3. Explain what is the role of the following agents in the market economy
а) Board of Governors;
b) Federal Reserve System;
с) Congress;
d) member banks;
e) federal budget;
f) Internal Revenue Service
g) Secretary of the Treasury;
h) congressional budget committees.
Are there such institutions in the economic system of the Russian Federation?
Find the equivalents in Russian and explain the difference in their functions?
4. Translate into Russian
a) The Federal Reserve controls the supply of money and credit in a number of ways.
b) The purchasers of the government securities transmit money balances to the Federal Reserve, thereby reducing the nation's money supply.
с) It (Federal Reserve) may raise or lower the interest rate (the rediscount rate) at which it lends the funds, thereby discouraging or encouraging bank borrowing.
d) To enable individuals and firms increase their spending government expenditures may he raised directly or taxes may be reduced.
e) The tax system is administered by the Internal Revenue Service under the general supervision of the Secretary of the Treasury.
f) The huge deficits make it very difficult to use fiscal policy as a tool of economic stabilization.
5. Find antonyms. Write one sentence with each word to illustrate the difference
a) to borrow – ...
b) subtract – ...
c) purchase – ...
d) raise – ...
e) discourage – ...
f) deficit – ...
g) efficiency – ...
6. Explain the difference in meaning between the following words
to reduce – to induce – to produce
power – authority – government
big – large – great – huge – enourmous
7. Finding the roots
a) Find the equivalents in Russian then look up the correct translation of each word. Has the meaning changed?
1) recession; 2) to engage; 3) entrepreneur; 4) business; 5) virtual; 6) tax; 7) code; 8) governor.
What other borrowed terms in economics (other fields) do you know?
Write one sentence with each word. Try to come up with an interesting and understandable story.
8. Discuss the following questions
l) Do you agree that there are only two principle tools of macroeconomic policy? What other «tools» of macroeconomic policy do you know? (Please be very specific).
2) What is the major difference between the American tools of macroeconomics and the ones of Russian government?
3) Why do you think economists don't succeed in regulating the economy of Russia?
Лексический материал (третья часть)
1. Выучите следующие слова и выражения
behavior – поведение
to investigate – исследовать
applied economics. – прикладная экономика
distinction – отличные
subject – предмет, субъект
matter – вопрос, материал
to blur – затуманивать, размывать
to remain – оставаться
exchange ratios – ставка (соотношение) обмена
optimization – оптимизация
utility – полезность
satisfaction – удовлетворение
constraints – ограничение, стеснение
opportunity cost – альтернативные издержки
to sacrifice – пожертвовать, приносить в жертву
to undertake – взять на себя
utility function – функция полезности
to allow – позволять, разрешать
to influence – влиять
to maximize – максимально увеличивать
revenue – доходы
Текст C
1. Прочтите и переведите текст
MICROECONOMICS
The word «micro» means small, and microeconomics means economics in the small. The optimizing behavior of individual units such as households and firms provides the foundation for microeconomics.
Microeconomists may investigate individual markets or even the economy as a whole, but their analyses are derived from the aggregation of the behavior of individual units. Microeconomic theory is used extensively in many areas of applied economics. For example, it is used in industrial organization, labor economics, international trade, cost-benefit analysis, and many other economic subfields. The tools and analyses of microeconomics provide a common ground, and even a language, for economists interested in a wide range of problems.
At one time there was a sharp distinction in both methodology and subject matter between microeconomics and macroeconomics.
The methodological distinction became somewhat blurred during the 1970s as more and more macroeconomic analyses were built upon microeconomic foundations. Nonetheless, major distinctions remain between the two major branches of economics. For example, the microeconomist is interested in the determination of individual prices and relative prices (i.e., exchange ratios between goods), whereas the macroeconomist is interested more in the general price level and its change over time.
Optimization plays a key role in microeconomics. The consumer is assumed to maximize utility or satisfaction subject to the constraints imposed by income or income earning power. The producer is assumed to maximize profit or minimize cost subject to the technological constraints under which the firm operates. Optimization of social welfare sometimes is the criterion for the determination of public policy.
Opportunity cost is an important concept in microeconomics. Many courses of action are valued in terms of what is sacrificed so that they might be undertaken. For example, the opportunity cost of a public project is the value of the additional goods that the private sector would have produced with the resources used for the public project.
Theory of the Consumer
The individual consumer or household is assumed to possess a utility function which specifies the satisfaction which is gained from the consumption of alternative bundles of goods. The consumer's income or income-earning power determines which bundles are available to the consumer. The consumer then selects a bundle that gives the highest possible level of utility. With few exceptions, the consumer is treated as a price taker – that is, the consumer is free to choose whatever quantities income allows but has no influence over prevailing market prices. In order to maximize utility the consumer purchases goods so that the subjective rate of substitution for each pair of goods as indicated by the consumer's utility function equals the objective rate of substitution given by the ratio of their market prices. This basic utility-maximization analysis has been modified and expanded in many different ways.
Theory of the Producer
The individual producer or firm is assumed to possess a production function, which specifies the quantity of-output produced as a function of the quantities of the inputs used in production. The producer's revenue equals the quantity of output produced and sold times its price, and the cost to the producer equals the sum of the quantities of inputs purchased and used times their prices. Profit is the difference between revenue and cost. The producer is assumed to maximize profits subject to the technology given by the production function. Profit maximization requires that the producer use each factor to a point at which its marginal contribution to revenue equals its marginal contribution to cost.
Under pure competition, the producer is a price taker who may sell at the going market price whatever has been produced. Under monopoly (one seller) the producer recognizes that price declines as sales are expanded, and under monopsony (one buyer) the producer recognizes that the price paid for an input increases as purchases are increased.
A producer's cost function gives production cost as a function of output level on the assumption that the producer combines inputs to minimize production cost. Profit maximization using revenue and cost functions requires that the producer equate the decrement in revenue from producing one less unit (called marginal revenue) to the corresponding decrement in cost (called marginal cost). Under pure competition, marginal revenue equals price. Consequently, the producer equates marginal cost of production to the going market price.
Материал для обсуждения
1. Answer the following questions for general understanding
l) What is, according to the text, microeconomics?
2) What is meant by «economics in the small»?
3) What economic phenomena are of microeconomists' attention?
4) Where is microeconomic theory used?
5) What is «optimization»?
6) What is the concept of the theory of consumer?
7) What is the major difference between the theory of consumer and the theory of producer?
2. Find equivalents in Russian
a) optimizing behavior of individual units;
b) industrial organization;
c) labor economics;
d) international trade;
e) cost-benefit analysis;
f) sharp distinction in both methodology and subject matter;
g) subjective rate of substitution.
3. Translate into Russian
a) Microeconomic theory is used extensively in many areas of applied economics.
в) Their analyses are derived from the aggregation of the behavior of individual units.
с) The consumer then selects a bundle that gives the highest possible level of utility.
d) The consumer is free to choose whatever quantities income allows but has no influence over prevailing market prices.
e) The producer equates marginal cost of production to the going market price.
f) The producer recognizes that price declines as sales are expanded.
g) Under pure competition, the producer is a price taker who may sell at the going market price whatever has been produced.
4. Give definition to the following
а) Microeconomics
b) applied economics
c) optimization
d) opportunity action
e) utility maximization
5. Discuss the following questions
l) What areas of applied economics are of the most importance?
2) What distinction in methodology between macro- and microeconomics is the most distinctive?
3) Does the author's concept of theories of consumer and producer comply with your own?
6. Подготовьте устное изложение по теме «Macro- and Microeconomics»
UNIT 3
DEMAND AND SUPPLY
Лексический материал (part 1)
1. Выучите следующие слова
in the former – в прошлом
implicit – подразумевающийся
to hold the approach – придерживаться взглядов
approach – подход
provisionally – временно
list – список, перечень
vertical – вертикальный
horizontal – горизонтальный
demand curve – кривая спроса
to slope down – спускаться
downward – направленный вниз
to signify – означать, выражать.
2. Find equivalents in Russian
1. key concept;
2. consumption;
3. imperial foundation;
4. curiosa of theorists;
5. of a commodity at higher prices;
6. strong demand;
7. quantities of a goods;
8. ordinal characteristics;
9. conspicuous consumption.
Текст A
1. Прочтите и переведите текст
THE LAW OF DEMAND
Demand is a key concept in both macroeconomics and microeconomics. In the former, consumption is mainly a function of income; whereas in the latter, consumption or demand is primarily, but not exclusively, a function of price. This analysis of demand relates to microeconomic theory.
The theory of demand was mostly implicit in the writings of classical economists before the late nineteenth century. Current theory rests on the foundations laid by Marshall (1890), Edgeworth (1881), and Pareto (1896). Marshall viewed demand in a cardinal context, in which utility could be quantified. Most contemporary economists hold the approach taken by Edgeworth and Pareto, in which demand has only ordinal characteristics and in which indifference or preferences become central to the analysis.
Much economic analysis focuses on the relation between prices and quantities demanded, the other variables being provisionally held constant. At the various prices that could prevail in a market during some period of time, different quantities of a good or service would be bought. Demand, then, is considered as a list of prices and quantities, with one quantity for each possible price. With price on the vertical axis and quantity on the horizontal axis, the demand curve slopes downward from left to right, signifying that smaller quantities are bought at higher prices and larger quantities are bought at lower prices. The inverse relation between price and quantity is usually called the law of demand. The law rests on two foundations. One is the theory of the consumer, the logic of which shows that the consumer responds to lower prices by buying more. The other foundation is empirical, with innumerable studies of demand in actual markets having demonstrated the existence of downward-sloping demand curves.
Exceptions to the law of demand are the curiosa of theorists. The best-known exception is the Giffen effect – a consumer buys more, not less, of a commodity at higher prices when a negative income effect dominates over the substitution effect.
Another is the Veblen effect – some commodities are theoretically wanted solely for their higher prices. The higher these prices are, the more the use of such commodities fulfills the requirements of conspicuous consumption, and thus the stronger the demand for them.
Материал для обсуждения
1. Answer the following questions for general understanding
l) What is «demand»?
2) What is the current theory of demand based on?
3) What prominent economists contributed to the development of the theory of demand?
4) How is it possible to show the interrelation of price and quantities consumed?
5) What is «Giffen effect»?
6) What is Veblen effect?
2. Complete the table
| PERSONALITY | YEAR | IDEAS |
3. Which is not true about the law of demand
a) Consumption is the key concept of microeconomics.
b) Classical economists contributed a lot to the development of the theory of demand.
4. Translate into Russian
a) Much economic analysis focuses on the relation between prices and quantities demanded.
b) Marshall viewed demand in a cardinal context, in which utility could be quantified.
c) Consumption or demand is primarily, but not exclusively, a function of price.
d) With price on the vertical axis and quantity on the horizontal axis, the demand curve slopes downward from left to right.
e) A consumer buys more, not less, of a commodity at higher prices when a negative income effect dominates over the substitution effect.
f) Innumerable studies of demand in actual markets having demonstrated the existence of downward-sloping demand curves.
5. Explain the difference and write one sentence with each
a) sign – signify;
b) list – page;
c) quantity – quality;
d) effect – effective;
e) substitute – restitute;
f) conspicious – curious.
6. Find antonyms to the following
a) negative –
b) possible –
c) numerable –
d) vertical –
7. Think of examples of exceptions to the law of Demand in the contemporary
Russia. Write an essay of 100-150 words.
8. Discuss the following questions
l) Do you agree that «conspicious consumption» lays the great role in the economy of Russia?
2) Do you think that the economic crisis and instants and immediate raise of prices in September 1998 in Russia was provoked by a) reducers; b) consumers; c) wholesalers; d) traders?
3) Do you think it is logical that «consumer esponds to lower prices by buying more»? Think of an example when consumer believes that prices would go even lower and doesn't react immediately in the expected way.