increased greatly _______ recent years.
j. They have provided many services _______ the citizens _______ that town and do not
charge very much _______ the services.

17
Text B
In States which have a communistic system, private property and private enterprise are
reduced to a minimum. They exist, but are limited to a small area of the economy. Karl Marx
conceived of a world in which there would be no private property whatsoever. Communism in
theory states that all property should belong to the State. In practice, however, the citizens of
states like the USSR are permitted to have personal effects.
The important thing about the communist system is its central planning. The State organizes
the whole economic effort of the nation. A central authority with complete power decides what
goods and services wil be produced. The authority decides what quantities of goods will be
produced, and also controls their quality, deciding how they will be distributed and what
prices will be charged for them. In addiction, the State provides all (or most of) the services
which the citizens require. It is responsible for the economy, and is therefore concerned with
methods of production as well as with quality and quantity. The national economy must be
planned ahead over a number of years.
A Marxist economy is planned. The system is related to the needs of the State as a whole,
not to the needs ol the private person. The emphasis on collective effort and not on personal
effort so that the individual is subordinated to the needs of the collective State.

Exercises
1. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) Private property in a capitalistic state is reduced to a minimum.
b. ( ) Karl Marx wanted a world in which there would be no private property.
c. ( ) Communist theory and practice are not exactly the same as regards property.
d. ( ) Central planning by the State is an essential part of the communist system.
e. ( ) The central authority decides on the quantity, quality, price and place of sale of any
commodity.
f. ( ) The central authority is resopnsible for the economy but is not concerned with
methods of production.
g. ( ) The word 'Marxist' is very similar in meaning to the word 'communist'.
h. ( ) Marxism is concerned with the needs of the private individual.
i. ( ) Collective needs are more importantn a communist state than the needs of the
individual.

2. Combine these pairs of sentences, using which

EXAMPLE That is the garage
In that garage the new car is kept.
⇒ That is the garage in which the new car is kept.

a. Economies is a science.
In that science everything must be studied in an objective way.
b. The USSR has a system.
In that system central planning is very important.
c. The USA has an economy.
In that economy government planning is limited to equite a small area.
d. Marxism proposes a special economic system.
In that system collective needs are more important than individual needs.
e. The British have a certain way of life.
In that way of life private enterprise and private ownerships of property are very
important.
f. The Americans and the British have separate ideologies. In these ideologies there are
many similar points.

3. Combine these groups of three sentences using would and should. The table shows
the relationships between will : would and should in sentences of this type.

direct indirect
statement statement
simple future will would
obligation shall should

18
 EXAMPLE These goods and services will be produced.
These prices shall be charged.
The central authority decided these things.
⇒ The central authority decided what goods and services would be
produced, and what prices should be charged.

a. These prices will be charged for the commodity.

This quantity shall be made available.
The planners discussed these things.
b. This quality will be most suitable.
This quantity shall be produced.
The government considered those things.
c. These conditions will affect the international economic system in the next ten years.
These plans shall be adopted.
The economists could not agree on these things.
d. These changes will be made next year.
These crops shall be grown.
The farmers decided these.
e. These changes will be made in the factory.
These wages shall be paid to the workers for the next two years,
The employers did not discuss these things.

4. Make these words negative byadding the prefix in- and altering it to suit the
consonant which follows.
EXAMPLE (a) legal ⇒ in + legal ⇒ illegal
(b) probable ⇒ in + probable ⇒ improbable
(c) regular ⇒ in + regular ⇒ irregular

a. practical b. possible c. responsible

d. mobile e. proper f. rational
g. legible h. logical i. personal
j. relevant

5. Below are two lists. Pair off each word in the first list with its opposite in the second
list.
theoretical local
private maximum
individual selling
mineral complex
capitalistic communistic
simple organic
buying collective
minimum public
national practical

Supplement

1. The table shows how words are formed around the verb produce. List all the words
you can make from the table and use them in suitable blanks in the sentences.

Produc e r
t iv (e) ity
Ion

NOTE the difference in pronunciation between produce (pre'dju:s) and product ('prodekt)

a. The company________a new commodity every year.

b. The company's newest ________ is a special blue soap powder.
c. The ________ of soap powders met last year to discuss prices.
d. That factory is not as ________ now as it was five years ago.
e. The ________ of that factory has gone down over the last fve years.
f. The manager of the factory has decided that they must increase their ________ of packets
of soap powder.
19
2. This table shows how certain nouns can be formed from certain adjectives, as for
example activity from active. Make a list of the nouns an put each word in its suitable
place in the sentences. Note the loss of the letter e in active, socure, mobile and
productive.
active
equal
secure
complex
mobile
liquid ity
solid
regular
productive
similar
rapid

a. The system was complex, its _________ surprised him.

b. The movements of the products in the factory was rapid.
The _________ of the work suprised him.
c. People who have cars are very mobile. This _________ is a useful thing.
d. The National Bank has a solid reputation. Its _________ in money is similar to the _________
of its buildings.
e. The national economy, like a man, should be active.
Its _________ is a sign of its health.
f. Your money is secure in the National Bank. Its _________ is important both to you and to
the bankers.
g. The workers in those factories are very productive.
There _________ is very useful to the national economy.
h. Those men arrive regularly at nine o'clock. Their _________ is well-known.
i. The American and British economic systems are very similar. This _________ is not
surprising.
j. Those two men earn equal sums of money. They have ________ it wages because they
produce the same quantity and quality of goods.
k. The exchange of money should be as liquid as possible
The _________ of money helps the economy to grow.

3. Composition. Write about 300 words on the topic 'Economic Systems'. Use the
material in the texts and exercises.

UNIT 6 . MIXED ECONOMIES

20
Text A
No state today is completely communistic; no state is completely capitalist.
The various national economic systems tend towards communism or capitalism, and many
are difficult to classify exactly.
It has been found neccssary in many countries to control or regulate national
economic conditions.
Even the most dedicated free enterprise systems, such as the USA, have felt this need.
The under-developed countries in the world are usually interested in control and longterm
planning.
Such countries as India have had a number of plans guided by the government.
India makes a distinction between the public sector of the economy on the one hand and the
private sector on the other hand.
Such systems, with public and private sectors, are neither communistic nor capitalistic, but
are sometimes called mixed economies.
Britain today has a mixed economy.
In the public sector of British economic life are the nationalized industries like coal and steel,
British Rail and BOAC1.
In the private sector are the majority of the nation's industries, both large and small.
The private sector includes giant companies like ICI 2 and BP3 and a great number of small
family businesses.
In 1962 the British government set up an official body to plan national economic policies.
This body is called the National Economic Development Council.
The members of this council are representatives of the employers, the employees and other
interested people.
1
BOAC : British Overseas Airways Corporation
2
ICI : Imperial Chemical lndustries
3
Bp: British Petroleum

Exercises
1. Answer these questions. You may answer either YES or NO. Give your reasons. Quote
from the text in support of your answer.
a. Are there any completely communistic states ?
b. Are there any completely capitalistic states?
c. Do the various national economics tend towards one or other ideology ?
d. Are the various economic systems difficult to classify?
e. Have most countries found economic control necessarry ?
f. Has the US felt the same need ?
g. Are the under-developed countries interested in control and planning?
h. Has India had a number of national economic plans?
i. Is the Indian economy based entirely on private enterprise ?
j. Does the Indian economy have two distinct sectors ?
k. Is the Indian system a mixed economy ?
l. Is BOAC a nationalized British industry?
m. Is ICI a nationalized British industry?
n. Was the NEDC set up by the British government?
o. Are both employers and employers represented on the NEDC?
2. Answer these questions, basing your answers on the text.
a. Why is it difficult to classify many national economic systems ?
b. What are the under-developed countries interested in ?
c. What is the Indian system sometimes called ?
d. In which sector are the majority of British industries ?
e. What did the British government set up in 1962?

3. Invert these sentences (cf. lines 18 and 20 in the text)

EXAMPLE The majority of the nation’s industries are in the private sector.
⇒ In the private sector are the majority of the nation’s industries

21
 a. The nationalized industries are in the public sector of British economic life.
b. Goods like coal and iron are among the most important commodities in any economy.
c. Essential services like transport and education are in the public sector of many socialist
economics.
d. Food production and distribution are in the private sector of the national economy.
e. The coal and steel industries are among the activities controlled by the government.

4. You inverted five sentences in Exercise 3 by beginning with the prepositional phrases
in those sentences. Sentences are often inverted in order to to add more information
to the subject of the sentence. It is easier to add this information if the subject comes
at the end.
Add the following information to your five sentences, in order to practise the
technique.

EXAMPLE In the private sector are the majority of the nation's industries.
These industries play a vital part in maintaining the life of the nation
⇒ In the private sector are the majority of the nation's industries, which
play a vital part in maintaining the life of the nation. N

a. (to 3a) These industries include various types of transport, steel-production and coal
mining.
b. (to 3b) Coal and iron are vital minerals in any nation's list of resources.
c. (to 3c) Transport and education employ a large part of the national work-force.
d. (to 3d) Food Production and distribution are perhaps the most basic activities in any
economy.
e. (to 3e) These industries are generally classified as heavy industries.

5. Change these sentences by changing certain adjectives into verbs. The new verbs are
listed, but not in the proper order. Note that all these verbs are concerned with
making something happen, or causing something to happen.
EXAMPLE They made the economy regular.
⇒ They regulated the economy.
complicate; consolidate; liquidate; simplify; nationalize; internationalize; activate;
reactivate.

a. They made the subject complex.

b. They made the subject simple.
c. They made the business ‘solid’ (by bringing them together).
d. They made the business ‘liquid’ (by breaking it up or ‘dissolving’ it)
e. They made the economy active.
f. They made the economy active again (or for a scond time)
g. They made the industry national (or public).
h. They made the business international.

TEXT B

No state today is completely communistic or completely capitalistic. The various national

economic systems tend generally towards one type or the other, but many systems are
difficult to classify.
It has been found necessary in many countries, even in such dedicated strongholds of free
enterprise as the USA, to control or regulate national economic conditions. The under-
developed countries of the world are inevitably interested in control and longterm plans guided
by the government. India has had a number of plans guided by the government. India makes a
clear distinction between the public sector and the private sector of its economy. Systems of
this type are sometimes called mixed economies.

22
 Britain nowadays has a mixed economy. In the public sector of British economic life are the
nationalized industries like coal and steel, British Rail and BOAC. In the private sector are the
majority of the nation's industries, both large and small, from giants like ICI and BP to small
family businesses.
In 1962 the government set up an official planning body to guide national economic
policies. This body is known as the National Economic Development Council. The members of
the NEDC are representatives of the employers' federations, and the Trades Union Congress,
together with members of the government, eminent industrialists and leading economists.
The main function of the NEDC is planning national production and setting up production
targets. It is however a very difficult matter to plan ahead in a mixed economy. It is not possible
to plan a head with any certainty even in a rigidly controlled economy, because natural
disasters, political changes and other factors can-affect the general plan in unexpected ways.

Exercises

1. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) The USSR is completely communistic.
b. ( ) The USA is not completely capitalistic.
c. ( ) The many economic systems in the world are not difficult to classify.
d. ( ) Even the United States finds it neccessary to control national economic conditions
to a certain extent.
e. ( ) The interest of the under developed countries in longterm planning is inevitable.
f. ( ) India makes a clear distinction between the two sectors of its typically mixed
economy.
g. ( ) The nationalized industries in Britain are inevitably in the private sector of the
economy.
h. ( ) Giants like ICI and BP are not publicly owned.
i. ( ) The British government controls the economy very strictly through the NEDC.
j. ( ) Planning ahead in a mixed economy is not particularly difficult.

2. Combine these pairs of sentences in the two ways shown in the example.
EXAMPLE The government has set up an official committe.
This comittee must decide national economic policy.
i⇒ The government has set up an official committee which must decide
national economic policy.
ii ⇒ The government has set up an official committee to decide national
economic policy.

a. The economists have organized a commission.

This commission must study the economic problems of Latin America.
b. The workers have demanded an investigation.
This investigation must find out what happened in the factory.
c. The trade unions have asked for a new plan.
This plan must regulate the flow of work.
d. The government has proposed a new scheme.
This scheme must come into operation next year.
e. The employers have prepared a special scheme.
This scheme must be approved by the government.

3. Arrange the following sentences in their proper order, to produce a paragraph about
the National Economic Development Council.

A. It meets regularly, under the chairmanship of the Prime Minister.

B. Each committee is concerned with an individual industry and is composed of members
from management, the trade unions, government committees and three independent
members.
23
 C. The NEDC, which was set up in 1962, brings together representatives of government,
management and the trade unions, and provides a meeting place for the discussion of
future policy and planning.
D. The EDCs study measures to improve efficiency and competitive power in each industry.
E. Other members are the ministers of the main economic departments of the government,
representatives of management and trade unions and the nationalized industries,
independent members and other interested people.
F. The NEDC has set up twenty-one Economic Development Committees.

4. In each of these sentences a word is missing. Provide a word from the text, from
between lines 4 and 16.
a. The USSR is a ___________of communism.
b. The Americans are ___________ to a system of private enterprise.
c. To control an economy is much the same as to ___________ it.
d. The work was carefully ___________ by the authorities for-five years.
e. It is necessary to make a sharp ___________ between planned and unplanned economies.
f. He does not work in this ___________ of the economy but in the public one.
g. A mixed economy possesses some of the qualities of the two main ___________ of economic
system.
h. Coal, steel and farming are very important national ___________
i. The ___________ of the workers were happy about the new plan, but a small number were
not.
j. Some industrial ___________, like BP and ICI, are international as well as national in their
activities.

5. Study the table. It shows how words can be forrned by adding first the suffix - ify, and
then the suffix –cation (with suitable changes in spelling)
EXAMPLE simple ⇒ simplify ⇒ simplification

Use the table and the example to help you fill in the blanks in the sentences.

simple ify
note
pure ification
class
clear (= clar-)
NOTE Remember to remove the ‘e’ in simple, note and pure.

a. This plan is not simple enough. We must therefore __________ it. The __________ of the plan
is essential.
b. The economy of that country belongs in the Marxist group or class. We must therefore
__________ it as communistic. The __________ of the economy of that country is not difficult.
c. That water is not pure enough. It is neccssary therefore to __________ it. The __________ of
the water is a matter of public health.
d. Please send a note to the members of the Council. You should __________ them of the date
of the next Council meeting. The __________ should reach them this week.
e. The economics teacher tried to make the situation clear. He tried to __________ his
description by making it simpler. When he had made this __________, his students
understood the whole matter much better.

Supplement

1. Seven words can be formed from the basic word nation. This table shows how to do it.
Make a list of the words, and put each word in its suitable place in the sentences. You
will also need the word nation itself.

Suffix
stem
1 2 3
24
 d
ize
ation
nation al
ism
lst lc

a. The USA is the homeland of the American ___________

b. Most countries have ___________ banks, such as the Bank of England.
c. The Socialist Party has plans to ___________ various privately owned industries.
d. British Rail is already a ___________ industry, because it is publicly owned.
e. The name given to the change from private to public ownership is ___________.
f. In the last twenty years ___________ has been a strong political force leading to the
formation of many new nations.
g. A person who is interested in the progress and history of his own country may be called
a ___________.
h. Many governments have certain policies which are not international but simply
___________.

2. Make acronyms or letter-names from the groups of names listed below.

EXAMPLE (a) The United States of America ⇒ The USA
(b) British Petroleum ⇒ BP
NOTE keep the definite article ‘the’ where this is customary.
a. The Organization of African Unity.
b. The United Kingdom (of Great Britain and Northern Ireland).
c. North Atlantic Treaty Organization.
d. The European Economic Community.
e. Association of South East Asian Nations.
f. United Nations Organization.
g. World Health Organization.
h. The International Labour Organization.
i. The International Monetary Fund.
j. TheFood and Agricultural Organization.
k. Trans World Airlines.
l. British European Airways.
m. General Agreement on Tariffs and Trade.

3. Composition. Write about 400 words on the topic ‘Mixed Economies’. Your work
should be in two parts: (i) an introduction on economic system in general; (ii) mixed
economies in particular. Use the material provided in the texts and exercises.

25
UNIT 7. REVISION AND CONCLUSION

Most people work to earn a living, and produce goods and services.
Goods are either agricultural (like maize), or manufactured (like
cars). Services are such things as education, medicine and commerce.
Some people provide goods; some provide services. Other people
provide both goods and services. For example, in the same garage 5
a man may buy a car or some service which helps him maintain his
car.
The work people do is called economic activity. All economic
Activities taken together make up the economic system of a town, a
City, a country or the world. Such an economic system is the sum- 10
Total people do and what they want. The work people do
either provides what they need or provides the money with which they
can buy essential commodities. Of course, most people hope to have
enough money to buy commodities and services which are non-
essential but which provide some particular personal satisfaction, 15
such as toys for children, visit to the cinema and books.
The science of economics is based upon the facts of our everyday
Lives. Economists study our everyday lives and the general life of our
communities in order to understand the whole economic system of
which we are part. They try to describe the facts of the economy in 20
which we live, and to explain how it works. The economist's methods
should of course be strictly objective and scientific.
We need food, clothes and shelter. We probably would not go to
work if we could satisfy these basic needs without working. But even
when we have satisfied such basic needs, we may still want other 25
26
things, such as the toys, visits to the cinema and books mentioned
above. Our lives might be more enjoyable if we had such things.
Human beings undoubtedly have a wide and very complex range of
wants. The science of economics is concerned with all our needs:
with the desire to have a radio as well as the basic necessity of having 30
enough food to eat.
So far we have suggested that economic systems are the same every-
where. This is not entirely true. Not all economic system in the world
are the same. The economic system of the USA differ greatly from
the system in the USSR. The American system is based on private 35
enterprise and is essentially capitalistic, while the Russian system is
communistic and based on the principles of Karl Marx, the l9th
century political economist. The economic systems of these two
nations contrast very strongly.
Britain is similar to the USA. It has an economic system based 40
on private enterprise and private supplies of capital. An important
form of capital is surplus income available for investment in new
business activities. Property in both the US and Britain can be and is
owned by individual citizens and these citizens exercise considerable
economic freedom of choice. They can choose what they want to do 45
and how they want to earn their living, but are not of course entirely.
free to do as they wish. They must obey the law. Otherwise, howeyer,
they can use their time, money and energy as they wish. If a person
can do this, then economists say that he is economically free. In all
communities, of course, limits are imposed upon personal freedom, 50
limits which are sometimes very complex.
Complete economic freedom of acton can create great difficulties,
because the freedoms exercised by various individuals inevitably conflict.
If citizens were completely free, some landowners might build
factories in unsuitable places, while some factory owners might make 55
their employees work too long each day. If they were completely free,
workers might stop working when they got their first pay, and come
back only when they needed more money. Such economic anarchy
could create instability in the entire economy of a country.
Laws which relate to economic conditions are sometimes concerned 60
with contracts between employers and employees, Sometimes
they are concerned with workers’ health, wages and pensions, and
sometimes with the location of places of work. Sometimes they protect
the interests principally of the workers, while at others they may
be beneficial to the employers. The government policy towards both 65
employees and employers will depend very much upon the political
and economic ideology which the government adopts, and may be
biassed towards employers and capital on the one hand, or workers
and the problems of labour on the other.
In states which have a communistic system, private property and 70
private enterprise are reduced to a minimum. They exist, but are
limited to a small area of the economy. Karl Marx conceived of a
world in which there would be no private property whatsoever.
Communism in theory states that all property should belong to the
State. In practice, however, the citizens of states like the USSR are 75
permitted to have personal effects.
The important thing about the communist system is central planning.
The State organizes the whole economic effort of the nation.
A central authority with complete power decides what goods and
services will be produced. The authority decides what quantities of 80
goods will be produced, and also controls their quality, and decides
where they will go and what prices will be charged for them. Additionally,
the State provides all (or most of) the services which the citizens require.
It is responsible for the economy and is therefore concerned with
methods of production as well as quality and quantity. 85
The national economy must be planned ahead over a number of
years.
Marxist economies are planned. The system is related to the needs
27
of the State as a whole, not the needs of the private person. The
emphasis is collective and not individual, so that the individual is 90
subordinate to the needs of the collective State.
The central authority in communist countries performs the function
of the price system in capitalistic economies. Under capitalism
the prices of goods and services are related to supply and demand.
The system operates freely, dependent upon the quantities available 95
and what people want. Therefore we say that in private enterprise
systems the production of goods tends to follow price movements, to
rise when prices rise and fall when prices fall. This rise and fall is not
however normal in communist countries. The control exercised by
the State prevents any such fluctuation of prices. Government 100
planners under communism therefore know what goods are available
and what prices will be charged, but economists in not-communist
systems do not always know this.
No state today is completely communistic or completely capitalistic.
The various national economic systems tend towards one type 105
or the other, but many are difficult to classify. It has been found
necessary in many countries to exercise some degree of control over
national economic conditions, and under-developed nations particularly
are interested in longterm plans. Countries like India have
had a number of plans guided by the government, India makes a 110
clear distinction between the public sector and the private sector of
its economy and so has a system called a mixed economy.
Britain today has a mixed economy. In the public sector are the
nationalized industries like coal and steel, British Rail and BOAC.
In the private sector are the majority of the nation's industries, from 115
giants like ICI and BP down to small family businesses. In l962 the
British government set up an official planning body known as the
National Economic Development Council, a body which would help
Plan national production and set up production targets. The members
of the NEDC are representatives of both the employers' federations 120
and the TUC, together with members of the government, eminent
industrialists and leading economists.
It is however a very difficult matter to plan ahead in a mixed economy.
It is not possible to plan ahead with any certainty even in a
rigidly controlled economy, because natural disasters, political 125
changes and other factors can affect the general plan in unexpected
ways.

Exercises
1. Answer these questions. They relate to lines 92-103 of the text.
a. What performs the function of the capitalistic price system in communist countries ?
b. What are pricecs in a capitalistic system related to?
c. What does the price system depend upon?
d. In a capitalistic system, what does production follow?
e. When does production fall?
f. In a communistic system, what does the control exercised by the State prevent from
happening?
g. What do economists in communist countries usually know?

2. Below is a list of pronouns occuring in the text. Say what each pronoun refers to.

EXAMPLE they (in line 11)

Answer ‘they’ refers to ‘people’ in line 11

a. it (in line 21) b. It (in line 40) c. They (in line 45)
d. he (in line 49) e. They (in line 56) f. They (in line 62)
g. its (in line 112)

3. Below are 45 words taken from earlier units. Make each word negative by adding a
suitable prefix: non-, un- or in- (or il-, im-, ir- as required)
28
 economic available Organic
active probable sufficient
distinct regular conditional
legal mobile complete
systematic productive desirable
public legible essential
definite important usual
dependent logical stable
secure adequate equal
industrial proper communist
practical rational solvent
scientific suitable conclusive
relevant personal political
satisfactory enjoyable expert
frequent responsible necessary

4. Combine these pairs of sentences by means of if, in order to make new conditional
sentences. lt may be necessary to change some words in some of the sentences in
order to make complete sense.
a. We have a car. / We can be much more mobile.
b. You want to get a new house. / You must earn a lot of money.
c. You will complete the work more rapidly. / You all work together on it.
d. We buy these goods this week. /We may be able to sell them next week, and make some
extra money.
e. You buy your essential commodities from us. /Perhaps we shall be able to sell them to
you more cheaply than other shops.
f. There is no system of control. /Certain people may decide to build factories in
unsuitable places and employ workers for long hours.
g. They may increase their output. / Their employers provide better working conditions.
h. We may provide some help now. /You undertake to help us later.

29
 PART 2.
UNIT 8. UTILITY AND PRICES

Text A
Our basic needs are simple, but our additional individual wants are
often very complex. Commodities of different kinds satisfy our wants
in different ways. A banana, a bottle of medicine and a textbook
satisfy very different wants. The banana cannot satisfy the same
wants as the textbook. 5
This characteristic of satisfying a want is known in economics as
Its ‘utility'. Utility, however, should not be conlused with usefulness.
For example, a submarine may or may not be useful in time of peace,
but it satisfies a want. Many nations want submarines. Economists
say that utility determines 'the relationship between a consumer and 10
a commodity'.
Utility varies between different people and between different
nations. A vegetarian does not want meat, but may rate the utility
of bananas very highly, while a meat-eater may prefer steak. A
mountain-republic like Switzerland has little interest in submarines, 15
while maritime nations rate them highly.
Utility varies not only in relation to individual tastes and to geography,
but also in relation to time, In wartime, the utility of bombs
is high, and the utility of pianos is low. Utility is therefore related
to our decisions about priorities in production-particularly in a 20
centrally-planned economy. The production of pianos falls sharply
in wartime.
The utility of a commodity is also related to the quantity which is
available to the consumer. If paper is freely available, people will not

30
be so interested in buying too much of it. If there is an excess of paper, 25
the relative demand for paper will go down. We can say that the
utility of a commodity therefore decreases as the consumer's stock of
that commodity increases.

Exercises
1. Answer these questions, basing your answer on the text.
a. What is the difference between our basic needs and our additional wants ?
b. What two ways are there of describing 'utility'? (see lines 6-7 and lines 9-11)
c. What example is used to show that utility varies from person to person?
d. What example is used to show that it varies from nation to nation ?
e. What example is used to show that it varies from time to time?
f. What example is used to show that utility is related to quantity?
g. What can we say about the way in which utility decreases?

2. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) Our basic needs are complex.
b. ( ) Our wants are satisfied in much the same way by all commodities.
c. ( ) Usefulness should not be confused with utility.
d. ( ) Vegetarians rate the utility of meat very highly.
e. ( ) The Swiss nation is not particularly interested in submarines.
f. ( ) In wartime the utility of pianos is high.
g. ( ) In a centrally-planned economy, decisions about priorities are related to utility.
h. ( ) The demand for paper goes down if the quantity of paper increases ?

3. Contrast these pairs of sentences, using while

EXAMPLE Switzerland has little interest in submarines. Maritim nations rate them highly.
i. ⇒ Switzerland has little interest in submarines, while maritime nations rate them highly.
ii.⇒ Switerlaand on the one hand has little interest in submarines, white maritime nations
on the other (hand) them highly.
a. In peacetime bombs are not in very great demand.
In wartime their utility is very high.
b. Bananas may satisly one kind of want.
Textbooks satisly an entirely different need.
c. Meat-eaters may enjoy both beef and bananas.
Vegetarians value only the bananas.
d. A product's utility may be very high in a certain part of the world.
In a different part of the world its utility may be very low.
e. Some people may prefer to save their money and invest it in a secure and profitable
scheme.
Some may prefer to buy a particular commodity which they have wanted for a long time.

4. Change these sentences in order to use should with not. This changes the statements
into recommendations.

EXAMPLE Utility is not to be confused with usefulness.

⇒ Utility should not be confused with usefulness.
a. The economic system is not to be studied in an unscientific way.
b. A communist government is not to be expected to concern itself with private profits.
c. The government of a capitalistic country is not to be expected to concern itself with
detailed central planning.
d. A capitalistic system is not to be regarded as completely free of central planning.
e. These factors are not to be considered the most important in helping us to improve the
quality of the service.

5. Find single words in the text for which these words could be substituted.
a. extra (1-2) e. preferences (19-21)
b. quality (6-7) f. rapidly (21-22)
c. coastal (14-16) g. amount (23-24)
d. likes and dislikes (17-18) h. Goes down (26-28)

31
Text B
In most economic systems, the prices of the majority of goods and services do not change over
short periods of time. In some systems it is of course possible for an individual to bargain over
prices, because they are not fixed in advance. In general terms, however, the ind ividual cannot
change individual cannot change the prices of the commodities he wants. When planning his
expenditure, he must therefore accept these fixed prices. He must also pay this same fixed price
no matter how many units he buys. A consumer will go on buying bananas for as long as he
continues to be satisfied. If he buys more, he show that his satisfaction is still greater than his
dislike of losing money.
A point in time comes when the financial sacrifice is greater than the satisfaction of
eating bananas. The consumer will therefore stop buying bananas at the current price. The
bananas are unchanged; they are no better or worse than before. Their marginal utility to the
consumer has, however, changed. If the price had been higher, he might have bought more.
It is clear from this argument that the nature of a commodity remains the same, but its
utility changes. This change indicates that a special relationship exists between goods and
services on the one hand, and a cunsumer and his money on the other hand. The consumer’s
desire for a commodity tends to diminish as he buys more units of that commodity. Economists
call this tendency the Law of Diminishing Marginal Utility.

Exercises
1. Answer these questions, basing your answers on the text.
a. Prices are fixed in most economic systems, but what is possible in some systems ?
b. What is the individual generally unable to change?
c. Under what conditions will a consumer go on buying a commodity ?
d. What does the consumer show by buying more bananas?
e. What happens with each succesive purchase ?
f. At what point will the consumer stop buying the commodity at the current price?
g. What remains unchanged with each purchase?
h. What has changed when this point is reached?
i. Under what conditions might he have bought more?
j. What does consumer's desire tend to do?

2. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) In the majority of systems prices are fixed but in the minority it is possible to
bargain.
b. ( ) It is generally possible for the individual to change the prices of the commodities he
wants.
c. ( ) We know that a consumer’s satisfaction is greater than his financial sacrifice if he
goes on buying a commodity at the current price.
d. ( ) When a customer becomes dissatisfied at paying the current price, he pays less.
e. ( ) The financial sacrifice becomes too great when the quality of the commodity gets
worse.
f. ( ) The consumer will probably buy more if the price falls.
g. ( ) If the price rises, the cunsumer will probably buy less.
h. ( ) If the price remains the same, the consumer will reach a point when his sacrifice is
greater than his satisfaction.
i. ( ) The utility of a product stays the same, but its nature changes.
j. ( ) ‘The Law of Diminishinng Marginal Utility’ is the name which economists give to the
tendency for a customer’s desire to diminish as he buys more units.

3. Make these sentences passive, omitting the agent phrase.

a. The government fixes the prices.
b. They fix the prices in advance
c. He must pay the current price.
d. The commodity satisfies the consumer.
e. The government has changed the policy.
f. They have produced additional supplies for the men.

32
 g. They have obtained various valuable minerals in that area.
h. Economists have classified the various economic systems.
i. Even in a dedicated capitalist economy the government plans certain things.
j. The committee prepared a special scheme.

4. Change these sentences as in the example. The meaning does not change.
EXAMPLE When he plans his expenditure, a consumer must accept fixed prices.
⇒ When planning his expenditure, a consumer must accept fixed prices.
a. When it prepares a new product, a company must spend a large amount of money.
b. When it decides production targets for a priod of years, a government must establish its
priorities very clearly.
c. When it makes a decision over the number of employees which will be needed, the
management of a factory must consider everthing very carefully.
d. When it tries to increase efficiency in production, a planning body should decide what
factors are most important.
e. When they consider problems of distribution, businessmen should investigate all the
methods currently in use and decide objectively whether they can be improved.

5. Change the listed words and phrases into agent nouns.

Example consume ⇒ + er ⇒ consumer.
plan ⇒ + er ⇒ planner

a. buy; b. sell; c. use; d. work; e. bank; f. mine; g. produce; h. organize; i. manage; j. begin;
k. breed; l. perform; m. a men who breeds cattle; n. a men who owns a house; o. a men who
pays tax; p. a men who produces whisky; q. a men who manages a bank.

Supplement
Study this diagram about kinds of production and then answer the question.

PRODUCTION
primary secondary tertiary
industries industries industries
intermediate final

hunting engineering banking teaching

fishing building trading medicine
farming gas, electricity insurance defence
mining weaving transport acting
etc. etc. etc. etc.

a. What three types of production are there?

b. If primary relates to ‘one’ and secondary relates to ‘two’, what does tertiary relate to?
c. What two types of tertiary industry are there?
d. What type does farming belong to ?
e. What type does farming belong to: trading; teaching; building?
f. Which of these categories describes secondary industries?-----(1) selling things; (2) making
things; (3) growing things.
g. Which of these categories relates to both primary and secondary industries? -----
(1) providing goods;
(2) 2 providing services.
h. Which of these categories relates to the three activities of mining, engineering and building?
------(1) heavy industries; (2) light industries.

33
UNIT 9. SUPPLY AND DEMAND

Text A
Bananas are a typical example of perishable goods. By 'perishable' we mean goods which
cannot be stored for any length of time without going bad. Most foodstuffs are in the perishable
category. Such goods are offered for sale as quickly as possible, and so the supply of perishables
and the stock of perishables available at any time are usually the same in quantity.
This is not true in the case of non-perishable goods like coal, steel and cars, which do not
deteriorate easily. The supply of cars on the market may not be the same as the actual stock of
cars in the factories. Economists talk about the Law of Supply, in which a rise in prices tends to
increase supply, while a fall in prices tends to reduce it. If prices rise for a particular commodity,
the rise will of course encourage producers to make more. On the other hand, if prices fall either
locally or throughout the world, producers will reduce production. This can result in serious
difficulties for many producers, and may cause them to go out of business completely. Over-
production of any commodity can also create difficulties, because it can lead to a glut on the
market, which may cause prices to fall sharply.
Supplies of many commodities can generally be adjusted to suit market conditions. This
means that changes in prices lead to changes in the quantity of a particular commodity which is
made available to consumers. Household goods and furniture belong to this category. In such
instances supply is said to be 'elastic', because it can be increased or decreased rapidly in
response to market prices.

Exercises
1. Answer these questions, basing your answers on the text.
a. What are perishable goods ?
b. What two things are usually the same in quantity?
c. What happens when the Law of Supply operates?
d. What does a rise in prices encourage ?
e. What does a fall in prices cause ?
f. What serious effect may a fall in prices have on some producers?
g. What can over-production lead to?
h. What happens when the supply of a commodity is adjusted to suit market conditions?
i. What kinds of goods belong to the category of commodities that can be adjusted easily?
j. What is meant by ‘elastic' supply ?

2. Say whether these statements are true (T) or false (F), and say why.
a. ( ) Bananas are typical of goods that easily deteriorate.
b. ( ) Steel can be stored for a long time without losing its value.
c. ( ) The actual stock of cars in a factory is usually the same as the supply of cars available
on the market.
d. ( ) According to the Law of Supply, a rise in prices tends to reduce supply.
e. ( ) If prices fall locally, production will be reduced throughout the world.
f. ( ) When there is a glut on the market demand, decreases and prices fall.
g. ( ) Changes in prices lead to a change in the quality of a commodity.
h. ( ) Supply is ‘elastic' because market prices rise and fall.

34
3. Combine these pairs of sentences, using that and changing will to would.
EXAMPLE He told me something. The prices will change.
⇒ He told me that the prices would change.
a. They told him something. The committee will meet next week.
b. The economists expected something. The prices will fluctuate considerably.
c. The government anticipated something. The workers will demand higher wages.
d. The management decided something. The new factory will be located in a different city.
e. The development committee arranged something. The meetings will be held at regular
intervals over the next two years.

4. Punctuate the following passage. Provide capital letters, commas, full stops, brackets,
colons etc,, where applicable.

non perishable goods such as coal steel cars and aeroplanes can be stored for considerable
periods of time without loss of value this is not true however with perishables which must
be placed on the market as quickly as possible. If they are not sold quickly they will
deteriorate if they deteriorate while in storage or in the shops both producers and
distributors lose a large amount of money if there is a glut of certain perishables these
commodities must be sold quickly even if the selling price is too low for a satisfactory profit.

5. Below are pairs of sentences. In the first sentence there is a verb in italics. In the
second sentence there is a blank. Make the italicized verb into a noun in order to fill
the blank.
EXAMPLE manage ⇒ manage + ment ⇒ management

a. It is sometimes necessary to adjust the quantity of goods flowing on to the market. This
______ is made according to market conditions.
b. He arranged the committee meeting. His ______ were very efficient.
c. The government encourages private enterprise. Their ______ sometimes takes the form of
financial help.
d. Some economists are interested in measuring changes in the price of essential
commodities. This ______ extends over a period of years.
e. The management tried to assess the amount of money needed for the plan. The ______
was to be made by a special committee.
f. He decided to invest his capital in the new enterprise. His ______ might be very profitable.

Text B
Elasticity of supply, as a response to changes in price, is related to demand. Economists define
‘demand' as a consumer's desire or want, together with his willingness to pay for what he
wants. We can say that demand is indicated by our willingness to offer money for particular
goods or services. Money has no value in itself, but serves as a means of exchange between
commodities which do have a value to us.
People very seldom have everything they want. Usually we have to decide carefully how we
spend our income. When we exercise our choice, we do so according to our personal scale of
preferences. In this scale of preferences essential commodities come first (food, clothing,
shelter, medical expenses etc.), then the kind of luxuries which help us to be comfortable
(telephone, special furniture, insurance etc.), and finally those non-essentials which give us
personal pleasure (holidays, parties, visits to theatres or concerts, chocolates, etc.). They may all
seem important, but their true importance can be measured by deciding which we are prepare
to live without. Our decisions indicate our scale of preferences and therefore our priorities.
Elasticity of demand is a measure of the change in the quantity of a good, in response to
demand. The change in demand results from a change in price. Demand is inelastic when a good
is regarded as a basic necessity, but particularly elastic for non-essential commodities.
Accordingly, we buy basic necessities even if the prices rise steeply, but we buy other things
only when they are relatively cheap.

Exercises
1. Answer these questions, basing your answers on the text.
a. What is elasticity of supply a response to ?
b. What is the definition of 'demand'?
35
 c. How is demand indicated?
d. What is money?
e. What do we do when we exercise choice ?
f. What comes second in our scale of preferences ?
g. What is our third priority?
h. What is elasticity of demand?
i. When is demand inelastic?

2. Say whether these sentences are true (T) or false (F), and if they are false say why.
a. ( ) When people offer money for particular goods, they indicate that a demand exists.
b. ( ) Money is usually valuable in itself.
c. ( ) People do not usually have everything they want.
d. ( ) Basic needs come before luxuries.
e. ( ) Our decisions on how to use our money show what we need most and what we are
willing to do without.
f. ( )Demand for essential commodities is always elastic.

3. Change these sentences in order to use the auxiliary verbs do or did. These verbs are
used for emphasis.
EXAMPLE i. These goods and services have a value.
⇒These goods and services do have a value.
ii. The people went to the city to find work.
⇒ The people did go to the city to find work.

a. These factors have an effect upon the economic system.

b. The management tried to change the methods.
c. The representatives of the employers and employees met last week.
d. The decision made by the trade unions affects everyone in the industry.
e. Short-term economic anarchy has a bad effect on longterm stability and investment.
f. The surplus money provided capital for a new housing scheme.
g. Stable conditions led to an improvement in the general state of the economy.
h. The government encourages new commercial enterprises,
i. A change in government usually means, a change in policy.
j. The minister wanted to make a fundamental change in the national economic policy.

4. Supply either the or a (n) in the blanks in these sentences.

EXAMPLE There is ________ demand for steel. ________ demand for steel is increasing.
⇒ There is a demand for steel. The demand for steel is increasing.

a. There is________ shortage of bananas. ________shortage of bananas will continue for some
weeks.
b. There has been________change of government. ________change in government will probably
mean a change of policy, change of policy may lead to________short period of instability.
________short period of instability could create ________feeling of insecurity.
c. The speaker suggested________special commission to study economic conditions. He said
that________special commission should examine all aspects of national economic life.
________commission should investigate demands of________workers and________conditions
under which they work. It should also hear________views of ________employers. Such________
commission would render________very valuable service to________nation.

5. Give suitable opposites for these words

EXAMPLE capitalism : communism

a. minority d. positive g. solid

b. maximum e. public h. simplify
c. theoretical f. collective i. longterm

Supplement

1. Many words are formed by adding –able. There is however an active use of –able and
a passive use. Try these exercises.

36
 A. The Active use of –able.
EXAMPLE Fruit can perish ⇒ Fruit is perishable.
NOTE that can is not always necessary in the first sentence.
a. The plan can work
b. Market conditions can change
c. Economic conditions can vary
d. These policies suit (us)
e. Those products have a value
f. Some investments make a profit

B. The passive use of –able

EXAMPLE The difficulty can be avoided
⇒ The difficulty is avoidable

a. The commodity can be marketed

b. The plan can be tested
c. The flow of work can be measured
d. The relationship can be defined
e. The product can be obtained

2. Practise saying these phrases. The main stress is italicized for you.
a. perishable goods
b. available supplies
c. heavy industry
d. inelastic demand
e. diminishing utility
f. scale of preferences
g. essential commodities
h. economic laws
i. government policy
j. maximum security
k. important statistics
l. economic anarchy

UNIT 10. SOME ECONOMIC LAWS

Basic human needs are simple, but every individual has additional
personal wants which may be very complex. These complex personal
wants are satisfied in different ways by different things. A car, a bottle
of whisky and a newspaper satisfy very different wants and the whisky
is not a close substitute for the car. This special characteristic of satisfying 5
a want is known in economics as its 'utility'. Utility is not the
same as usefulness. A submarine, for example, may or may not be
useful in peacetime, but it satisfies a want. Many nations want submarines.
Economists describe this kind of utility as 'the relationship
between a consumer and a commodity'. 10
Utility varies between different people and between different
nations. A vegetarian does not want meat, but may rate bananas very
highly. A mountain-republic like Switzerland has little interest in
submarines, while maritime nations rate them highly. Utility also
varies with time. In time of war, the utility of bombs is high and that 15
37
of pianos is low. Utility is therefore related to our sense of priorities.
The utility of a commodity is also related to the quantity available to
the consumer. If men buy a large quantity of paper, they will lose
interest in buying more paper. The demand for paper will go down.
The utility of a commodity consequently decreases as the consumer's 20
stock increases.
In most economic systems, the prices of the majority of goods and
services are fixed. The individual cannot change the prices of the
commodities he wants, and when panning his expenditure, he must
accept these prices. A consumer will go on buying cigarettes as long 25
as his satislaction continues and they render utitity. If he continues
to pay the current price, his satisfaction is greater than his financial
sacrifice. With each purchase, however, his satisfaction decreases,
although the prices remain the same. If a consumer's supply of money
is limited, a point will come when the financial sacrifice is greater than 30
the satisfaction of smoking cigarettes. He will stop buying the commodity.
The cigarettes are the same, but their utility has changed. If
the prices rose, he would buy fewer; if they fell, he might buy more.
We can see that the nature of a commodity remains the same, but
its utility changes. This indicates that a special relationship exists 35
between goods and services on the one hand and a consumer and his
money on the other hand. The consumer's desire for a commodity
tends to diminish as he buys more units of that commodity. This
tendency is called the Law of Diminishing Marginal Utility.
Utility is of course related to the Laws of Supply and Demand. 40
When economists talk about a Law of Supply, they mean that a rise
in prices tends to increase the supply of a commodity, while a fall in
prices tends to reduce it, When they talk about a Law of Demand,
they mean that a fall in prices tends, to increase the demand for a
commodity, while a rise in prices tends to decrease the demand. In 45
any economic situation, a consumer will decide to buy a commodity
only in terms of its particular utility to him.
If the prices of a particular commodity rise in the economy as a
whole, the rise will naturally encourage producers to make more of
that commodity. If, on the other hand, prices fall locally or throughout 50
the world, producers will reduce production. Supplies of many
commodities can generally be adjusted to suit market conditions.
This means that changes in market prices lead to changes in the
quantity of a particular commodity made available to consumers.
Household goods and furniture are in this category. In such instances, 55
supply is said to be elastic, because it can be increased or decreased
rapidly to suit market prices.
The principle of elasticity operates in the area of demand as well
as in the area of supply. People very seldom have everything they
want. They usually have ta choose carefully how they will spend their 60
money. When they exercise this choice, they work according to their
personal scale of preferences, beginning with top-priority essentials
like food and housing. Next on their scale come those commodities
which provide comfort or convenience of some kind (telephones,
insurance etc.) and finally come the non-essentiats like holidays and 65
trips to the theatre, which are important parts of life but not comparable
with food and shelter. If it is necessary to pay very high prices
for the essentials of life, people pay them----even if this means spending
all their income. In such cases demand is inelastic. For non-essentials,
however, demand is elastic and particularly responsive to changes in price. 70

Exercises
1. Answer these questions, basing your answers on the text.
a. What noun is used to show that whisky is not a simple replacement for a car? (1-10)
b. What noun is used to show that nations are not at war ? (1-10)
c. What adverb is used to show that the utility of a commodity decreases because
stock increases? (17-21)
38
 d. What verb is used to show that cigarettes provide utility as long as satisfaction
continues? (22-29)
e. What adjective is used to show that the price of cigarettes is the price ruling now?
(22-29)
f. What verb is used to show that a consumer's desire tends to 'go down' or 'become
less' as he buys more of a commodity? (34-39)
g. What noun is used to show that household goods and furniture belong to a certain
type of commodity? (50-57)
h. What adjective is used to show that food and housing are more important than
other commodities ? (59-63)

2. Say whether these sentences are true (T) or false (F), and if they are false say why.
a. ( )Switzerland is a maritime nation, and places a high priority on submarines.
b. ( )If the current price of cigarettes remains the same, consumers continue to buy
more, even when their satisfaction is less than their financial loss.
c. ( ) Because a consumer's desire for a commodity tends to diminish as he buys more
units of that commodity, economists talk of a Law of Diminishing Utility.
d. ( )Because the supply of furniture and household goods can be adjusted to suit
market conditions, we say that their supply is elastic.
e. ( ) Because elasticity of demand refers to things high on our scale of preferences, we
can say that the demand for essentials like food and shelter is very elastic.

3. Combine these pairs of sentences by using although.

EXAMPLE X = His satisfaction decreases.
Y = The prices remain the same.
i. X although Y
⇒ His satisfaction decreases, although the prices remain the same.
ii. Although Y, X
⇒ Although the prices remain the same, his satisfaction decreases.
a. X = The individual cannot change the current price.
Y = He may want to do so.
b. X = The utility of the cigarettes has changed.
Y = Their quality is the same.

c. X = He wants to buy that car now.

Y = He should wait until he has enough money for both the car and other necessary
things.
d. X = The work has not been done yet.
Y = It was planned five years ago.
e. X = The scheme has been started.
Y = It has not yet received government permission.

4. Punctuate the following passage. Provide capital letters, commas, full stops, brackets,
colons, etc., where applicable.

prices have risen throughout the national economy since 1954 between 1948 and 1953
there was a period of price stability the government decided in 1960 to change the national
policy considerably and to introduce certain price controls although controls were not very
popular with industrialists the government also tried to reduce demand by limiting
increases in wages throughout the economy although limitation of wages was not very
popular with the trade unions this limitation of wage increases applied to both the public
and private sectors an official commission was created to regulate wage and price increases
called the national prices and wages board or npwb.

5. Insert a suitable preposition in each of the blanks in these sentences.

a. He is interested ________ economics.
b. He is not concerned ________ non-essential commodities.
c. The demand ________ bananas will probably increase.
d. The supply ________ cigarettes does not usually fluctuate.
e. The consumer's need ________ such commodities is well-known.
f. There was a change ________the quantity of material supplied.

39
 g. He paid quite a lot of money ________ that car.
h. He paid the money ________ that man.
i. The American economic system is based ________ capitalistic principles.
j. Most citizens conform ________ the law of the country in which they live.
k. Non-essential commodities like chocolates cannot be compared________basic necessities
like shelter.

Supplement
1. We call this type of diagram a histogram. The histogram shows the money spent
on certain classes of commodity during 1964 in the state of Noland. The vertical
axis shows the value of the purchases per million dollars. The horizontal axis lists
the actual classes of commodity. Answer the questions which follow.

4500
4000
3500
3000
2500
2000
1500
1000
500
0
Food clothing housing durables

a. How much actual money was spent on food in Noland in 1964?

b. How much was spent on clothing?
c. What is the sum-total of money spent on the three basic necessities?
d. How much was spent on the fourth class of non-perishable consumer goods?
e. How much less was spent on durables than on clothing?
f. How much more was spent on food than on housing?

2. Composition. Write about 400 words on the economist’s concept of utility. Use the
material in the units.

40
UNIT 11. LABOUR AND CAPITAL

Text A
Money is not only a means of exchange but is also a means of measuring the value of
men's labour. In economic theory, 'labour' is any work undertaken in return for a fixed
payment. The work undertaken by a mother in caring for her children may be hard work,
but it receives no fixed payment. It is not therefore labour in the strict economic sense.
As a scientist, the economist is interested in measuring the services which people
render to each other. Although he is aware of the services which people provide for no
financial reward, he is not concerned with these services. He is interested essentially in
services which are measurable in terms of money payments of a fixed and/or regular
nature. In economics, money is the standard by which the value of things is judged. This
standard is not a religious or subjective standard, but an objective and scientific one.
Human labour produces both goods and services. The activities of a farmworker and a
nurse are very differcnt, but both are measurable in terms of payment received. Labour in
this sense is not concerned with distinctions of social class, but simply with the payment
of wages in return for work. When we talk about 'the national labour force", however, we
are thinking of all those people who are available for work within the nation, i,e. the
working population.
It should be noted that any person engaged in private business is not paid a fixed sum
for his activities. He is self-employed and his activities are partly those of an employer and
partly those of an employee. If however he employs an assistant, to whom he pays a fixed
wage, his new employee provides labour in return for payment. He receives his wages, while

41
his employer receives the surplus (large or small) from the whole business. This surplus is
the reward of private enterprise and is known as ‘profit’.

Exercises
1. Answer these questions, basing your answers on the text.
a. What is money, in addition to being a means of exchange?
b. What, in economic theory, is 'labour'?
c. Why is a mother's work not 'labour'?
d. What does the economist measure ?
e. What is he not concerned with?
f. What two words are used to describe the money standard?
g. What two words are used to suggest different standards from the money standard?
h. What common factor relates the work of the nurse and the farmworker ?
i. What is labour (in the economic sense) not concerned with?
j. What te rm is used to describe a person engaged in his own private business ?
k. What does the employer receive instead of wages?
l. What is the reward of private enterprise called ?

2. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) Money is both a means of exchange and a means of measuring labour.
b. ( ) A mother's work in caring for her children is not labour because it is seldom very
hard work.
c. ( ) The economist is interested in the services which people provide for nothing.
d. ( ) Services which are measurable in terms of money concern the economist very
much.
e. ( ) The money standard as used by economists is scientific and strictly objective.
f. ( ) Economists say that the activities of farmworkers and nurses are the same.
g. ( ) Labour in the economic sense is also concerned with the payment of higher
wages to the national labour force.
h. ( ) If an employer engages an assistant, his own work can be classified as labour.

3. Combine these sentences by using not only... but also. This combination creates a
contrast.
EXAMPLE Money is a means of exchange.
Money is a means of measuring men's labour'.
⇒ Money is not only a means of exchange, but also a means of measuring
men's labour.

a. The economic system is the sum-total, of our individual economic activities.

The economic system is the general situation which influences our individual
activities.
b. This Scheme is acceptable to both the management and the trade unions.
This scheme has government approval.
c. The factory is producing less every year.
The factory is losing valuable workers.
d. The government has set up a new economic commission.
The government has begun to consider a change in the law very seriously.
e. The situation interests economists considerably.
The situation has certain features which make it highly unusual.

4. Punctuate the following passage. Provide capital letters, commas, full stops, brackets,
colons etc., where applicable.

the total working population of noland in 1965 was about 15 million some 46 per cent of
the total population this included about 76 per cent of persons of normal working age 14 to
60 for women 14 to 65 for men about 90 per cent of the men were engaged in productive
work while the remaining ten per cent were students private individuals without the need
to work or disable persons the proportion of women in the national labour force was much
lower being about 54 per cent many women did not wish to undertake paid employment or
were prevented from doing so by household duties the great majority of the working
population worked for a wage or salary but 09 million were employers or self employed.

42
5. Make the words negative by using the profix dis-
EXAMPLE satisfaction ⇒ dis + satisfaction ⇒ dissatisfaction
NOTE The prefix dis- usually possesses a more specialized meaning of ‘oppositeness' or
'opposite action' than the negative prefixes un-, in- and non-. Use your dictionary if
necessary.

a. ability b. pleasure c. agree d. obey

e. engaged f. connect q. quality h. Continue
i. possess j. comfort

TEXT B

Labour is any work performed for an employer at a negotiated rate

while profit is the surplus which accumulates as a result of productive
work. The employer obtains this surplus after he pays the necessary
expense of his business and the wages of his employees, He may be
required to share the surplus with others who have provided the 5
capital with which he started his business. Most businesses need
capital in order to start productive work, and the capital pays for the
accommodation, machinery and other items which the business
needs. There is always an element of risk in providing capital and
starting a business. The business may not be successful. The employees 10
of the business do not bear this risk, but the employers and the
providers of capital do bear it. If the business is successful, the risk
has been justified and the invested capital earns part of the profits as
a return on the investment.
The capital which people provide to help new businesses is an 15
accumulation of previous surpluses on previous business activities.
In this way the past is used to finance the future. Such capital is
accumulated by a deliberate policy of saving surpluses. This policy
may be personal and individual, or it may be public and collective.
As such, it is common to both the capitalistic and communistic 20
Systems. In both systems, a certain part of the profits is 'ploughed
back' into the system in order to create capital.
In general terms; capital can be defined as (1) a factor of production
(for example, machinery or cash);(2) the assets possessed by a
person, a company or a nation. Land, houses and shares in a business 25
are capital. In terms of the state, all railways, docks, roads, airports and state
funds of money are part of the nation’s capital.

Exercises
1. Answer these questions, basing your answers on the text.
a. What is profit?
b. At what point does an employer obtain his surplus ?
c. Who may he be required to share it with?
d. What do most businesses need ?
e. Why is there always an element of risk in providing capital?
f. Who bears the risk?
g. What justifies the risk ?
h. How is the past used to finance the future?
i. What do people 'plough back' into the system?
j. Why is it ploughed back?
k. What examples of private capital are given?
l. What examples of public capital are given ?

2. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( )Labour is work performed by an employer at a negotiated rate.
b. ( )The expenses of a business are part of its surplus.
c. ( )Usually new businesses need capital.
43
 d. ( )Because businesses may not always be successful, there is always some risk
involved in financing them.
e. ( )Employers and employees share the risk in financing new enterprises.
f. ( )The surpluses which people provide to help new businesses arise from previous
economic activities.
g. ( )Communistic economies also have policies of saving surpluses.
h. ( )A nation's capital in economic terms is the city where the government is situated.

3. Combine these sentences by using who, following either the first or second example.
EXAMPLE (1) He may be required to share the surplus with others.
The others have provided the capital.
⇒ He may be required to share the surplus with others who have provided
the capital.
(2) The manager will begin work next month.
The manager was appointed last week.
⇒ The manager who was appointed last week will begin work next month.

a. He may wish to discuss the scheme with others.

The others have been interested in it for some time.
b. The economics expert took six months to present his report.
The expert was chosen to investigate the matter.
c. The government appointed a special commission of industrial experts.
These experts would meet regularly to plan production targets.
d. Those employees were satisfied with the working conditions.
The employees were engaged on two-year contracts.
e. Those employees werenot satisfied with the working conditions.
The employees were engaged on a day-to-day basis.
f. The bank decided to provide capital for the farmers.
The farmers were interested in increasing their productivity.
g. The official investigator decided that the management was not efficient.
The investigator was sent by the government to inspect the factory.
h. The trade unions represent the majority of those workers.
The workers earn fixed wages.
i. The owners of the factory needed a manager.
The manager would be concerned not only with efficiency in production but also with
good relations between employers and employees.
j. The central planning authorities discussed changes in policy.
The authorities were concerned with the drop in production.

4. Punctuate the following passage. Provide capital letters, commas, full stops, brackets,
colons etc., where applicable.

there must always be people willing to bear the risk of new business undertakings in
addition to simple risk bearing however it is necessary to have people who will control
and co ordinate the various factors of production such people should decide the nature the
quantity the quality and the distribution of new products as well as bearing the risk of
success or failure economists call the person who undertakes these functions and
entrepreneur this term is french and means one who undertakes something.

5. Make compound words by altering these sentences.

EXAMPLE He is not interested in bearing risks.
⇒ He is not interested in risk-bearing.
a. He is not interested in owning a house
b. He is interested in making profits.
c. The company has decided on a policy of sharing profits.
d. The business of raising capital is sometimes difficult.
e. The problem of making good policies is part of politics.

6. Find single words in the text for which these words could be substituted:
a. done (1-3) f. carry (10-12)
b. grows (1-3) g. Made wothwhile (12-14)

44
 c. gets (3-4) h. Building-up (15-16)
d. given (4-6) i. Earlier (15-16)
e. danger (9)

Supplement
Here are two histograms showing the national expenditure in Noland over two years: 1964 and
1965. Study and compare them, and then answer these questions.

1964
4000
3000
2000
1000
0
Food clothing housing durables
4500
4000 1965
3500
3000
2500
2000
1500
1000
500
0
Food clothing housing durables
a. How much more was spent on food in 1965 than in 1964?
b. How much more was spent on clothing ?
c. How much money was spent on durables over the two-year period ?
d. On which class of commodity was expenditure unchanged ?
e. What is the total increase in national expenditure between 1964 and 1965?
f. Would you describe the trend of national expenditure in Noland over the two years as (i)
static, or (ii) dynamic?

45
UNIT 12. MARKETS AND MONOPOLIES

Text A
The term 'market', as used by economists, is an extension of the ancient idea of a market as
a place where people gather to buy and sell goods. In former days part of a town was kept as
the market or marketplace, and people would travel many kilometres on special market-
days in order to buy and sell various commodities. Today, however, markets such as the
world sugar market, the gold market and the cotton market do not need to have any fixed
geographical location. Such a market is simply a set of conditions permitting buyers and
sellers to work together.
In a free market, competition takes place among sellers of the same commodity, and
among those who wish to buy that commodity. Such competition influences the prices
prevailing in the market. Prices inevitably fluctuate, and such fluctuations are also affected
by current supply and demand.
Whenever people who are willing to sell a commodity contact people who are willing to
buy it, a market for that commodity is created. Buyers and sellers may meet in person, or
they may communicate in some other way: by letter, by telephone or through their agents.
In a perfect market, communications are easy, buyers and sellers are numerous and
competition is completely free. In a perfect market there can be only one price for any
given commodity: the lowest price which sellers will accept and the highest which
consumers will pay. There are, however, no really perfect markets, and each commodity
market is subject to special conditions. It can be said however that the price ruling in a market
indicates the point where supply and demand meet.

Exercises
46
1. Answer these questions, basing your answers on the text.
a. What was a market originally?
b. What is a modern market?
c. Among whom does competition take place?
d. What does competition influence ?
e. What three things cause prices to fluctuate ?
f. When is a market created?
g. What three means are mentioned by which buyers and sellers can communicate if they
do not meet in person?
h. What price operates in a perfect market ?
i. What does the ruling price indicate ?

2. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) The ancient idea of a geographically fixed market place has been extended to
cover sets of conditions which permit buyers and sellers to work together.
b. ( )The world cotton market is not located in any special place.
c. ( )The competition between buyers of a commodity influences the prevailing prices.
d. ( )Supply and demand inevitably affect prevailing prices.
e. ( )A market for a commodity is created whenever buyers and sellers meet in person
but not when they work through their agents.
f. ( )Competition in a perfect market is conducted in a completely free way by numerous
buyers and sellers enjoying easy communications.
g. ( ) The lowest price which buyers will offer is the only price in a perfect market.
h. ( ) Each commodity market is imperfect in some special way.
3. Combine these pairs of sentences by using as and by making the second sentence
passive. Two answers are required.

EXAMPLE The term 'market' is an extension of the ancient idea of the market-place.
Economists use the term in a special way.
i. ⇒ The term 'market', as the term is used by economists, is an extension of the ancient idea
of the market-place.
ii. ⇒ The term 'market', as used by economists, is an extension of the ancient idea of the
market-place.

a. The term 'labour' means any work done for a known reward. Economists use the
term in a special way.
b. The term 'money' refers not only to a means of exchange but also to a means of
measuring the value of men's labour. Economists understand the term in a special
way.
c. The idea of a perfect market is a theoretical concept and not a practical reality.
Economists present the idea in a special way.
d. The methods of controlling prices and wages will probably not succeed.
The government described the methods in a special way.
e. The scheme for a new industrial complex will take fifteen years to complete.
The planners discussed the scheme at the meeting in a special way.

4. Arrange these sentences in their proper sequence in order to obtain a paragraph on

durable goods.
A. Finally, it is interesting to note that many buyers and sellers on important markets
never see the commodities which they buy and sell.
B. Commodities like these can be bought and sold and stored without difficulty by
people who live at great distances from each other and from the sources of supply.
C. Certain commodities have a wider market than others.
D. In addition, commodities which are easy to transport, safe to handle and simple to
grade are generally in universal demand.
E. Durable foods, for example, have a far wider market than perishable goods.
F. For this reason such goods are a good commercial proposition simply because the
risk of investing in them is relatively low.

5. This table shows how words are formed from the stem var-. List the words and then
use them to complete the sentences.

47
va y Verb ‘veәri
r
i able ‘veәriәbl
ed Adj ‘veәrid
ous ‘veәriәs
ety vә'raiәti
Noun
ation veәri’eiϛәn

a. Conditions on that market are stable and do not ________ very much from year to
year.
b. That businessman handles a very ________ selection of products, including bananas, toys
and cars.
c. It is often difficult to classify the ________ types of economic system in the world,
because they tend to possess elements of capitalism and communism in different
degrees.
d. The managers of that company hope to increase the _______ of products which they
offer for sale to the public.
e. There has been little _______ in price levels over the last five years.
f. Because prices on that market fluctuate considerably from week to week, we say that
they are _______.

TEXT B

Although in a perfect market competition is unrestricted and sellers

are numerous, free competition and large numbers of sellers are not
always available in the real world. In some markets there may only be
one seller or a very limited number of sellers. Such a situation is
called a ‘monopoly’, and may arise from a variety of different causes. 5
It is possible to distinguish in practice four kinds of monopoly.
State planning and central control of the economy often mean that
a state government has the monopoly of important goods and
services. Some countries have state monopolies in basic commodities
like steel and transport, while other countries have monopolies in 10
such comparatively unimportant commodities as match es. Most
national authorities monopolize the postal services within their
borders.
A different kind of monopoly arises when a country, through geographical
and geological circumstances, has control over major
natural resources or important services, as for example with Canadian
nickel and the Egyptian ownership of the Suez Canal. Such monopolies
can be called natural monopolies.
They are very different from legal monopolies, where the law of a
country permits certain producers, authors and inventors a full 20
monopoly over the sale of their own products.
These three types of monopoly are distinct from the sole trading
opportunities which take place because certain companies have
obtained complete control over particular commodities. This action
is often called 'cornering the market' and is illegal in many countries. 25
In the USA anti-trust laws operate to restrict such activities, while in
Britain the Monopolies Commission examines all special arrangements
and mergers which might lead to undesirable monopolies.

Exercises
1. Answer these questions, basing your answers on the text.
a. What are not always available in the real world ?
b. What is a monopoly?
c. What are the first three kinds of monopoly ?
d. What examples ol important state monopolies are given?
48
 e. What are Canadian nickel and the Suez Canal examples of?
f. What are certain inventors permitted by law to have ?
g. What word in the last paragraph shows that the fourth type of monopoly is quite
distinct from the other three ?
h. What happens when certain companies obtain complete control over particular
commodities ?
i. What do the Americans call their anti-monopoly laws?
j. What does Britain use to restrict special arrangements ?

2. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( )’Monopoly’describes a market in which there is only one seller or a very limited
number of seller.
b. ( ) In theory there are four kinds of monopoly.
c. ( ) States always monopoliz important basic commodities.
d. ( ) Egyptian nickel is a good example of a natural monopoly.
e. ( ) Cornering the market is quite legal in the USA.
f. ( ) The Monopolies Commission consider that it is undesirable to restrict business
mergers.

3. Change the second sentence in these pairs of sentences in the same two ways as in the
examples. The meaning remains the same in each case.
EXAMPLE In some markets there may only be one seller.
A. Situation like this kind is called a monopoly.
i. ⇒ A situation of this kind is called a monopol.
ii. ⇒ Such a situation is called a monopoly.
a. In some countries production is centrally planned. A situation like this is usually
planned.
A situation like this is usually communistic.
b. In some countries production is a matter of private enterprise.
A situation like this is called capitalism.
c. In some countries there are both private and public sectors.
An economic system like this is known as a mixed economy.
d. In most markets it is not necessary for buyers and sellers to meet in particular localities.
Markets like these are quite different from the market places of ancient towns.
e. For some people investment in new business enterprises is not too great a risk.
People like these sometimes make considerable profits but on other occasions can lose
much of their capital.

4. Punctuate the following passage. Provide capital letters, commas, full stops, brackets,
colons, etc., where applicable.

monopolies and similar arrangements may be referred in britain to the monopolies

commission between 1948 and 1966 the commission presented some twenty six reports
the government in l965 passed a special act called the monopolies and mergers act which
reorganized and enlarged the monopolies commission it provides for the investigation of
services and mergers especially newspaper mergers and improves and extends the
governments powers for taking action this section of the government is based on the
monopolies commissions reports

5. Find single words in the text for which these words could be substituted:
a. many (1-3) i. allows (19-21)
b. restricted (3-4) j. categories (22)
c. condition (4-6) k. commercial (22-24)
d. separate out (6) l. unlawful (24-28)
e. essential (7-11) m. limit (24-28)
f. relatively (9-13) n. studies (26-28)
g. frontiers (11-13) o. unions (26-28)
h. type (14)

Supplement

49
Here is a single histogram showing national expenditure on goods in Noland over a three-year
period. The histograms of the three separate years have been combined into one. Study it and
then answer the questions.

4500
4000
3500
3000
2500 1964
2000
1500 1965
1000 1966
500
0
Food clothing housing durables

a. Which two classes of commodity are the most static or stable over the three-year period ?
b. Which class of commodity shows the most sustained upward trend ?
c. By how much is this class growing cach year ?
d. What is the total expenditure on clothing over the three-year period ?
e. By how much is the total national expenditure greater in 1966 than 1965 ?
f. What can be said about the amounts of money spent in 1964 on housing and in 1966 on
durables?

UNIT 13. THE OPEN MARKET

In addition to being a means of exchange, money is also a means of

measuring the value of men's labour. Labour, in economic theory, is
any work undertaken in return for a fixed payment. A mother may
work very hard in caring for her children, but she receives no fixed
wages for this work. It is not therefore labour in the strict economic 5
sense. Economists are interested in measuring the services which
people render to each other. Although aware of the services which
people provide for nothing, they are not concerned with such services.
In economics, money is the standard by which the value of things is
judged. This is an objective, scientific standard and not in any way 10
related to standards of a religious, ethical or subjective nature.
Human labour produces both goods and services. The activities of
a farmworker and a nurse are very different, but each is measurable
in terms of payment received. If however a farmer is self-employed
and does not receive a fixed wage from anyone else, he is in a different 15
category from the nurse and from his own farmworkers. His activities
are not wholly labour. His workers receive their wages, but he receives
whatever surplus (large or small) emerges from his farming. This
surplus, like any surplus in industry or commerce, is what we usually
call 'profit'. 20
Employers obtain their net profits only alter they have paid all
expenses arising out of their business activities: intrerest, rentals,
payments for machinery, wages and overheads generally. The surplus
50
is not usually available only for employers and their families. Normally
part of it goes to those who have provided the initial capital 25
needed to start a business. There is always an element of risk in
providing capital for new businesses. Such businesses may fail. Both
those who provide the capital and those who run the businesses agree
to bear the risk, but employees of such businesses are not expected to
bear any risk. If the business is successful, the risk-taking has been 30
justified, and invested capital earns part of the profits as a return on
the investment and the period during which the capital was at risk.
Capital in this instance is simply the accumulation of previous surpluses
on previous business activities. In this way the past is used to
finance the future. The accumulation of capital is almost always 35
deliberate, either on the part of individual citizens or on the part of
the state. Even in non-capitalistic societies a certain part of the surplus
achieved in any enterprise is 'ploughed back' into the system in
order to promote further growth.
When capital, labour and enterprise combine to make a new 40
business successful, the business must still continue to compete on
the market with other companies producing the same type of commodity.
The term 'market', as used by economists, is a logical extension
from the idea ofa place set aside for buying and selling. Formerly,
part of a town was kept as a marketplace, and country people 45
would come in on market-days to buy and sell. Markets today need
not however be located in any fixed place: the sugar market and the
cotton market are not geographical locations, but simply sets of
conditions which permit buyers and sellers to work together.
In a free market, competition takes place among sellers in order to 50
sell their commodities at the best possible price, and among buyers
in order to obtain what they want at a price which suits them. Such
competition influences prices. Changes in supply and demand have
their effects, and it is not surprising that considerable fluctuations in
price can take place over periods of weeks and months. 55
Since these modern markets are not normally located in any special
place, buyers and sellers do not always have to meet face-to-face.
They may communicate by letter, by cable, by telephone or through
their agents. In a perfect market, such communications are easy,
buyers and sellers are numerous, and competition is completely unimpeded. 60
In a perfect market there can be only one price for any
given commodity: the lowest price which, sellers will accept. There
are, however, no really perfect markets, because each market is subject
to its own peculiar-conditions. It can be said however that the
price ruling in a market indicates the point where supply and demand 65
meet.
Monopoly is one of the peculiar factors which can affect the sale
and purchase of certain commodities. In some markets, there may be
only one seller or a cartel of sellers working very closely together to
control prices. The result of such monopolistic activity is to fix prices 70
at a level suitable to the seller, a level which may bring him artificially
high profits. Many governments dislike this procedure and have taken
legal action to restrict or halt any business activities directed towards
‘cornering the market’. In the US, anti-trust laws operate to limit
cartels and mergers, while in Britain the Monopolies commission 75
examines all special arrangements and mergers referred to them by
the Board of Trade which appear to operate against the public
interest.
This type of monopoly is not the only possibility, however. There
are three other forms: state, legal and natural. State monopolies are 80
quite common nowadays, where the authorities in a particular
country control industries like steel and transport or important and
prestigious services like national airlines. Legal monopolies are
rather different, because the law permits certain individuals to benefit
solely from their special inventions, discoveries or processes. No 85
other person may infringe their rights in respect to such monopolies.
51
Finally, natural monopoly arises where a nation or individual
possesses most of a particular mineral for reasons of geography and
geology. Canadian nickel and South African gold are two well
known examples of this kind of monopoly. 90

Exercises
1. Answer these questions, basing your answer on the text.
a. What word in paragraph 1 suggests that 'labour' should be understood in an exact,
sense, related to economics?
b. Which word can be taken as the opposite of ‘objective’ ?
c. What word in paragraph 2 indicates that a man is working only for himself?
d. What word in paragraph 3 means ‘regular payments for accommodation and
equipment’?
e. What word in the same part of paragraph 3 means ‘regular expenses’?
f. What verb is used in paragraph 3 to show that a business risk has been worthwhile?
g. What phrase in the fourth paragraph is taken from farming to suggest that a surplus
returns to the system from which it came, in order to make business ‘grow’ faster?
h. What word in paragraph 5represents a ‘set of conditions’ and not a ‘geographical
location’?
i. What noun is used between lines 56-66 to refer to middleman or special
representatives doing work for a businessman ?
j. What word in the same section indicates that market competition should be
completely free ?
k. What verb in the same paragraph can be replaced by ‘prevailing’ or ‘operating’?
l. What word in the next to last paragraph refers to a very limited group of sellers
working together to restrict trading opportunities ?
m. What adverb in the same paragraph suggests that monopolistic profits may be kept
high by unnatural means ?
n. What adjective in the last paragraph shows that such services as national airlines
have great social value ?

2. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) The money standard used by economists is essentially an ethical standard.
b. ( ) Employees enjoy the surplus in industry that we usually call 'profits'.
c. ( ) The future is often financed by the past.
d. ( ) Although the accumulation of capital is generally considered a stricly capitalistic
activity, it also takes place in communistic economies.
e. ( ) Although the term ‘market’ originally referred to a fixed locality, today it need not do
so.
f. ( ) The four types of monopoly are not possible in a perfect market.

3. Combine these pairs pf sntences, using ony after. The meaning is the same in both new
forms, but the emphasis is different.
Example Employers obtain their surpluses.
They have paid all their debts
i. ⇒ Employers obtain their surpluses only after they have paid all their debts.
ii. ⇒ Only after they have paid all their debts do employers obtain their surpluses.

a. Most manufacturers of everyday goods begin to make a profit.

They have been in business for some time.
b. Sellers decide to lower their prices.
They see that buyers are prepared to go to other groups whose products are cheaper.
c. Undesirable mergers stop occurring.
The authorities pass anti-trust laws.
d. New businesses operate succesfully.
Investors have provided sufficient capital to help them get underway.
e. Some governments change their basic policies.
They find that the practical problems of government are different from theoretical
politics.

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4. Each of these sections is part of a text about money, labour and markets. Punctuate
the sections, and then arrange them in their proper order.
a. Although they are no longer located in fixed places modern markets are still an
extension of the old idea of a market place in a town.
b. Money is a means of measuring mens labour we can define labour as any work
undertaken for an agreed payment.
c. Competition supply and demand all influence market prices and make them
fluctuate.
d. A self employed person does not perform labour although his employees do so he
receives the profits on his business activities.
e. The exception to this situation, however is the monopoly which is a special condition
in which a single seller or a small group of sellers controls the market.
f. The profits of a company are usually shared among the investors the profits are
therefore a return on invested .
g. This capital is simply the accumulated surplules of the past used to finance the
business activities of the future.
h. Buyers and sellers may do business without ever meeting each other the price they
accept is the point where supply and demand meet.

5. Each of the adjectives listed below is derived from a noun.

EXAMPLE noun ‘object’ ⇒ adjective ‘objective’
Find the nouns from which these adjectives are derived, and then use them in the
appropriate blanks in the sentences.

subjective productive
scientific succesful
capitlistic geographical
industrial prestigious
monopolistic natural

a. Economics is a _______
b. Most new businesses need _______ in order to obtain accommodation, machinery and
materials.
c. Coal-mining is a major _______
d. The government has a _______ of the sale of sugar, because no one else is permitted to
sell it.
e. The new _______ is a special kind of soap powder.
f. The factory has been a great _______ and its productivity is among the highest in the
area.
g. National airlines usually have considerable _______ and people are often proud to be
associated with them.
h. The _______ of the area suggests that building a new airport would be a difficult
undertaking.
i. The _______ of the commodity makes it difficult to prevent the formation of monopolies.
j. The_______of the discussion was the number of new employees to be engaged during the
next year.

Supplement
1. Below is a list of countries. What names do we give the currencies used by these
countries?
EXAMPLE The USSR ⇒ roubles
The US ⇒ US dollars
The UK ⇒ pounds (sterling)
Greece ⇒ drachmas

a. Switzerland k. India
b. Nigeria l. Denmark
c. Mexico m. Yugoslavia
d. Portugal n. Italy
e. Ethiopia o. Spain
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 f. The netherlands p. Hongkong
g. Japan q. Indonesia
h. Iran r. West Germany
i. Kenya
j. Brazil

2. Composition. Write about 400 words on Markets. Use the basic material provided in
the units.

UNIT 14. MONEY AND BANKING

All values in the economic system are measured in terms of money. Our goods and
services are sold for money, and that money is in turn exchanged for other goods and
services. Coins are adequate for small transactions, while paper notes are used for general
business. There is additionally a wider sense of'the word ‘money’, covering anything which
is used as a means ol exchange, whatever form it may take. Originally, a valuable metal (gold,
silver or copper) served as a constant store of value, and even today the American dollar is
technically ‘backed’ by the store of gold which the US government maintains. Because gold
has been universally regarded as a very valuable metal, national currencies were for many
years judged in terms of the so-called ‘gold standard’. Nowadays however national currencies
are considered to be as strong as the national economies which support them.
Valuable metal has generally been replaced by paper notes. These notes are issued by
governments and authorized banks, and are known as ‘legal tender’. Other arrangements such
as cheques and money orders are not legal tender. They perform the function of substitute
money and are known as ‘instruments of credit’. Credit is offered only when creditors believe
that they have a good chance of obtaining legal tender when they present such instruments at a
bank or other authorized institution. If a man's assets are known to be considerable, then his
credit will be good. If his assets are in doubt, then it may be difficult for him to obtain large sums
of credit or even to pay for goods with a cheque.
The value of money is basically its value as a medium of exchange, or, as economists put it,
its ‘purchasing power’. This purchasing power is dependent on supply and demand. The
demand for money is reckonable as the quantity needed to effect business transactions. An
increase in business requires an increase in the amount of money coming into general
circulation. But the demand for money is related not only to the quantity of business but
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also to the rapidity with which the business is done. The supply of money, on the other
hand, is the actual amount in notes and coin, available for business purposes. If too much money
is available, its value decreases, and it does not buy as much as it did, say, five years earlier.
This condition is known as ‘inflation’.
Banks are closely concerned with the flow of money into and out of the economy. They
often co-operate with governments in efforts to stabilize economies and to prevent inflation.
They are specialist in the business of providing capital, and in allocating funds on credit. Banks
originated as places to which people took their valuables for safe-keeping, but today the great
banks of the world have many functions in addition to acting as guardians of valuable private
possessions.
Banks normally money from their customers in two distinct forms: on current account, and
on deposit account. With a current account, a customer can issue personal cheques. No interest
is paid by the bank on this type of account. With a deposit account, however, the customer
undertakes to leave his money in the bank for a minimum specified period of time. Interest is
paid on this money.
The bank in turn lends the deposited money to customers who need capital. This activity
earns interest for the bank, and this interest is almost always at a higher rate than any interest
which the bank pays to its depositors. In this way the bank makes its main profits.
We can say that the primary function of a bank today is to act as an intermediary between
depositors who wish to make interest on their savings, and borrowers who wish to obtain
capital. The bank is a reservoir of roanable money, with streams of money flowing in out. For
this reason, economists and financiers often talk of money being ‘liquid’, or of the ‘liquidity’ of
money. Many small sums which might not otherwise be used as capital are rendered useful
simply because the bank acts as a reservoir.
The system of banking rests upon a basis of trust. Innumerable acts of trust build up the
system of which bankers, depositors and borrowers are part. They all agree to behave in certain
predictable ways in relation to each other, and in relation to the rapid fluctuations of credit and
debit. Consequently, business can be done and cheques can be written without any legal tender
visibly changing hands.

Exercises
1. Answer these questions, basing your answer on the text.
a. How are all values in the economic system measured ?
b. What kind of money is used for general business ?
c. What is the wider sense of the word ‘money’ ?
d. What originally served as a store of value ?
e. What backs the US dollar?
f. How are national currencies judged nowadays ?
g. Who can issue paper notes ?
h. What name is given to arrangements like cheques ?
i. When is credit offered ?
j. When is a man's credit good?
k. What phrase do economists use for the value of money ?
l. How do we reckon the demand for money ?
m. What word is used to describe the flow of money round the economic system ?
n. What is inflation ?
o. In what way do banks co-operate with governments ?
p. What was the original function of a bank ?
q. In what two ways do banks receive money from their customers ?
r. What does the customer agree to do when he opens a deposit account ?
s. How does the bank make its main profit ?
t. Between whom does the bank act as an intermediary?
u. Why do financiers often talk of the ‘liquidity’ of money?
v. What does the bank render usefull ?
w. Whose trust for each other maintains the banking system?
x. What does this trust permit?

2. Say whether these statements are true (T) or false (F), and if they are false say why.
a. ( ) The US dollar is a constant store of value.
b. ( ) Instruments of credit are accepted because they can be converted easily into
substitute money.

55
 c. ( )The purchasing power of money depends upon supply and demand.
d. ( )The demand for money is related to the rapidity with which business is done.
e. ( ) You can earn interest on a currenct account.
f. ( ) Banks lend money to depositors who need capital.
g. ( )The main profits of a bank come from lending money at a fixed rate of interest.
h. ( ) Money is described as ‘liquid' because it is compared to flowing water.
i. ( )Legal tender must change hands when we do business and we must see it change
hands.

3. Change these conditional sentences. The form changes but the meaning remains the
same.
EXAMPLE A man can obtain money if he issues a personal cheque.
⇒ A man can obtain money by issuing a personal cheque.

a. You can improve the factory if you install new machinery.

b. You can learn something about economics if you study the basic textbooks.
c. They could improve conditions if they changed the laws.
d. You can make more money if you provide services which the public really need.
e. A person can obtain some additional money if he deposits his savings with a bank for a
certain length of time.
f. Business can be done without banknotes if you use instruments of credit.

4. Each of these sections is part of a text on money and babnking. Punctuate each
section, and then arrange them in their proper order.
A. today a banks primary function is to act as an intermediary between depositors and
borrowers it serves as a reservoir of loanable money.
B. the term money in its widest sense covers anything which serves as a store of value
and a means of exchange legal tender is the name for actual notes issued by
governments or authorized banks while instruments of credit such as cheques act as
substitute for legal tender.
C. the whole system however is based on simple acts of trust between all concerned
without this trust modern banking would be impossible.
D. a bank accordingly makes main profits by lending part of its store of deposited money
at fixed rates of interest these rates usually exceed the rates offered to depositors.
E. the purchasing power of money is dependent upon supply and demand variations
therefore occur in the amount of money actually in circulation such institutions as banks
assist in the flow of money throughout the economy.
F. banks have developed greatly from their original position as places of security for
valuables today they are service industries which handle large sums of money on
current and deposit account.

5. Form adjectives from these nouns:

a. money e. commerce i. locality
b. addition f. capital j. majority
c. base g. responsibility k. minority
d. benefit h. nature l. relation

6. Form verbs from these adjectives:

a. regular e. realistic i. specific
b. complex f. national j. special
c. simple g. satisfactory k. influential
d. relative h. selective l. indicative

7. Form nouns from these verb-adjective pairs.

a. imagine : imaginative g. prescribe : prescriptive
b. collect : collective h. describe : descriptive
c. inform : informative i. possess : possessive
d. investigate : investigative j. prevail : prevalent
e. invent : inventive k. prevent : preventive
f. originate : original l. vary : various

56
Supplement
Figure I represents loanable money in the national Bank of Noland during 1958. The circle
represent the total volume of noland dollars (N$) as 100 %. A quarter of the total available
money (25%) was allocated to development projects in the manufacturing industries.

Fig. I.
Bank advances
1958 allocated to
Total: 25 % manufacturing
N$ 3,000 million projects

Figure II indicated the increase in total available assets and also the increase in allocations to
manufacturing projects ten years later.

Fig. II.
1968
Total
N $3,500 million

a. in 1958 the Bank invested 25 of its available assets in manufacturing projects. How much
actual money was this?
b. In 1968 the Bank invested 30% of the then available capital. How much actual money was
this?
c. By how much actual money has the investment increased when we compare 1958 and
1968?
In figure III we are provided with fuller information about the allocation of loans by the Bank in
the following year.

Fig. III.
1969
Total $3,600 million
all other loans

25 % manufacturing
project loans

40 %
20 %

agricultural loans
commercial loans

d. How much actual money was provided for manufacturing projects in 1969?
e. How does this compare with the 1968 figure? Give details.
f. How much was provided in 1969 for projects related to agriculture ?
g. How much was provided for commerce ?
h. What percentage of money was devoted to non-commercial, non-agricultural and non
manufacturing loans ?
i. How much in actual money was this ?
j. What simple conclusion can we come to about the general development of capital
investment through this Bank over the period 1958-69?

57
 LIST OF CONTENTS

PART ONE

Unit 1. Economic Activity 1

2. The Science of Economics 4

3. Different Economic Systems 7

4. The Limits on Economic Freedom 11

5. Central Control of the Economy 16

6. Mixed Economies 21

7. Revision and Conclusion 26

PART TWO

Unit 8. Utility and Prices 30

9. Supply and Demand 34

10. Some Economic Laws 38

11. Labour and Capital 41

12. Markets and Monopolies 46

13. The Open Market 50

14. Money and Banking 54

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 ENGLISH MODUL 1

FOR ECONOMIC STUDENTS

Adopted From Tom McArthur (A Rapid Course in English)

By :

RAWINTAN BINTI
ENNY HARDI
RIFQI NOVRIYANDANA

LAMBUNG MANGKURAT UNIVERSITY

ECONOMIC AND BUSINESS FACULTY

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