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Economics is a social science. Micro and macro approach

economics is a training in clear thinking. It enables us to trace cause
and effect carefully. It teaches us to consider alternatives.

Secondly, knowledge of economics may enable us to earn a living. One
common definition of economics is “the study of how people make a
living.” The more we know about the subject, the better career decisions
we will be able to make.

Thirdly, people in the world of business require knowledge of the
economic problems that relate to their particular enterprises. A
businessman has to adjust himself to change in the supply of land,
labor, or capital needed for his organization. He has to endeavor to
obtain maximum efficiency in production. He has also to know the “ins
and outs” of business economics if he expects to survive.

Fourthly, economics will also help us to fulfill our responsibilities as
citizens in a democracy. We are supposed to vote*, directly or
indirectly, on many questions involving economic issues – the government
budget regulating industries, taxes, and foreign trade. The study of
economics will help us deal with these questions intelligently.

The next argument in favor of* the study of economics is that it has to
do with its general cultural value. Economic reasoning has become a part
of our everyday life. Wherever one goes, one may become involved in
economic discussions. Everyone is expected to know* something about the
trends in the cost of living or the dangers of an inflated currency or
the unemployment rate increases or decreases*.

Of course, studying economics cannot make us geniuses. But without
economics the dice of life are simply loaded against us*.

Thus, economics teaches us what rules we should follow in order to
advance in material prosperity and how to earn the greatest possible
profits with the least possible outlay to manage. Our economic knowledge
serves us in managing our personal lives, in understanding society, and
improving the world around us. The ways that economics can help us
individually will be as different as are our personal lives. Learning
about the stock market* may help people manage their own finances;
knowledge about price theory and antitrust policy may improve the skills
of a lawyer; better awareness of the determinants of cost and revenue*
will produce better business decisions. The teacher, the doctor, the
investor all need to know about accounting and tax regulations* to get
the most satisfaction and profit from their businesses.

It is not a wise thing to make snap judgments on many matters that find
their ways into newspapers and magazines. If we wish to make any
worthwhile endeavor to affect human welfare, then we must cultivate an
interest in current issues and by way of preparation we shall have to
study some of economic theories, principles, or laws.

Economists have two ways of looking at economics and the economy. One is
the micro approach, and the other is the macro.

Microeconomics is the study of individual consumers and the business
firm who make choices about such matters as what to buy and what to
sell, how much to work and how much to pay, how much to borrow and how
much to save. Microeconomics examines cause-and-effect relationships
that influence choices of individuals, business firms and society. It is
concerned with things such as scarcity, choice and opportunity costs,
and with production and consumption. Principal emphasis is given by
microeconomists to the study of prices and their relationship to any
economic units.

Macroeconomics is the study of the economy as a whole. Macroeconomics
examines questions such as how fast the economy is developing; how much
overall output is being generated; how much total income is. It also
seeks solutions to macroeconomic problems such as how employment can be
increased, and what can be done to increase the output of goods and
services. Macroeconomics considers the combined effect of individual
choices on the overall performance of the economy as reflected by such
measures as the nation’s price level, total production, and level of

2. Economics. Problems of scarcity, choice and opportunity costs

One of the things that young people discover as they become older is
that they can’t have everything. Everyone is reminded of it every time
he or she goes shopping. Although we may see twenty or fifty items that
we really want to buy, we know that we will have to limit our selection
to one or two. Everybody goes through the life having to make choice.

Neither individuals nor societies can have all the things they would
like to have. Every business, government, even sports teams, must pick
and choose from among the desired objects because there is not enough of
everything to go around.* Economists note that there is no limit to the
amount of kinds of things that people want. There is, however, a limit
to the resources, things used to produce goods and services, available
to satisfy those wants. Once that limit is reached, nothing else can be

In other words, when a nation’s resources (all its workers, plants,
farms, etc.) are fully employed, the only way it will be able to
increase the production of one thing will be by reducing the production
of something else. If more resources (labor, plastic, steel, etc.) are
used to increase the production of computers, then the production of
something else that requires those same resources (such as stereo) must
be cut back.

Human wants are unlimited, but the resources necessary to satisfy those
wants are limited. Thus, every society is faced with* the identical
problem, the problem of scarcity.

Since there is not enough of everything to go around, everyone –
individuals, business firms, and government – needs to make choices from
among the things they want. In the process they will do their best to
economize, to get the most from what they have. With this in mind, we
can define economics as the social science that describes and analyzes
how society chooses from among scarce resources to satisfy its wants.

Economists are concerned with how we make choices in a world of scarce
resources. Individuals, families, business firms and governments all
must make decisions about how best to allocate their limited resources
that are at command.*

When resources are limited, choices are limited as well. This means that
the decision to have one thing is, at the same time, the decision not to
have something else.

The need to choose is imposed on us all by our income, wealth and
ability to borrow. Individuals and families are limited by the size of
their personal income, savings and ability to borrow. Similarly,
business firms are limited by their profits, savings and borrowing
power, and governments by their ability to tax and borrow.

Income, savings, profits and taxes enable people, institutions and
government to purchase goods, products you can see or touch, and
services, work performed for pay that are enjoyed by others. The problem
that each must face, however, is that once the decision has been made to
choose one set of alternatives, one loses the opportunity to choose the

Let’s suppose that you managed to save enough to buy the roller skates
you always wanted. While you were building up your savings, you were
amazed by your friend’s computer devices and would now love a TV tuner.
You can afford to buy either roller skates or a TV tuner, but not both.
It’s a trade-off.

Economists describe these kinds of trade-offs as opportunity costs. The
opportunity cost of something is its cost measured in terms of what you
have to give up getting it. Thus, the opportunity cost of the roller
skates in the example above would be a new TV tuner. The opportunity
cost of any decision is the value of the next best alternative that is
given up. This is true whether the decision relates to consumption,
production, or investment.

Let’s consider some of the ways that opportunity costs play fundamental
roles in our lives. Many high school students consider going to college
for four years after graduating from high school. What is the cost of
acquiring college education?

Obviously, the cost of tuition, the cost of books and other suppliers,
and the cost of living in a hostel represent the money cost* of going to
college. But what else is a cost of going to college? If a student did
not go to college, then he or she would most likely find a job instead.

Economists describe the money that those who choose college might have
earned during their years of study as forgone earnings.* Forgone
earnings represent another, very important cost of a college education.
Thus, the opportunity cost of going to college is the goods and services
represented by the money cost of the education, plus the value of the
forgone earnings.

Business firms are also faced with the problem of choices and
opportunity costs. In planning an advertising program, for example, a
local store has to choose between a newspaper ad and a direct-mail
campaign. If it puts its efforts into newspaper advertising, the
opportunity cost is the benefits of a direct-mail campaign.

Like individuals and business firms, government also pays opportunity
costs. If, for example, the federal government chooses to increase its
spending for roads by reducing the number of missile-firing submarine*
to be built, the opportunity cost of the improved road network would be
a more powerful navy.

So, the problems of scarcity, trade offs and opportunity costs are the
main economic issues that any economic unit faces.*

3. Factors of production

Economic resources are scarce relative to the limitless needs and wants
of people and businesses operating in the economy. It is important to
use these resources efficiently in order to maximize the output that can
be produced from them.

They are combined in various ways to produce goods and services. Since
these resources go into the creation of goods and services, they are
called the factors of production. Each factor of production has a place
in the national economy, and each has a particular function.

Traditionally, economists have noted four factors of production: land,
labour, capital, and entrepreneurship.

Land or natural resources are the things provided by nature such as soil
and minerals that are used in the creation of products. The price paid
for the use of land is called rent.

Some nations are rich in natural resources and exploit this by
specializing in the extraction and production of these resources, for
example, the development of the North Sea oil and gas*.

Air, sunshine, rainfall are classified as free goods since consumption
by one person does not reduce their availability for others – free goods
do not have an opportunity cost. One major resource is for the most part
free – the air we breathe. The rest are scarce, because there are not
enough natural resources in the world to satisfy the demands of
consumers and producers.

Labour is the human input into the production process. Economists
distinguish between the physical and mental efforts that people put into
the creation of goods and services. The price paid for the use of labor
is called wages. Wages represent income to workers, who own their

Not all labour is of the same quality. Some workers are more productive
than others because of the education, training and experience they have
received. The amount of labour will depend ultimately on the population
of the country (or the world, if people can immigrate), and on the
number of people who are available to work. Those in school, those
retired, too handicapped to work*, mothers who stay at home with their
children are not part of the labour force.

Capital goods or capital as it is commonly called are man-made goods (or
means of production) which are used in the production process. Capital
or physical capital refers to the machinery, tools*, roads, factories,
and buildings which human beings have produced in order to produce other
goods and services. A modern industrialized economy possesses a large
amount of capital, and it is continually increasing. Increases to the
capital stock* of a nation are called investment. Investment is
important if the economy is to achieve economic growth in the long run.

To an economist, capital has another meaning. It is the finance raised
to operate a business. While business people refer capital to money they
can use to buy factories, machinery and other similar productive
resources. Payment for the use of someone else’s money, or capital, is
called interest.

So, economists distinguish between physical and financial capital.

Entrepreneurship is the willingness of business owners to take risks and
introduce new products and services to the market. It is the managerial
or organizational skills needed by most firms to produce goods and
services. Because of its essential role in initiating the process of
production, entrepreneurship is identified by some economists as a
“fourth factor of production,” along with land, labour and capital.
Entrepreneurs are people who bring together other productive resources
to make goods and services. The success and/or failure of a business
often depends on the quality of entrepreneurship.

Entrepreneurs serve an important role in enabling the economy to adjust
to changing conditions and new possibilities for material improvements
by creating new business enterprises, and even whole new industries.

The reward to entrepreneurs for the risks, innovative ideas and efforts
that they have put into the business are profits, whatever remains after
the owners of land, labor and capital have received their payments.

Today, another factor of production has become vitally important. The
fifth factor of production is information. Information means facts and
figures about markets and competition that are often stored on computers
and are accessible immediately. This is a computer age, and business
cannot compete without information about markets, financial conditions,
and other important business conditions.

4. Economic system and their ways of providing answears to the
fundamental economic questions

Whenever people gather in a community, they necessarily deal with a few
universal economic problems. These fundamental questions are as crucial
today as they were at the dawn of human civilization. Every human
society – whether it is an advanced industrial nation, a centrally
planned economy, or an isolated tribal society – must face and resolve
three fundamental and interdependent economic questions.

What goods and services are to be produced, and in what quantities are
they to be produced?

How are these goods and services to be produced?

Who will receive and consume these goods and services?

The first basic choice is that of what goods a society should produce
and in what quantities.

Every economy has limited resources at its disposal but the goods and
services wanted by its people are numerous. With the limited resources
it can’t produce all that is wanted by its people. So an economy faces
the problem of what goods and services are to be produced and in what
quantities. In other words it faces the problem of allocation of
resources between their alternative uses.

Should resources be allocated to the production of consumer goods or
producer goods; whether to produce civilian goods or goods for defense;
whether to construct luxury hotels or houses, all these are problems of

In fact the choice to be made refers to what goods are to be produced
and the second choice associated with it relates to the quantities of
these goods. In other words what combination of goods and services
should be produced? The nature of the combination of goods and services
to be produced depends on the consumer’s preferences* reflected in
market prices or on the priority laid down in government policies.

How Are Those Goods and Services to be produced?

A second basic choice is that of how to produce. Most goods can be
produced in more than one way by using resources in different quantities
and combinations. It is often possible to vary the combinations of
resources in manufacturing. Any society decides how it will organize its
scarce resources in order to use them efficiently. Efficiency is a key
criterion deciding how to produce. Efficiency means producing goods and
services with a minimum of expense, effort, and waste. As the economy
has to economize its limited resources it has to make a choice between
various techniques of producing different goods.

Who Will Get to Use the Goods and Services Produced by the Economy?

No one can get all he wants. Whatever is produced in an economy it
cannot be sufficient to meet everybody’s wants. So a problem arises who
will get and how much. This is the problem of distribution of what is
produced in an economy among different groups.

In fact, what determines who is to receive a particular share of the
economic pie?

Production of goods and services is the result of the joint efforts of
the owners of the four factors of production: land, labour, capital and
entrepreneurship. So the total production is to be distributed among the
owners of these factors of production. There is no system by which goods
and services may directly be distributed among the factor owners. What
they get is the money income in the form of rent, wages, interest and
profits. With this income they buy the goods and services. How much can
wage earners buy or land owners buy or owners of capital buy or profit
earners buy? It will depend upon their income. So it is a problem of
distribution of national income.

The way that a country handles three basic questions is based on its
economic system.

An economic system is a mechanism that deals with the production,
distribution and consumption of goods and services in a particular

The economic system is composed of people, institutions and their
relationships to resources. It addresses the problems* of economics,
like the allocation and scarcity of resources.

There are four main types of economic systems present in the world: the
traditional economy, the command economy, the market economy, and the
mixed economy.

The traditional economy is an economic system in which decisions about
what, how, and for whom questions are made on the basis of customs,
beliefs, religion, habit, and tradition.

People’s economic roles are the same as those of their parents and
grandparents. The ways they produce clothing and shelter are almost
exactly the same as those used in the past. Traditions decide what these
people work for a living, how their work is performed and who gets what
is produced in such an economy. Since there is little produced, there is
little to go around.

It has an advantage over other systems, in that there is little
disagreement among members because relatively little is disputed.
However, it restricts individual initiative and has a lack of advanced
goods, new technology, and economic growth.

The command economy is a society where the agencies of government make
all decisions concerning what will be produced, how it will be produced,
and for whom it will be produced.

In a command economy, a central authority or agency draws up plans that
establish what will be produced and when, sets production goals, and
makes rules for distribution.

The government owns a considerable fraction of the means of production
that is, they are publicly owned; it also owns and directs the
operations of enterprises in most industries; it is the employer of most
workers and tells them how to perform their work.

The individual has very little say* as to how the basic economic
questions are answered.

Command economies don’t help* their workers’ motivation because everyone
is given the same amount of goods and the same standard of living. A
hard working citizen would not be given a chance to benefit from his
extra work because he cannot increase his standard of living any greater
than it currently is and he will earn just as much as a person who makes
little or no effort.

The market economy (or so called free market economy or free enterprise
economy) is an economic system in which the decisions of many individual
buyers and sellers interact to determine the answers to the questions of
What, How and Who.

In a market economy the fundamental economic questions are answered in
the marketplace by the interaction of buyers and sellers. For example,
the question of what to produce may be based on what trend is popular
right now. The producers can create a product that they think they will
sell well to the consumers in hope to make a profit. The question of how
to produce is usually based on the producer’s choice. They might decide
to produce a product with more workers or they might decide to produce
it more with machines and computers to save on labour costs*. The
question involving for whom to produce is based on the consumers who
decide what they want or need and what price they are willing to pay for

There are several essential elements in a market economy. One of these
is private property – the right of individuals and businesses to own the
means of production. In a free market economy, the major factors of
production are privately owned. Private ownership gives people the
incentive to use their property to produce things they will sell and
make profits.

This desire to earn profits or the profit motive is a second ingredient
in a market economy.

The profit motive encourages sellers to produce at the lowest possible

The mixed economy is an economic system that answers the three economic
questions both in the marketplace and in the government*.

A mixed economy contains both private and public, or state-owned (or
controlled) enterprises and relies on the market but with a large dose
of government intervention. A mixed economy usually involves producers
working closer with the government to achieve economic goals.

Since no country in the world exemplifies either type of economic system
in its pure form, all major economies are mixed ones because markets as
well as government decisions* play a role in answering the basic
economic questions. The blend of market and government participation is
different in different countries with mixed economies. INCLUDEPICTURE
“../_themes/blocks/blobul1e.gif” \* MERGEFORMATINET \d” The optimal
level of government intervention remains a problem which is of interest
to economists.

5. Functions of Government and goals of economic system

In every economic system, entrepreneurs bring together land, labor,
capital and technology to produce and distribute goods and services. But
the way these different elements are organized and used also reflects a
nation’s political ideas and culture.

The American economy is based on the free enterprise system. Consumers
are free to decide how to spend or invest their money. The goal of
producers is to make profits by satisfying consumer demand. Open
competition among producers usually results in their providing the best
quality of goods and services at the lowest possible prices. While
consumers and producers make most decisions that drive the economy,
government activities have a powerful effect on the U.S. economy.

Government, at the federal, state and local levels, seeks to promote the
public safety, assure reasonable competition, and provide a range of
services believed to be better performed by public rather than private
enterprise. For example, in the United States, government is primarily
responsible for the administration of justice, education (although there
are many private schools and training centers), the road system, social
statistical reporting, and national defense. In addition, government
often is asked to interfere in the economy to correct situations in
which the price system does not work. It uses antitrust legislation to
control or break up other business combinations that become so powerful
that they can get over market forces. It provides welfare and
unemployment benefits to people who cannot support themselves, either
because they face problems on their personal lives or lose their jobs as
a result of economic disadvantage. It pays much of the cost of medical
care for the aged and those who live in poverty. It regulates private
industry to limit air and water pollution. It provides low-cost loans to
people who suffer losses as a result of natural disaster. It has played
the leading role in the exploration of space, which is too expensive for
any private enterprise to handle.

The American economy is often described as a market system, one in which
the What, How and Who questions are answered by individual buyers and
sellers in accordance with the laws of supply and demand.

In The Wealth of Nations, Adam Smith said that government’s role should
be limited to national defense, the administration of justice, the
facilitation of commerce, and the provision of certain public works. The
degree of government involvement in the economy is a matter of some
debate in the United States today. Most Americans continue to believe
that an economy generally operates best when decisions about what to
produce and what prices to charge for foods are made through the
give-and-take of millions of independent buyers and sellers, not by
government or by powerful private interests.

Although the government intervention is kept to a minimum one of the
most remarkable trends in contemporary economic life is the growth in
the importance of government in economic affairs.

Since government policies influence how society answers the fundamental
economic questions, the United States are said to have a mixed economy,
that is, a combination of elements of free enterprise with government
participation and control. Although Americans often disagree about
exactly where to draw the line between their beliefs in both free
enterprise and government management, the mixed economy they have
developed has been remarkably successful. In order to create the best
standard of living for all people the following economic
responsibilities are best fulfilled by government.

Safeguarding the market system is one of the most important functions of
US economy. It accomplishes this responsibility by controlling the power
of monopolies. Monopolies are the firms that have so much control over a
market that they can set the price at which their goods are sold. In the
world that Adam Smith described, many small business firms competed for
the consumer’s dollar. Competition forced sellers to produce the thing
consumers wanted, at the lowest possible prices. Sellers whose products
did not measure up in price or quality lost sales and faced the chance
of failure. Meanwhile, the ongoing efforts to reduce costs and improve
quality resulted in a more efficient use of the economy’s limited

Quite the opposite is true where there is little or no competition.
Prices are determined by the producers themselves rather than in the
marketplace. There is no need for producers to reduce production costs
since consumers cannot take their business elsewhere. A lack of
competition leads to higher prices, wasted resources, and lower living
standards since the public would be able to afford fewer goods.

The federal government promotes and protects competition by enacting and
enforcing “rules of the game” known as antitrust laws that prohibit
practices that reduce competition and increase the power of monopolies,
and other rules and regulations that allow more competition in certain
industries. The federal government is responsible for furnishing the
public with information about market conditions and the state of the
economy and helping to settle disputes.

Providing public goods and services. A free enterprise market system may
not produce all the goods that people want at prices that cover the
costs of producing them. These goods and services are known as public
goods and services whose benefits are social, or collective. Public
goods and services benefit large numbers of people that cannot be
provided by the market system and so must be furnished by government.
Government provides them because private firms in a free market economy
find it impossible to make a profit producing public goods and services
since anticipated profits from the product or service do not justify a
private firm’s investment. An essential characteristic of public goods
and services is that anybody cannot be excluded from receiving their
benefits, regardless of whether or not he or she pays for them. There is
no easy way to charge individual users or to exclude them from the
benefits of the service. Every person in the nation or community
benefits equally from national defense, street lighting, parks, the
police and highway maintenance crews, airports and other public goods
and services, even those who pay no taxes.

Dealing with externalities. Many public goods as well as private goods
create costs for which no compensation is made as they fall outside the
market system. Economists refer to the effects of economic activities
that fall outside the market system as externalities. Externalities
occur throughout the economy and may be both harmful and beneficial.
Because of the market’s inability to cope with externalities the cost of
promoting or correcting these externalities falls to government. So,
since externalities take place outside the market, society has
traditionally turned to government to discourage those that are harmful
and encourage those that are beneficial.

Governments have found it appropriate to support activities that are
believed to generate beneficial externalities. A beneficial externality
occurs when an economic activity creates benefits for others. Education
is subsidized not only because it helps promote equal opportunities to
all citizens, but also it is believed to generate beneficial
externalities. For example, educated people normally commit fewer crimes
than uneducated people, so the more educated people are, the less will
be spent on crime prevention. The government provides tax breaks to
companies that offer their employees health and retirement benefits that
meet certain standards.

Correcting harmful externalities is another function of the government.
Examples of harmful externalities are everywhere: air, water, land and
sound pollution, traffic congestion, automobile accidents, nuclear
accidents, and cigarette smoking in enclosed public places are only a
few of them. Smoke and exhaust fumes pollute the air, the fast food
packaging litters highways, and the noise of planes at a nearby airport
is harmful to the quality of life and personal health. But there is
nothing in the market system to assign the costs of cleanup or health
care to those who caused the problem. There is no reason for oil
companies to pay costs caused by air pollution or the medical costs of
those made ill by it. The fast food companies are not expected to clean
up the litter discarded by their customers. It is left to government to
limit the effects of these harmful externalities.

Measures taken by governments generally fall into categories of
persuasion, taxation, regulation, and subsidy.

Persuasion is sometimes used to stop people from behaving in ways that
harm others. Government-sponsored campaigns urging people not to litter
or not to drive when they have been drinking are example of this

Taxation can be used to limit harmful externalities. Government can use
its power to levy taxes on firms that dump toxic wastes into the oceans
or pump pollutant-filled smoke into the atmosphere. The tax rate on the
quantity of pollutants can encourage a firm to clean up its discharges
or it would generate the funds needed to pay someone else to do it.

Regulation can be used by government to deal with harmful externalities
by making them illegal or setting safety standards. Regulation involves
passing laws banning or restricting the activity. Governments impose
fines on companies that contribute heavily to air and water pollution.

Subsidy is a payment by government to producers or consumers. Subsidies
are used to encourage economic activities that generate beneficial
externalities. Government can encourage beneficial externalities by
offering subsidies to producers of certain goods to enable them to sell
the goods to the public at a low price and compete with foreign
competition. Government subsidies and loans have enabled thousands of
farmers who have been forced into bankruptcy to continue farming their
land and to plant in ways that saved the soil rather than depleted it.

Assisting those in need. Every modern society helps its poor citizens,
and the United States is no exception to this rule. Government programs
to relieve poverty redistribute income from those earning more than
enough on which to live to those in need. There are a number of programs
to increase the income of disadvantaged groups and to provide everyone
with equal economic opportunity. The poor, the elderly, victims of
discrimination and others in need have been the intended beneficiaries
of these efforts.

Programs to help those in need fall into two categories.

Programs to help people in need by increasing their income. Welfare
payments, food stamps and Social Security benefits are examples of these
efforts. The Medicare program pays for many of the medical costs of the
elderly. The Medicaid program finances medical care for low-income
families. The federal government provides food stamps to help poor
families obtain food. It also provides welfare grants to support
low-income parents with children.

Programs to eliminate the causes of poverty and economic disadvantage.
The goal of these programs is to outlaw discrimination and provide for
educational programs designed to equip people with certain essential

Helping specific groups. Programs to help specific groups are designed
to help businesses, farmers, labor and other specific interest groups.
Tariff laws protect industries threatened by foreign competition. Patent
and copyright laws protect inventors, writers and the firms that employ
them. A number of laws favorable to labor unions in 1930’s led to the
greatest growth in union membership in history.

Stabilizing the economy. Experience has shown that government can do
much to stabilize (smooth out the ups and downs) of the economy. When
the swings become severe, unemployment can raise, business failures
often increase, and the population in general can suffer. Fortunately,
government has the ability to limit the swings between the economy’s
highs and lows.

The Goals of the American Economic System

Since the economists refer to the economy as a “system”, they imply that
it has a purpose and that there is an order in its structure. Every
society seeks to attain certain objectives and the United States is no
exception to this rule. The United States has goals that it tries to
fulfil through its public policies. The question as to what the goals of
American economic policy ought to be is frequently controversial. While
some controversy exists, most Americans are likely to agree that a list
of the nation’s goals should include the following.

Full employment. Full employment is the level of employment at which
everyone who wants to work is working. Government measures aim at
achieving the level at which there is a job for everyone ready, willing
and able to work. Society suffers when many workers cannot find jobs and
many manufacturing plants are idle.

Economic growth. A second economic goal of every society is economic
growth. By this is meant an increase in the quantity of goods and
services produced per person. By maintaining stability, an economy
avoids substantial price fluctuations and is better able to encourage
efficiency – continuous full employment of available resources. This
leads to steady economic growth. When an economy grows, there is more
of what people want and standards of living generally rise.

Price stability. An economy may at times be unstable. Business
conditions, particularly in market economies, tend to fluctuate, rise
and fall. Such times of inflation and deflation are likely to create
hardships for many sectors of economy. A third economic goal of every
society is to achieve stability of prices. Price stability refers to
times during which prices remain reasonably constant.

Economic freedom. In a democracy, there is a close connection between
political freedom and economic freedom. Freedom of choice is an ideal of
the American political and economic system. People should all have a
high degree of freedom to choose how they will earn their living and how
they will spend their money.

Economic security. For whatever reasons, physical handicaps, old age,
accidental injury, or the like, there are those among people who are
unable to earn their own way. Economic security means that somehow those
who are unable to care for themselves fully will be provided for.

Equity. One of the major goals of any society is to achieve an equitable
distribution of income. It is important to note that equitable means
“fair” or “just”, not “equal”. Equity is the quality of being fair or
impartial. As an economic goal, equity means that the economic system
ought to offer all its citizens equal opportunities to achieve their

Efficiency. Since every society possesses only limited amounts of the
various factors of production, it is important to use them efficiently.
In general, efficiency is the best use of available resources to attain
a desired result. As a national goal, efficiency refers to the entire
economy’s ability to get the most out of its scarce resources. An
inefficient economy wastes resources and fails to provide the highest
possible standard of living for consumers

6 Demand and its effect on the kinds and quantities of products produced
in a market economy. Price elasticity of demand

The theory of supply and demand is perhaps one of the most fundamental
concepts of economics and it is the backbone of a market economy. The
supply and demand model describes how prices vary as a result of a
balance between product availability and consumer demand.

Since contemporary economies rely on the market forces of supply and
demand instead of government forces to distribute goods and services
there must be a method for determining who gets the products that are
produced. This is where supply and demand begin to work. By themselves
the laws of supply and demand give us basic information, but when
working together they are the key to distribution in a market economy.

It is not enough for a buyer to want or desire an item. He or she must
show the ability to pay and then the willingness to pay. So, demand is
comprised of three things:


Ability to pay;

Willingness to pay.

What factors alter a consumer’s desire, willingness and ability to pay
for products? Some factors include consumers’ income, consumers’ tastes,
the prices and availability of related products like substitutes for
that product or complementary goods, and the item’s usefulness.

Substitutes are goods that satisfy similar needs and which are normally
consumed in place of each other. As the price of one substitute
declines, demand for the other substitute will decrease. Butter and
margarine are close substitutes. If the price of butter goes up, then
people will tend to substitute margarine for butter.

Complementary goods are those that are normally consumed together (e.g.,
DVD players and DVD movies). An increase in the price of a product will
diminish demand for its complement while a decrease in the price of a
product will increase demand for its complement.

Think of the item’s usefulness this way. It is a hot summer day and you
are gasping for a drink*. You come across a lemonade stand and gulp down
a glass*. It tasted great so you want another. This second glass is
marginal utility meaning an extra satisfaction a consumer gets by
purchasing one more unit of a product. But now you reach for a third
glass. Suddenly your stomach is bloated and you are feeling sick. That’s
diminishing marginal utility! The law of diminishing marginal utility
says that the more units one buys the less eager one is to buy more.

In economics, demand is the desire, willingness and ability of the
people within a market area to purchase particular amounts of goods or
services at certain prices in a given period of time. To the economists
consumers make rational choices about how much to buy and how to spend
their income on the products that will give them the most satisfaction
at the least cost.

So, demand describes the behavior of buyers.

The law of demand states that the higher the price of a product, the
fewer people will demand that product, that is, demand for a product
varies inversely with its price, all other factors remaining equal*.
Factors other than good’s price which affect the amount consumers are
willing to buy are called the non-price determinants of demand. The law
of demand expresses the relationship between prices and the quantity of
goods and services that would be purchased at each and every price. In
other words, the higher the price of a product, the lower the quantity

Economists like to look at things graphically. A demand schedule is a
table showing the number of units of a product that would be purchased
at various prices during a given period of time. The information can be
presented in graphic form called a demand curve. It shows an inverse
relationship between the price and quantity demanded. The demand curve
represents the quantities of a product or service which consumers are
willing and able to buy at various prices, all non-price factors being
equal. The demand curve slopes downward from left to right based on the
law of demand. Or to put it another way, a demand curve shows that the
quantity demanded is greater at a lower price and lower at a higher

The advantage of the curve is that it enables economists to see the
relation between price and quantity demanded and to estimate what the
demand would be for those prices falling in between the prices that are
in the demand schedule. Each point along the curve represents a
different price-quantity combination.

Increased demand can be represented on the graph as the curve being
shifted to the right, because at each price, a greater quantity is
demanded. An example of this would be more people suddenly wanting more
cut jeans. On the other hand, if the demand decreases, the opposite
happens. Decreased demand can be represented on the graph as the curve
being shifted to the left, because at each price, the quantity demanded
is less. It means that fewer people want to buy cut jeans.

The key point is to distinguish between demand and the quantity

Demand refers to how much of a product or service is desired by buyers.

The quantity demanded is the amount of a product that people are willing
to buy at a certain price.

The difference is subtle but important. If the demand of ice cream goes
up in the summer it is because consumptive demand has truly increased,
clearly it is hot. In the case the business can most likely raise prices
without suffering a cut in sales. This is a change in the quantity
demanded. If sales of ice cream were to increase in January as a result
of a price cut, however, the information we would be receiving is that
the demand was artificially manipulated. In reality, actual demand is
low but extra efforts had to be made to increase sales. This is a change
in demand.

Economists distinguish two different ways that the quantity of purchases
of a product can change.

According to the law of demand a change in price leads to a movement
along the original demand curve and results in a change in the quantity
demanded, that is, more will be purchased but only at a lower price.

When one of the non-price factors changes (e.g., a change in income)
there will be a change in demand. Since economists use the term “demand”
to refer to the original demand curve, it is necessary to mention that
there is either an increase or decrease in demand that causes the
original demand curve to shift outward or inward. It means that either
more or less will be purchased at the same price. Change in demand
causes a shift of the demand curve in response to a change in a
condition other than the good’s price.

There are some things that would cause the demand curve to shift to the
right or to the left. All of them are directly related to consumers. In
other words, at any given price, consumers will be willing and able to
purchase either more or less.

A change in the size of the market.

A change in income for the average consumer.

A change in the population.

Changes in the prices and availability of related goods



Changes in consumer tastes.

An important concept in understanding supply and demand theories is
elasticity. It is a measure of how much buyers and sellers respond to
changes in market conditions. Comprehension of elasticity is useful to
understand the response of supply and demand in a market, in order to
achieve an expected result or avoid unforeseen results. For example, an
entrepreneur expecting a price increase might find that* it lowers the
profits if demand is highly elastic, as sales would fall sharply.
Similarly, a business reckoning on a price cut might find that* it does
not increase sales, if demand for the product is inelastic.

Elasticity varies among products because some products may be more
essential to the consumer. A good or service is considered to be highly
elastic if a slight change in price leads to a sharp change in the
quantity demanded or quantity supplied. A price increase of a product or
service that isn’t considered a necessity will discourage more consumers
because the opportunity cost of buying the product will become too high.
On the other hand, an inelastic good or service is one in which changes
in price bring about only modest changes in the quantity demanded or
quantity supplied, if any at all. Products that are necessities are more
insensitive to price changes because consumers will continue buying
these products despite a price rise. This is known as the price
elasticity of demand and the price elasticity of supply.

In economics, the price elasticity of demand is an elasticity that
measures the nature and degree of the relationship between changes in
the quantity demanded of a commodity and changes in its price.

One typical application of the concept of elasticity is to consider what
happens to consumer demand for a product when prices increase. As the
price of a product rises, consumers will usually demand less of that
product, perhaps by consuming less, substituting another product for it,
and so on. The greater the extent to which demand falls as price rises,
the greater is the price elasticity of demand.

Demand is called elastic if a small change in price has a relatively
large effect on the quantity demanded.

The number and quality of substitutes for a product is the basic
influence on price elasticity of demand. If the prices of the
substitutes remain the same, a rise in the product’s price will
discourage consumers from buying this product. On the other hand, if
there is a price cut in the product, consumers will substitute other
items for this product. Thus, the demand for this product tends to be
elastic. In general, demand is elastic for non-essential commodities
(visits to theatres or concerts, holidays, parties, etc.)

However, there are some goods that consumers cannot consume less of, and
cannot find substitutes for even if prices rise. Such goods are said to
have inelastic demand.

Demand is inelastic, when a change in price has a relatively small
effect on the quantity demanded.

The demand for some goods and services will be inelastic if:

they are necessities. An example of a product with a highly inelastic
demand is salt: people need salt, so for even relatively large changes
in the price of salt, the quantity demanded will not be significantly

it is difficult to find substitutes. If substitutes for a product are
not available or of bad quality, consumers will not respond
significantly to changes in its price.

goods are relatively inexpensive. People are less apt to change their
buying habits when the price of a product is increased or decreased.

The elasticity of demand also deals with the effect of a price change on
the seller’s total revenue. Total revenue is the amount paid by the
buyers and received by the sellers of products. When the price
elasticity of demand for a product is elastic, the percentage change in
quantity is greater than that in price. Hence*, when the price is
raised, the total revenue of producers falls, and the total revenue of
producers rises, when the price is decreased.

When the price elasticity of demand for a product is inelastic, the
percentage change in quantity is smaller than that in price.

7. Supply and its effects on the kinds and quantities of products in a
market economy. Price elasticity of supply

supply is one of the two key determinants of price. The theory of supply
explains the mechanisms by which prices and levels of production are
set. Unlike demand, supply describes the behavior of sellers.

The law of supply states that the quantity of a commodity supplied
varies directly with its price, all other factors that may determine
supply remaining the same. The law of supply expresses the relationship
between prices and the quantity of goods and services that sellers would
offer for sale at each and every price. In other words, the higher the
price of a product, the higher the quantity supplied. As the price of a
commodity increases relative to price of all other goods, business
enterprises switch resources and production from other goods to
production of this commodity, increasing the quantity supplied.

Clearly the law of supply is the opposite of the law of demand.
Consumers want to pay as little as they can. They will buy more when
there is a price decrease in the market. Sellers, on the other hand,
want to charge as much as they can. They will be willing to make more
and sell more as the price goes up. This way they can maximise profits.

The relationship between price of a product and its quantity supplied is
represented in a table called a supply schedule. The supply curve is a
graphic representation of the market supply schedule and the law of
supply. The supply curve shows a direct relationship between the
quantities of products that firms are willing to produce and sell at
various prices, all non-price factors being constant. The supply curve
slopes upward from left to right based on the law of supply. Producers
supply more at a higher price because selling a larger quantity at a
higher price increases their revenue.

The supply curve enables producers to anticipate what the supply would
be for those prices falling in between the prices that are in the supply
schedule. Each point along the curve represents a different
price-quantity combination, or to put it another way, a direct
correlation between the quantity supplied and price. Like a movement
along the demand curve, a movement along the supply curve will occur
when a price change leads to a change in the quantity supplied, that is,
more will be offered for sale but only at a higher price or vice versa.

Like a shift in the demand curve, a shift in the supply curve to the
right or to the left means that the quantity supplied is affected by a
factor other than a product’s price.

People often confuse supply with the quantity supplied. The difference
between supply and quantity supplied is that

Supply represents the amounts of items that suppliers are willing and
able to offer for sale at different prices at a particular time and
place, all non-price determinants being equal.

The quantity supplied refers to the amount of a certain product
producers are willing to supply at a certain price. A change in the
price of the product will cause a change in the quantity supplied.

As with demand, economists separate changes in the amount that sellers
will sell into two categories.

Price is an important determinant of the quantities supplied. The law of
supply states that the amount offered for sale rises, as the price is
higher. The quantity of pairs of cut jeans producers are willing to
offer for sale rises, since their price is higher primarily because they
need to cover the increased costs of production.

Thus, according to the law of supply a change in price leads to a
movement along the original supply curve and results in a change in the
quantity supplied. On the one hand, an upward movement along the curve
represents an increase in the quantity supplied as the price is raised.
On the other hand, a downward movement along the curve shows a decrease
in the quantity supplied as a result of a price reduction.

When one of the factors other than a product’s price changes (e.g., a
change in technology) there will be a change in supply. Economists use
the term “supply” to refer to the original supply curve. An increase in
supply is reflected by a shift of the supply curve to the right. It
means that at the same price, sellers are willing to supply more than
they were willing to supply before. A decrease in supply is represented
by a shift of the original supply curve to the left. It means that at
any given price, producers are willing to supply less than they were
willing to supply before.

However, there are things other than price which affect the amounts of
goods and services suppliers are able to bring into the market. These
things are called the non-price determinants of supply.

As it has been mentioned a change in the quantity supplied caused only
by a change in the price of the product. A change in supply is caused by
a change in the non-price determinants of supply. Based on a new supply
schedule, the supply curve moves inward or outward since the prices stay
the same and only the quantities supplied change.

Non-price determinants of supply are:

Changes in the cost of production. Production costs relate to the labour
costs and other costs of doing business used in production process. The
cost of production is probably one of the most important influences on
production process. An increase in the costs of any input brings about
the lower output, which means that the supply curve will shift inward.
Regardless of the price that a firm can charge for its product, price
must exceed costs to make a profit. Thus, the supply decision is a
decision in response to changes in the cost of production.

Changes in technology. Changes in technology usually result in improved
productivity. Improved technology decreases production costs and
therefore increases supply.

Changes in the price of resources needed to produce goods and services.
If the price of a resource used to produce the product increases, this
will increase the production costs and the producer will no longer be
willing to offer the same quantity at the same price. He will want to
charge a higher price to cover the higher costs. As a result the supply
curve will shift inward.

Changes in the expectations of future prices. Changes in producers’
expectations about the future price can cause a change in the current
supply of products. If producers anticipate a price rise in the future,
they may prefer to store their products today and sell them later. As a
result, the current supply of a particular product will decrease. In
this case a supply curve will shift to the left. It is necessary to keep
in mind that supply is not the quantity available for sale.

Changes in the profit opportunities. If a business firm produces more
than one product, a change in the price of one product can change the
supply of another product. For example, automobile manufacturers can
produce both small and large cars. If the price of small cars rises, the
producers will produce more small cars to earn higher profits. They will
shift the resources of the plant from the production of large cars to
the production of small ones. Therefore, the supply of small cars will
increase and a supply curve will shift outward. So, profit opportunities
encourage producers to produce those goods that have high prices.

Changes in the number of suppliers in the market. Potential producers
are producers who can produce a product but don’t do it because of
relatively low price. If price of a product rises potential suppliers
will switch over production to that product to make more profit. If more
producers enter a market, the supply will increase, shifting the supply
curve to the right.

Making a summary it is necessary to emphasize that the understanding of
concepts of supply and demand provides an explanation of how prices are
determined in competitive markets.

In economics, the price elasticity of supply is the degree of
proportionality with which the amount of a commodity offered for sale
changes in response to a given change in the going price. In other words
elasticity of supply is a measure of how much the quantity supplied of a
particular product responds to a change in the price of that product.

Elasticity of supply works similar to elasticity of demand. If a change
in price results in a large change in the quantity supplied, supply is
considered elastic. On the other hand, if a great change in price
results in a small change in the quantity supplied, supply is called

Determinants of price elasticity of supply are

the ability of producers to change the amount of goods they produce

time period needed to alter the output.

Elasticity of supply is different in the short run and the long run.
Supply is usually more inelastic in the short run than in the long. For
example, supply of many goods can be increased over time by allocating
alternative resources, investing in an expansion of production capacity,
or developing competitive products that can substitute for hot items.
Hence, supply is more elastic in the long run than in the short run
since producers adjust supply to price changes over a longer time.

8. The equilibrium price. The price system in a market economy.

The price system lies at the heart of any society. The price system is
an economic system where prices are not set by government but by the
interaction of supply and demand. Under such a system every commodity
and every service has a price, i.e. the amount of money for which a unit
of goods or services is sold and bought.

Price for a commodity is a reflection of supply of and demand for this
commodity. The theory of supply and demand is the step toward
understanding how market prices are determined and the way in which
these prices help make production and consumption decisions – the
decisions that make up not only the structure, but also the flesh and
blood of the economic system*.

The concepts of supply and demand have been introduced separately but it
is time to put the two concepts together. In economic theory, the
interaction of supply and demand is known as equilibrium.

One of the functions of markets is to find equilibrium prices that
balance the supply of and demand for goods and services. An equilibrium
price (also known as a market price) is one at which each producer can
sell all he wants to produce and each consumer can buy all he demands.
Naturally, producers always would like to charge higher prices. But even
if they have no competitors, they are limited by the law of demand: if
producers insist on a higher price, consumers will buy fewer units. The
law of supply puts a similar limit on consumers. They always prefer to
pay a lower price than the current one. But if they insist on paying
less suppliers will produce less and some consumers will go home empty

In economics, economic equilibrium often refers to an equilibrium in a
market that is the case where a market for a product has attained the
price where the quantity supplied of a certain product exactly equals
the quantity demanded. Thus, market clearance refers to an assumption
that markets always go to where the quantity supplied is equal to the
quantity demanded.

At prices above the equilibrium price, the quantity supplied exceeds the
quantity demanded, so a surplus or excess supply develops.

What process occurs to bring the market back into equilibrium? Simple,
the market price adjusts. When the quantity supplied by firms is greater
than the quantity demanded by consumers there is more being produced
than is being consumed. Unsold products start to accumulate. Firms
respond by lowering prices to stimulate demand. Lower prices also means
that firms will begin to produce less. In response to the lower prices
the quantity demanded increases. This price response continues and the
quantity supplied declines while the quantity demanded increases until
the equilibrium is restored.

At prices below the equilibrium price, the quantity demanded is greater
than the quantity supplied, and a shortage or excess demand develops.

It should be noted that a shortage is not the same thing as scarcity.
Scarcity is an inevitable consequence of limited resources and unlimited
wants. Scarcity cannot be eliminated. Shortage, however, can be
eliminated by allowing prices to rise to the equilibrium level. Sellers
see the goods and services are quickly bought up and realize they could
have asked a higher price. The price goes up until the shortage
disappears. The price continues to adjust until the quantities demanded
and the quantities supplied are equal. When the quantity supplied is
less than the quantity demanded the opposite happens. The increased
quantity demanded is a signal to firms to raise prices. With higher
prices the quantity demanded declines and firms are motivated by the
higher prices to produce more, which returns the market to equilibrium.

A decrease in demand (demand curve shifts to the right) leads to a
decrease in both the equilibrium price and equilibrium quantity.
Equilibrium price and quantity respond in the same direction as the
shift in the demand curve.

An increase in supply (supply curve shifts to the right) produces a
higher equilibrium quantity but a lower equilibrium price. With supply
curve shifting*, the equilibrium price and equilibrium quantity change
in opposite directions.

To the economists, in most mixed economies prices ration scarce
resources, motivate production and provide answers to the What, How and
Who questions.

Since there is not enough of everything to go around goods and services
are allocated, or distributed, based on their price. To put it another
way, the more scarce something is, the higher the price will be and the
fewer people will want to buy it. Economists describe this as the
rationing effect of prices.

Price increases and decreases also send messages to suppliers and
potential suppliers of goods and services. Price increases attract
additional producers. Price decreases drive producers out of the market.
Production-motivating function of prices refers to the way prices
encourage producers to increase or decrease the level of output. By
doing this prices help the economy maintain allocative efficiency and
productive efficiency.

At the same time economists stress the importance of the price system in
determining how much will be produced. Every economy faces certain basic
choices. Among them, the most important are what goods should be
produced, how they should be produced and for whom the results of
economic activity should be made available.

Prices act as signals to buyers and sellers. One of the things that
prices do is carry information to buyers and sellers. A product’s demand
curve is an important determinant of how much firms will produce, since
it reflects the amount of the product that will be in demand at each
price. Low prices are signals to buyers (consumers), who can now afford
to purchase the things they want. When prices are high enough, they send
a signal to sellers (producers), who can now earn a profit at the new
price. Acting in accordance with the profit motive, business firms
produce what the consumers desire. Producers can earn more revenues by
responding to the consumer demand than by ignoring it. Those who sell
goods at prices consumers are not willing to pay will suffer financial
losses. In that way prices provide answer to the question of What to

Prices encourage efficient production. Prices encourage business people
to produce their goods at the lowest possible cost. The producers’
desire for profit leads them to introduce new production methods to
lower production costs.

Firms that are efficient will produce more goods with fewer raw
materials than firms that are inefficient. The quest for greater
effciency motivates producers to succeed in competitive activity. While
these efforts are in the best interests of the sellers, all of consumers
may benefit because they are provided with the things they want at lower
costs. In such a way the price system carry out the task of determining
how goods and services are produced.

How the price system determines how society’s output will be distributed
among the people. Finally, prices help to determine who will receive
the nation’s output of goods and services. Under the price system, each
person’s income is determined in the market place. Some people are
endowed with talent, skill, intelligence, education or special training
and earn more, on the average, than those who are not endowed with such
qualities. What the worker can buy with his wage will depend, in turn,
upon the prices of the goods and services the worker would like to own.
Consumers who are willing and able to pay the equilibrium price (or
more) buy a desired product, while those who are unwilling or unable to
pay this price have to do without this product. Thus, by assigning
values to the work people perform, the price system answers the Who

9. The Sources Of Income and how to get the most from money people earn

The Sources Of Income and how to get the most from money people earn

Before you can consume anything, however, you must do two things. First
you must earn the income to buy the things you want. Then you must
decide how the money will be spent. There are two ways to earn income:
from your work and from the use of your wealth.

Income From Work.

Most of the income you are likely to earn will come from work. In return
for working, you will receive a wage or salary. (The term “wage”
typically refers to the earnings of workers paid by the hour or unit of
production. “Salary” refers to earnings paid on a weekly or monthly
basis.) How much you earn will depend on your job, your abilities, your
performance, and a number of other factors.

Income From Wealth.

Wealth can be expressed as the value of the things yon own. Adding the
value of all

your possessions, bank accounts, savings, and the like will give you the
total amount of your wealth.

Used in certain ways, wealth can earn income. If you owned a motorcycle,
you might be able to let others use it for n fee. In that instance
economists would say that you used your wealth to earn “rent” Wealth, in
the form of money that is loaned to others or deposited in a savings
account, will earn interest. As you can see, interest and rent are two
forms of income that can be earned by wealth. As you read on, you will
leans about other types of income (such as dividends and capital gains)
that can be generated from your wealth.

Getting The Most For Our Money

The number and value of things we are able to buy depends upon the size
of our income and how wisely we spend it

A Budget Can Help.

As consumers, all of us are limited by what we can spend. We know that
money used to buy one thing reduces our ability to buy something else.
Most of the time, we are able to keep track of our expenditures (the
money spent) so we are able to meet our immediate needs. But every now
and then we find ourselves unable to buy something we wanted simply
because the money was riot available. To help keep track of income and
expenditures, many people use personal budgets. A budget is a financial
plan that summarizes income and “expenditures over a period of time.
When a budget has expenses that exactly equal income, it is said to be
balanced, when proposed expenses are greater than expected income, the
budget is said to have a deficit. Budgets in which income exceeds
expenditures will have a surplus

Although there are as many ways to prepare a budget as there are people
who use them, the process usually involves three steps: setting
financial goals, estimating income, and planning expenditures.

Setting Financial Goals.

Although much of your income is likely to be used for day-to-day needs,
you will also want to plan for the more costly items you would like to
buy in the future. Further education, a car, a business of your own cost
far more than you could hope to pay out of current income. For that
reason, you will want to have a savings plan to help you achieve such
goals in the not-too-distant future.

Estimating Income.

The next step in preparing a personal budget is to draw up a list of all
your sources of income. These would include things such as part-time
jobs, allowances, gifts, and interest on savings. Planning Expenditures.

Finally, you will want to list all the things you are likely to buy or
t:o pay for over the period. This will enable you to think through your
wants and eliminate those things you can do without for now. Suppose,
for example, that your proposed expenditures total $100 more than your
anticipated income. You would then have to decide which items could be
removed to bring

to totals into balance. As you complete the process, you will be dealing
with opportunity costs. The item;, dropped from your budget will
represent the opportunity cost of those you keep. This will also be the
time to \nclude savings to meet your financial goals, as we discussed

12 Challenges and rewards of consumer credit

Consumer credit

Consumer credit provides cash, goods, or services now, while spreading
repayment into the future. In this way credit enables you to enjoy your
purchase even before you have paid for it. But there are 2 important
strings attached to every credit purchase: credit costs something, and
the principal, the original amount borrowed, must be paid back. If you
are thinking about borrowing money or buying something on credit, you
will want to know how much that credit will cost you and whether or not
you can afford it. Then you can shop for a best terms.

Shopping for credit: The finance Charge and the Annual Percentage Rate
(APR). Credit costs vary from one lender to another, so it pays to shop
before you sign anything. Federal law requires that the lender tell you
the total finance charge and the annual percentage rate or APR.

The finance charge is the total amount you pay to use credit. It
includes interest costs and any other fees (such as service charges and
insurance) that seller or lender may be entitled to add to the loan.

The annual percentage rate (APR) is the cost of credit calculated as a
percent on an annual basis.

Obtaining and using credit

Credit is an arrangement that enables us to receive cash, goods or
services now, with the understanding that we will pay for them in the
future. Charge accounts, credit cards, installment plans, car loans and
households are some of the best known forms of credit.

Like so many things credit has its advantages and disadvantages. The
principal advantages of credit are:

Immediate possessions. Credit enables us to enjoy goods and services
immediately that we might otherwise have had to do without or postpone.

Flexibility. Credit allows us to time our purchases so us to take
advantage to sale items or other bargains even when our funds are low.

Safety. Credit cards and charge accounts provide a safe and convenient
means of carrying out purchasing power with us while we are shopping or

Emergency funds. Credit gives us a cushion in an emergency.

Character reference. The regular payment of bills is recorded in a
credit person’s history, and this record can be used as a character

Here are some of the disadvantages of buying on credit:

Overspending. Sometimes credit cards and charge accounts make it too
easy to spend money. Then, as the debts mount, it is often difficult to
make the necessary monthly payments.

Higher cost. It usually costs more to buy on credit than for cash. One
reason is that stores offering credit often charge more then those that
sell only for cash. Another is that interest or other charges are often
added to the cost of goods sold on credit.

Untimely shopping. Credit shoppers often ignore sales and special prices
because they can buy what they want on credit whenever they want it.

Who can borrow?

Lenders expect their money to be repaid along with the interest and
other fees they charge for them use of their money. For that reason
lenders will investigate the credit history of all loan applicants to
determine that they are credit worthy. A credit history is the record of
how individuals pay their bills and repay loans.

The Three C’s. In judging an individual’s credit worthiness, lenders
often look at the “Three C’s” of credit: character, capacity and

Character refers to your personal qualities – your honestly and
willingness to repay debts. If your record shows you paid bills on time
in the past, lenders will assume you will continue to do so in the

Capacity is a measure of your ability to repay debts. Creditors will
want to know about your sources of income, how much you earn and your
other financial obligations.

Capital refers to the things that people own – money in the bank or
property. In general, the more one owns, the easier it will be to repay
one’s debts. Lenders may also ask that some capital be offered as
collateral, something pledged as security for the loan.

How to establish credit?

To establish your credit you must prove that you are willing and able to
handle your financial obligations. If necessary, it is possible to
borrow before you have established a credit rating if you can find a
co-signer. A co-signer is a person with an acceptable credit rating who
guarantees to repay the loan if you are unable to do so.

13 Advertising and its place in our life

Learning to use advertising

Advertising is one of our nation’s largest industries. Since consumers
are the principal targets of these sales campaigns, we ought to know
something about services advertisements perform, as well as some of the
techniques they use.

The benefits of advertising. Advertising benefits consumers and the
economy in a number of ways:

It provides us with information about prices, recent improvements in
certain goods or services that are available now.

Advertising often results in lower prices. Large-scale production can
reduce costs. By creating mass markets, advertising enables producers to
reduce the costs of their products and pass those savings on to the
consuming public.

Advertising stimulates competition, and competition benefits as all.
Advertising by one firm puts pressure on others within the industry to
do at least as well to attract the consumers dollar.

Advertising pays most of the cost of magazines, newspapers, and all of
the cost of commercial radio and TV.

Advertising helps the economy as a whole by stimulating consumer demand.
Consumer spending has a direct effect on the health of the economy.
Advertising helps to keep that spending at healthy level.

The price we pay for advertising. Not everyone agrees that advertising
benefits the economy. Critics list the following points as its

The information contained in advertising does not inform and often
misleads the consumer.

Because it costs money to advertise, this cost adds to the price
consumers pay.

Consumers are tempted to spend money for products they do not really

Radio and TV are not really free because the cost of advertising on them
is also passed on to the consumer.

Advertising strategies. Three strategies that have been especially
popular with advertisers can be classified as slogans, rational appeals,
and emotional appeals.

Slogans. Advertisers often use slogans that sound great, but mean little
or nothing.

Rational appeals. Rational appeals rely upon logic or reason to convince
the consumer to buy a product.

Emotional appeals. Emotional appeals rely upon the use of psychology to
get the advertiser’s message across. The following is a sampling of such

Testimonials. These are the advertisements in which famous people claim
they use and enjoy a particular product. Ads for sport equipment
frequently rely on this strategy.

The bandwagon. The bandwagon appeal implies that everybody is using a
particular product and that if you don’t, you will be left out. Soft
drinks and automobile ads use this appeal.

Popularity. Some advertisements suggest that simply by using the
advertised product you will be popular or find romance.

Every day you as a consumer are the object of the marketing efforts of
companies that want your business. The advertising of television and
radio and in the newspaper flayers that come to your house are just some
of the ways that sales promotions reach you. Can you think of other
ways? Most of these marketing strategies represent honest efforts to
convince you to buy a product or service. Nevertheless, you are
responsible for evaluating advertising directed at you, separating fact
from emotion, and deciding whether or not to buy the product.

Mega vocabulary

Allocate v. – to use something for a particular purpose especially after
an official decision has been made – розміщувати, розподіляти. Syn. to

Allocation n. – the act of allocating something – розміщення, розподіл.
Allocation of labour – розподіл робочої сили, resource(s) allocation
розподіл ресурсів. Syn. distribution.

At one’s disposal – available for someone to use – в розпорядженні.
Syn. available, at one’s command.

Benefit v. – to be advantageous or helpful to somebody or something; to
do good to somebody or something – приносити/отримувати/мати
користь/вигоду, допомагати. To benefit a society – приносити користь
суспільству, a society benefits – суспільство отримує користь.

Combination n. – two ore more different things that exist together or
are used or put together – комбінація, поєднання. Factor combination –
поєднання факторів, combination of operations – поєднання операцій. Syn.
a blend.

Consumer n. – anyone who uses goods and/or services – споживач, клієнт.
Consumer behaviour – поведінка споживача, consumer choice – вибір
споживача/споживчий вибір, consumer goods/commodities – споживчі товари,
consumer awareness – обізнаність споживача, final/ultimate consumer –
кінцевий споживач, individual consumer – окремий споживач.Syn. a client,
a customer.

Distribute v. – to share things among a group of people – розподіляти,
розташовувати. Syn. to allocate.

Distribution n. – the act of distributing something – розподіл.
Distribution of wealth – розподіл (національного) доходу/бугутства,
income/reward distribution– розподіл доходу, distribution of risk –
розподіл ризику production distribution – розподіл продукції.

Efficiency n. – the quality of doing something well – ефектиність,
продуктивність. Economic efficiency – економічна
ефективність/рентабельність, increased efficiency – підвищена
продуктивність, labour efficiency – продуктивність робочої сили, market
efficiency – ефективність ринку, management efficiency – ефективність
керування, production efficiency – ефективність виробництва. Syn.
performance, productivity.

Encourage v. – to rouse a person to greater effort or interest
– заохочувати, спонукати, стимулювати, сприяти, підтримувати, надихати.
Syn. to favor, to stimulate, to support.

Incentive n. – something that serves as a stimulus to action by
appealing to self-interest – спонукальний мотив, стимул, заохочення.
Incentive to use one’s property – стимул використовувати чиюсь
власність. Syn. encouragement, motive, motivation, stimulus.

Institution n. – a large organization that has a particular kind of work
or purpose – установа, організація. Charitable institution – доброчинна
організація, government institution – урядова організація. Syn. an
organization, an agency.

Lack n. – a state of not having something or enough of something – брак,
нестача, відсутність. Lack of competition – відсутність конкуренції,
lack of demand – нестача\відсутність попиту, lack of funds – брак
грошей. Syn. shortage.

Ownership n. – a right to hold a thing entirely as one’s own – право
власності, власність. Ownership of the means of production – власність
на засоби виробництва, private ownership – приватна власність, public
ownership – усуспільнена власність.

Perform v. – to do something difficult or useful – виконувати,
здійснювати, робити. To perform an experiment – проводити дослід, to
perform an obligation – виконувати зобов’язання, to perform a task –
виконувати завдання, to perform a work – виконувати роботу.

Property n. – something that is owned or possessed – власність, майно.
Individual/personal property – особиста власність, private property –
приватна власність, public property – державна/громадська власність,
estate/real property – нерухоме майно, to own property – володіти
власністю. Syn. possessions.

Willing adj. – ready to do something without hesitation – готовий. To be
willing to do something – бути готовим, робити щось охоче. Syn. ready.

Afford v. – to be able to spare or give up – дозволяти собі.

Cut back v. – to make something smaller or less in size, amount or price
– скорочувати, знижувати, зменшувати. Syn. to decrease, to reduce, to

Choice n. – the act of choosing or selecting; the right or possibility
of choosing – вибір, альтернатива, можливість вибору. To have no choice
– не мати вибору, to make a choice – робити вибір. Syn. an alternative,
a pick, a t to meet with failure/to end in failure rade-off.

Choose v. (from/out of/between) – to select out of a number or between
alternatives – вибирати. Syn. to pick, to select, to trade off.

Enable v. – to make it possible for or to allow a person to do something
– давати можливість, право.

Give up v. – to abandon the attempt to do something – відмовлятися. Syn.
to forgo, to refuse.

Increase v. – to make or become greater in size, number, amount, value,
degree, price, etc. – збільшувати, зростати. Ant. to decrease.

Individual n. – a person, considered separately from the rest of the
group or society that they live in – особа, людина, особистість. Syn. a
person. Individuals – окремі особи, люди. Syn. – people.

Individual adj. – considered separately from other people or things in
the same group – особистий, індивідуальний; окремий; особливий.
Individual needs – особисті потреби.

In terms of – by taking as an example of – з точки зору, мовою. Syn. in
regard of, with regard to.

Limit n. – a point that may not or cannot be passed – межа. To go beyond
the limit – перевищувати межу, to set the limit – встановлювати межу, to
the limit – максимально, гранично.

Limit to v. – to stop an amount or number from increasing beyond a
particular point – обмежувати, ставити обмеження. Syn. to restrict to,
to restrain.

Opportunity n. (for something/of doing something/to do something) – a
set of circumstances providing a favorable chance or possibility –
слушна нагода, сприятлива можливість. Opportunity cost – альтернативна
вартість, to have an opportunity – мати можливість, to lose an
opportunity – втратити можливість, пропустити нагоду, take an
opportunity – ухопитися за можливість, to take the opportunity (of) –
скористатися можливістю/ випадком. Syn. a possibility.

Satisfy v. – to cause someone to be happy from some desire or need by
supplying what he desires, needs or demands – задовольняти. Syn. to

Condition n. – a favourable or unfarourable state of something – умова,
стан. Business conditions – ділова/господарська кон’юктура, condition of
the market – стан ринку, economic conditions – господарська кон’юктура,
essential condition – важлива/необхідна умова, financial conditions –
фінансовий стан/фінансові умови, market condition(s) – ринкова
кон’юктура, on/upon condition that – за умови, якщо, under such
conditions – за таких умов. Syn. a term.

Effort n. – an expense of strength and energy to achieve a desired end –
зусилля, намагання, спроба. Joint/combined efforts – спільні зусилля, to
make an effort – докласти зусилля, намагатися, to put an effort in/into
something – вкладати зусилля. Syn. an attempt, an endeavour, an

Failure n. – a lack of success – невдача, банкрутство, провал. Business
failure – банкрутство підприємства, market failures – недоліки/хиби
ринкової системи, to face the chance of failure – стикатися з ризиком
(можливістю) банкрутства, to meet with failure/to end in failure –
потерпіти невдачу/закінчитися невдачею.

Income n. – money of all kinds received by a person or organization in a
year from work, investment, rent, etc. – прибуток, дохід. Capital income
– прибуток від капіталу, family income – прибуток сім’ї, income from
business – прибуток від підприємництва, to become income – ставати
доходом, to draw/earn/get/make income – отримувати прибуток, to generate
income – накопичувати прибуток. Syn. a return.

Input n. – a resource required by a firm to enable it to produce goods
and services – запроваджений фактор виробництва. Capital inputs –
затрати капіталу, labour input – затрати праці.

In the long run – measured over a prolonged period of time – у кінцевому
підсумку, кінець кінцем, на закінчення, нарешті. Syn. after all, at
last, at long last, eventually, in the end, ultimately. Ant. in the
short run – незабаром, невдовзі, скоро.

Means n. – something that enables a purpose to be fulfilled – засоби.
Means of production – all goods that are made with the purpose of using
them to produce other goods – засоби виробництва. Syn. capital goods.

Own v. – to have as property – володіти. Syn. to have, to possess.

Payment n. – the sum of money paid – платіж, сплата. Cash
payments/payment in cash – платіж готівкою, interest payments – платежі
відсотків, public/welfare payments – платежі з соціального забезпечення,
terms of payment – умови платежу, to effect/make payment – здійснювати
платіж, to postpone the payment – відкласти платіж, unemployment payment
– грошова допомога по безробіттю. Syn. a pay

Raise v. – to increase the amount, size, value – підвищувати,
збільшувати. To raise living standard – підвищувати життєвий рівень, to
raise funds/money/capital – добувати (отримувати) гроші (капітал). Syn.
to go up, to increase, to rise.

Risk n. – a chance or possibility of suffering loss, danger, injury, etc
– ризик. At one’s own risk – на свій страх та ризик, at owner’s risk –
на ризик власника/під відповідальність власника, to assume/face/take/run
a/the risk(s) – ризикувати, наражатися на ризик, calculated risk –
обміркований ризик/ризик з точно розрахованими шансами на успіх. Syn. a
hazard, a peril.

Reward n. – something given or received for service, effort, or
achievement – винагорода. Due reward – відповідна винагорода, in reward
for something – у винагороду за щось, just reward – справедлива
винагорода, money reward – грошова винагорода, to earn/get/receive a
reward – отримувати винагороду. Syn. a recompense.

Advance (in) v.– to accelerate the growth or progress of something –
робити успіхи, удосконалюватися. To advance in knowledge – ставати більш
освіченим. Syn. to progress, to succeed in .

Affect v. – to bring about a change in something – впливати. Syn. to

Decision about/on n. – a settlement of a question, a making up of one’s
mind – рішення. To arrive at/come to/make/take a decision – приймати

Do with v. – to have relations to; to be connected with – мати справу,
займатися. Syn. to be concerned with, to deal with.

Endeavor v.– to make an earnest attempt – намагатися, докладати зусиль.
Syn. to do one’s best, to make an attempt, to seek, to try.

Endeavor n. – an act of trying to do something new or difficult –
намагання, спроба, зусилля, старання. Syn. an attempt.

Living n. – means of keeping alive or earning what is needed for life –
засоби існування. Living wage/cost of living – прожитковий мінімум,
standard of living – рівень життя, to earn/gain/get/make a living –
заробляти на прожиття. Syn. livelihood.

Responsibility n. – the state or quality of being responsible –
відповідальність, зобов’язання. On one’s own responsibility – за власною
ініціативою, to accept/assume/take (a) responsibility – взяти на себе
відповідальність або зобов’язання, to fulfill (a) responsibility –
виконувати зобов’язання, to share (the) responsibility – розподіляти

Run v. – to carry on, or control an activity, business or organization –
керувати, управляти. Syn. to manage.

Business n. – a) the activity of making money by producing or buying and
selling goods or providing services – бізнес, підприємництво, справа.
Big business – великий бізнес; small business – малий бізнес. To be out
of/go out of business – збанкрутувати. To do/conduct/engage in business
–займатися підприємницькою діяльністю, вести справи. To succeed in
business – досягти успіху в підприємницькій діяльності. Business
activity – ділова активність; business competition – конкуренція;
business decisions – ділові рішення, business management – управління
комерційним підприємством; business world – діловий світ. Syn.

b) an organization that produces or sells goods or provide a service –
компанія, підприємство. Business enterprise – торгівельно-промислове
підприємство, business firm – комерційна компанія, business unit –
організаційна одиниця. Syn. an enterprise, a firm.

Economics n. – a science dealing with production, distribution,
consumption, and exchange of commodities – економіка. Applied economics
– прикладна економіка, business economics – економіка підприємств,
managerial economics – економічні методи управління, normative economics
– нормативна економічна теорія, positive economics – позитивна
економічна теорія.

Economy n. – an organized system for production, distribution, exchange
and consumption of the wealth of society – господарство, економічна
система, економіка. Advanced economy – розвинена економіка/держава,
business economy – підприємницька економіка, economy of scarcity –
дефіцитна економіка, national economy – народне господарство, to build
up the economy – розвивати господарство.

Go up v. – to increase in amount, value, etc. – зростати, збільшуватись.
Syn. to increase, to rise.

Issue n. – an important subject of debate, a question that arises for
discussion – проблема, предмет суперечки. Economic issue – важлива
економічна проблема, issue of the day – актуальна проблема, to bring an
issue to a close – вирішити проблему, to join/take issue with somebody
on something – сперечатися з кимсь про щось. Syn. a matter, a problem, a

Performance n. – the act, manner or ability to perform a particular work
– продуктивність, результативність, ефективність. Economic performance –
економічна діяльність, individual performance – індивідуальна
результативність, overall performance – загальний результат діяльності,
standard performance – нормативна продуктивність, to increase/raise
performance – підвищувати продуктивність. Syn. productivity

Run v. – to carry on, or control an activity, business or organization –
керувати, управляти. Syn. to manage.

Statement n. – something you say or write, especially publicly o
officially – заява, твердження; виклад; викладення; формулювання.
Make/issue/give a statement – робити заяву. Syn. an assertion, an
affirmation. Achieve v. – to succeed in doing or getting something –
досягати, добиватися. To achieve one’s aim/goal/purpose – досягати мети,
to achieve one’s ambition/end – домогтися своєї мети, домогтися свого,
to achieve success in public life – досягати успіху в громадському
житті. Syn. to attain, to gain.

At the expense of – so as to cause loss or harm to something – за
рахунок чогось, ціною чогось. Syn. at/with the sacrifice of something.

Benefit n. – something that promotes welfare – користь, вигода. For the
benefit of somebody/for one’s benefit – на благо/користь когось, for
the public benefit – в громадських інтересах, to derive/get benefit from
– мати користь від/з. Syn. an advantage, a favour.

Compete v. – to try to get what others also seek and which all cannot
have – конкурувати. To compete with one another for profit – конкурувати
один з другим заради прибутку.

Effort n. – an expense of strength and energy to achieve a desired end –
зусилля, намагання. In an effort – в намаганні/спробі, joint/combined
efforts – спільні зусилля, to make an effort – докласти зусилля,
намагатися, to put an effort in/into something – вкладати зусилля, to
spare no efforts – не шкодувати зусиль. Syn. an attempt, an exertion.

Encourage v. – to give support, confirmation, or approval to process or
action – заохочувати, підтримувати, сприяти, спонукати, стимулювати,
надихати. Syn. to favour, to promote, to stimulate, to support.

Exceed v. – to be greater or more in number, degree, amount than
something else – перебільшувати, перевищувати, перевершувати.

Go out of one’s way – to make a special effort to do something –
старатися з усіх сил, не шкодувати зусиль, намагатися. Syn. to try, to
seek, to endeavor, to exert oneself, to do one’s best.

Guide v. – to control or regulate the activities – вести, керувати,
направляти. Syn. to direct, to lead, to rule.

In quest of – trying to find – в пошуках. Syn. in search of, in pursuit

Incentive n. – something that gives somebody a desire to work harder –
спонука, стимул, заохочення. Economic incentive – економічний
стимул/економічне стимулювання, incentive to economy – стимул до
економії, material incentive – матеріальний стимул, powerful/strong
incentive – сильний стимул, to have no incentive to work hard – не мати
стимулу працювати наполегливо, to offer an incentive – спонукати,
стимулювати. Syn: a motive

Keep one’s hand(s) off – to remain at a distance – не втручатися,
триматися осторонь/на відстані. Syn. to stay out of one’s way, not to

Outperform v. – to do better than the others – випереджати за
виробничими показниками. робити краще, ніж хтось.

Reject v. – to refuse to accept or believe in something – відхиляти,
відкидати, заперечувати, відмовлятися прийняти до розгляду або
обговорення, не погоджуватись з. To reject a bill in parliament –
відхиляти законопроект у парламенті, to reject an offer – відхилити
пропозицію/відмовитись від пропозиції, to reject a theory – не
погоджуватись з теорією/ заперечувати/відмовлятися прийняти теорію, to
reject completely, totally – категорично відмовлятися. Syn. to disagree,
to oppose, to refuse.

Self-interest n. – one’s personal interest or advantage as a motive of
behaviour- особиста зацікавленість; егоїзм.

Take one’s course – to develop as id normal – йти своїм шляхом, обирати
свій шлях.

Valuable adj. – being of great use or worth – корисний, важливий. Syn.
useful, important.

Assist v. (with something/in doing something/to do something) – to
provide with the means towards what is needed or sought; to make it
easier for somebody to do something – допомагати. Syn. to help.

Assign v. – to give work or duties to a particular person or group of
persons – визначати, призначати, передавати, доручати, розподіляти. To
assign the costs – призначати витрати.

Ban v. – to order with authority that something must not be done –
забороняти. Syn to forbid, to prohibit.

Benefit n. – an allowance to which a person is entitled as a citizen –
допомога, користь, вигода, благо. Cash benefit – грошова допомога,
social benefits – суспільні (громадські) вигоди, social security
benefits – допомога по соціальному забезпеченню, unemployment benefit –
(грошова) допомога по безробіттю, welfare benefit – виплати для
поліпшення матеріального неблагополуччя.

Effect n. – a result or consequence of an action – результат, вплив,
наслідок. Cause and effect – причина та наслідок, to bring into effect –
здійснювати, to have effect on something – мати бажаний результат,
почати діяти, to limit the effect – обмежувати вплив. Syn. consequence,

Eliminate v. – to remove or get rid of something – усувати, виключати,

Furnish v. – to supply what is needed, esp. what a person needs in order
to live – надавати. Syn. to give, to provide.

Generate v. – to bring into existence – породжувати, викликати. To
generate external benefits – породжувати зовнішні економічні ефекти
(наслідки), to generate the funds – накопичувати капітал. Syn. to

Lack n. – a state of not having something or enough of something – брак,
нестача, відсутність. Lack of competition – відсутність конкуренції,
lack of demand – нестача\відсутність попиту, lack of funds – брак
грошей. Syn. shortage.

Need n. – a/ a state in which something necessary or desirable is
required or wanted – потреба. Consumer needs – запити споживачів,
essential needs першочергові потреби, in case of need – у випадку
необхідності, need for cash – потреба в готівці, to be in need of
something – потребувати, to meet the needs – задовольняти потреби.

b/ poverty – бідність. For need of – через нестатки/злидні.

13.Outlaw v. – to declare something illegal – лишати чинності,
ліквідувати, забороняти. Syn. to ban, to forbid, to prohibit.

14.Restrict v. – to keep within certain limits – обмежувати. Syn. to
limit, to restrain.

15.Sale(s) n. – a/ an exchange of goods for money – продаж, збут.
Bargain sale – дешевий

Alter v. – to make changes in something, often for a specific purpose –
змінювати, перероблювати, міняти. To alter production methods –
змінювати технологію виробництва, to alter one’s mind –
передумати/змінити рішення (намір), to alter one’s plans – змінити
плани. Syn. to change, to modify.

Cut n. – the act of reducing the amount, number or rate of something –
скорочення, зниження, зменшення. Cut in expenditure –
скорочення/зменшення витрат, cut in sales – зменшення товарообороту, cut
in salary/wage – зниження платні, cut price – знижена ціна, price cut –
зниження ціни. Syn. a reduction, a decrease, a decline, a fall.

Demand v. – to request something clearly and firmly in a way that is
difficult to ignore or deny – вимагати, потребувати. Syn. to ask for, to
call for, to request, to require.

Demand (for something) n. – the act of demanding or requesting something
forcefully – попит, потреба, вимога. Actual demand – фактичний/дійсний
попит, demand making – формування попиту, change/increase/decrease in
demand – зміна/збільшення/зменшення попиту,
consumer/consumptive/customer demand – споживчий попит,
decreased/increased demand – зменшений/збільшений попит,
filled/met/satisfied demand – задоволений попит, great/
high/enormous/strong demand – великий попит, to be in (good/great)
demand – користуватися (великим) попитом, to create a demand –
створювати попит, to satisfy a demand – задовольняти потреби, to
meet/satisfy/supply a demand – задовольняти попит, to
meet/satisfy/supply the demand – задовольнити попит, to meet /satisfy
demand – відповідати вимогам, on demand – на запит, на вимогу.






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_^_`_A_Ae_ue_/`Ob?f?fig<hFhJhMh?h1/4hOh ??? & & & gd=c¤ & & F gd=c¤ & gd=c¤ & & & gd=c¤ ????¤ ????¤ a»aaaaeaoa7aeiae eSe|eheie©eii^i$inncoeo;oeEoe gd=c¤ & ‡ ? % 9 ‡ ? % 9 o oooooooooooooooooooooooooooo & F& AE & F% AE gd=c¤ & F) & F( gd=c¤ & F’ 6inal utility – гранична спадна корисність, to diminish in bulk – зменшуватися в обсязі. Syn. to decline, to decrease, to lessen. Estimate v. – to make an approximate calculation of something – підраховувати приблизно. Syn. to calculate, to compute, to count, to value. Item n. – a single thing in a list, group or collection of things – виріб, товар, вид товару. Demand item – ходовий товар, hоt item – товар, який користується підвищеним попитом. Syn. an article, a thing. Quantity n. – an amount or number of something especially that can be measured or is fixed – кількість, розмір, величина. Excess quantity demanded – перебільшення величини попиту, дефіцит, нестача, excess quantity supplied – перебільшення величини пропозиції, надлишок, in quantity – у (великій) кількості, price-quantity combination – комбінація/поєднання ціни та кількості, quantity demanded – величина попиту, quantity supplied – величина пропозиції. Response n. – something said or done in reaction to a question, statement, or circumstance – відповідь. In response to – у відповідь на. Syn. an answer, a reply. Shift v. – to change place, position or direction – переміщувати. To shift in/inward – переміщуватись до середини, to shift out/outward переміщуватись назовні, to shift to the left/to the right – переміщуватись вліво/вправо. Slope v. – to take an inclined course – нахилятися, мати нахил. To slope down/downward – опускатися полого, to slope up/upward – підніматися полого. Syn. to incline. Substitute something for v. – to use something instead of another thing – замінювати. Suffer v. – to experience or undergo something unpleasant or undesirable – зазнавати. To suffer a decrease in sales – зазнавати зменшення обсягу продажу/товарообороту, to suffer losses – зазнавати збитків. Syn. to incur, to sustain. Tend v. – to be generally inclined to react or behave in a particular way, or be in the habit of doing something – мати схильність (тенденцію), бути схильним, тяжіти. Syn. to be apt. Usefulness n. – a quality of having utility and especially practical worth or applicability – корисність. Item’s usefulness – корисність товару. Syn. utility. Vary v. – to change within a range of possibilities, or in connection with something else – міняти(ся), змінювати(ся). To vary directly with – змінюватися прямо пропорційно до, to vary inversely with – змінюватися обернено пропорційно до. Anticipate v. – to imagine or expect that something will happen – передбачати, очікувати, сподіватися. To anticipate payment – сплачувати/сплатити достроково. Syn. to expect, to hope, to predict, to foresee. Charge v. – to impose or ask somebody for an amount of money as a price or fee – призначати, вимагати плату, правити. To charge a price – призначати ціну, to charge on – стягувати, to charge a fee for something – призначати/стягувати плату за щось, to charge interest – стягувати/нараховувати відсоток. Syn. to fix, to impose, to set. Set v. – to decide and state when something will happen, how much something should cost, what should be done etc – встановлювати, засновувати, визначати, формувати. To set a price – визначати ціну, to set limits/measures to – встановлювати межу/обмежувати, to set up in business – заснувати/відкрити підприємств. Syn. to determine, to establish, to form. Shift n. – the act of moving from one position, place, direction, or condition to another – зміна, переміщення, зсув. Shift in demand/supply – зміна у характері попиту/пропозиції. Syn. a change, a transfer. Supplier n. – a company or a person that provides things that people want or need, especially over a long period of time – постачальник. Syn. a provider, a producer, a seller. Supply v. – to make available something that is wanted or needed by somebody or something often in large quantities and over a long period of time – постачати, доставляти, давати, задовольняти. To supply the demand – задовольняти попит, to supply a need – задовольняти потребу, to supply a service – надавати послугу, to supply goods to – постачати товари, to supply with something – постачати щось. Syn. to furnish, to provide, to sell. Switch (from something to something) v. – to change suddenly or completely, especially from one thing to another, or to exchange by replacing one thing with another – переміщати, міняти, змінювати. To switch over production – переключитися на виробництво/змінювати напрям виробництва. Syn. to move, to shift, to transfer. Trade v. – to engage in buying and selling for profit – торгувати. To trade in – торгувати чимось, to trade with – торгувати з кимось, to trade something for something – міняти/обмінювати на щось. Syn. to deal in/with, to sell. Adjust (to) v. – to make slight changes in something to make it fit or function better – виправляти, пристосовувати, регулювати, узгоджувати. To adjust in accordance with – приводити у відповідність, to adjust price(s) – узгоджувати (коригувати) ціни, to adjust supply to current demand – привести пропозицію у відповідність з поточним попитом, to adjust to current prices – коригувати у відповідності з поточними цінами. Syn. to fit (to), adapt (to/for). Discourage v. – to make someone feel less confident, enthusiastic and positive about something, or less willing to do something – знеохочувати, відбивати охоту; розхолоджувати; відмовляти; відраджувати, перешкоджати, заважати, стримувати. Syn. to deter. In the short run – іn the immediate future – невдовзі, незабаром, скоро. Syn. soon, presently, before long. Ant. in the long run. Necessities n. – things needed to support life – предмети/товари першої необхідності. Basic necessities – предмети/товари першої необхідності. Syn. essential goods, essentials. Necessity v. – something that a person needs, especially in order to live – необхідність, потреба, предмет першої необхідності. Of necessity – через необхідність, there is no necessity – немає необхідності/потреби. Syn. a need. Reckon on v. – to feel that something is likely to happen and to make plans which depend upon it – покладатися, розраховувати, сподіватися. To reckon with – приймати до уваги. Syn. to rely on. Respond to v. – to act or do something in return to a force or stimulus – реагувати, робити щось у відповідь. Тo respond to the demand – задовольняти попит. Syn. to react to. Assumption n. – something supposed but not proved – припущення, допущення. Syn. supposition. Attain v. – to succeed in doing or getting something – досягати, добиватися. To attain one’s ambition/end/goal/purpose – досягати мети, to attain a price – досягати ціни, to attain equilibrium – досягати рівноваги. Syn. to achieve, to gain, to reach. Balance v. – to establish equal or appropriate proportions of elements – бути/знаходитись у рівновазі, збалансовувати. To balance foreign trade – збалансувати зовнішню торгівлю, to balance out – приводити до рівноваги, to balance the budget – ліквідувати дифіцит бюджету. Syn. to be in/at equilibrium. Do without v. – to manage in spite of not having something – обходитись без. To do without any help – обходитися без сторонньої допомоги. Syn. to manage without, to dispense with. Empty-handed adj. – having failed to obtain what was asked for – з порожніми руками. To go empty-handed – йти без покупок. Equal v. – to be or become equal to – дорівнювати, відповідати. Syn. to be equal/equivalent, to match. Excess n. – the amount or degree by which one thing or quantity exceeds another – надлишок, надмір, перевищення, надмірність. Excess demand – надмірний/надлишковий/попит, надлишок попиту, excess quantity – надмірна/надлишкова кількість, надлишок кількості, excess supply – надмірна/надлишкова пропозиція, надлишок пропозиції, excess profit – надприбуток, in excess of – зверх, більше ніж. On an/the average – taking an amount or figure that represents the result of adding several quantities together and dividing the total by the number of quantities – у середньому. Syn. at an/the average, according to the average. Ration v. – to distribute relatively scarce resources from among competitive users when demand exceeds supply – нормувати, розподіляти, to ration scarce resources – розподіляти/нормувати обмежені ресурси. Syn. to allocate, to distribute, to divide. Account n. – an arrangement at a bank for depositing and withdrawing money -рахунок. Checking account – чековий/поточний рахунок, deposit account – депозитний рахунок, savings account – ощадний рахунок, to have/keep an account with a bank – мати рахунок у банку, to open an account – відкрити рахунок, to withdraw from an account – зняти з рахунку. Deposit v. – to put a sum of money for safekeeping into a bank account – вносити вклад у банк, здавати на зберігання. To deposit in a savings account – покласти на ощадний рахунок, to deposit money with a bank – внести гроші до банку. Effort n. – use of physical or mental energy – зусилля, напруга. Joint/combined efforts – спільні зусилля, to make an effort – робити зусилля, намагатися, to put an effort into something – вкладати зусилля. Syn. exertion. Every now and then – from time to time – час від часу, коли не коли. Syn. by and again, every once in a way, one time and another. Interest n. – money charged or paid for the use of money – відсоток, процент. Loan interest – позичковий відсоток, rate of interest/interest rate – процентна ставка, ставка/норма відсотка, обліковий відсоток, to bear interest – приносити процент/прибуток, to draw interest on capital/debt – отримувати проценти на капітал/борг, to earn interest – отримувати процент. Keep track of something – to be well informed about something – бути в курсі справи, стежити за чимсь. Syn. to keep trace of something. Ant. to lose track of something – не стежити за чимсь, не бути в курсі справи. Overtime n. – time worked in addition to regular working hours or payment made to workers for extra hours – понаднормований час, понаднормова робота. Overtime pay/payment – плата за понадормову роботу, overtime work – понаднормова робота, to be on overtime – працювати понаднормово, to work overtime – працювати понаднормово/багато. Possessions n. – any thing that has value and can be owned – майно, власність. Man of great possessions – людина з великим достатком, value of one’s possessions – вартість майна, to lose all one’s possessions – втратити усе майно. Syn. assets, ownership, property. Spend v. – to pay out (money) for goods and services – витрачати.To spend money like water – розтринькувати гроші, сипати грошима, to spend money on something – витрачати гроші на щось. Syn. to add up. Summarize v – to make a summary of something – підсумовувати. To summarize something over a period of time – підсумовувати щось за період часу/протягом періоду часу. CJaJCmoney or other goods for which it can be exchanged – вартість. Value of things – вартість речей, to pay the value of something – відшкодувати вартість. Syn. cost, worth. Charge n. – a price asked for services or goods – плата, тариф, ціна. Free of charge – безкоштовно, service charge – плата за послуги, tuition charge – плата за навчання, to be in charge of a business – керувати підприємством. Syn. cost, price. Compound v. – to determine interest on the total of the principal and accrued interest – підраховувати. Syn. to calculate, to compute. Convert v. – to change into another form, or function – конвертувати, перетворювати. To convert into cash – перетворювати в готівку. Deposit n. – something placed for safekeeping, as money in a bank – внесок, вклад, депозит. Amount on deposit – сума на депозиті, checkable deposit – вклад, що може вилучатися за допомогою чеків, demand deposit – безтерміновий вклад, внесок до вимоги, deposit account – рахунок у банку, депозитний рахунок, deposit at a bank – вклад у банку, on deposit – на зберіганні, savings deposit – ощадний вклад, to leave on deposit – залишати на депозиті, to place money on deposit – вносити гроші на депозит Hold v. – to maintain for use – зберігати. To hold money for liquidity – зберігати гроші з міркування ліквідності, to hold one’s savings – зберігати заощадження. Syn. to keep, to maintain. Instrument n. – a legal name for a formal document – документ, засіб, зобов’язання. Credit instruments – кредитні зобов’язання, instrument of payment – засіб платежу, long-term credit instruments – довгострокові кредитні зобов’язання, short-term credit instruments – короткострокові кредитні зобов’язання. On occasion – whenever the need arises – при нагоді, в разі потреби. Syn. from time to time, now and then. Return n. – income or profit from an investment – дохід, прибуток, надходження, відшкодування. Rate of return – норма прибутку, return on investment – прибуток на інвестований капітал, to be based on returns from something – грунтуватися на доходах від чогось, to earn a return – отримувати прибуток. Save v. – to keep for future use – заощаджувати, накопичувати, відкладати. To save money – заощаджувати гроші, save as you earn – заощаджуйте в міру того, як отримуєте доход. Syn. to build up, to economize, to generate, to store. Saving(s) n. – money set aside by individuals, either for some special purpose or to provide an income at some time in the future – заощадження, накопичення. Mutual savings banks – взаємо-ощадні банки, savings account – ощадний рахунок, savings bond – ощадна облігація, savings plan (program) – заощадження, savings and loan association – позичково-ощадна асоціація, savings institution – депозитна установа. Beneficiary n. – a person who receives the benefits of an insurance policy – бенефіціар, спадкоємець. Syn. heir. 2. Benefits n. – allowance paid under an insurance policy for some kinds of losses – страхова допомога. 3. Coverage n. – the total range of protection given to the insured by an insurance policy – покриття, відшкодування, страхування.Coverage under life insurance policy – відшкодування відповідно до полісу страхування життя. 4. Damage n. – harm or loss of value caused by fire and natural disasters – збиток, пошкодження, шкода, аварія. Liability for damages – відповідальність за збитки, to recover damages – одержати компенсацію за збитки, to suffer damage – зазнати збитків. Syn. loss. 5. Emergency n. – a situation, often dangerous, which arises suddenly and calls for prompt action – аварія, непередбачений випадок, крайня потреба. Syn. accident, casualty, catastrophe, collision, crash. Injury n. – physical impairment resulting from accident – каліцтво, травма, пошкодження. Syn. harm. Insure v. – to make a contract that promises to pay a sum of money in case of accident, sickness, loss, injury, damage or death – страхувати(ся). To insure against something – страхувати(ся) від чогось. The insured – the person or organization whose life or property is insured under an insured contract – страхувальник, застрахований The insurer – the person or company who undertakes to make payment in case of loss, damage, etc. – страховик. 8. Mature v. – to become due or payable – натупити строку (платежу). 9. Maturity n. – a becoming due – настання строку (платежу). At maturity – після настання строку, before maturity – до настання строку, maturity date дата завершення строку полісу, дата виплати страхової суми. 10. Odds n. – the chance or probability of success or failure – шанси. Long odds – нерівні шанси, the odds are against us – либонь, ми не досягнемо успіху, the odds are in our favor – ми, певно, досягнемо успіху, to calculate odds – розраховувати можливість. Syn. chance, probability. Policy n. – a written contract or certificate of insurance – поліс. Group policy – колективний поліс, insurance policy – страховий поліс, life insurance policy – поліс страхування життя, to draw up a policy – укладати поліс, to take out a policy – застрахуватися, отримати поліс. 12. Policyholder n. – a person holding an insurance policy – власник полісу. 13. Premium n. – the amount paid for an insurance policy – страховий внесок. Premium due – страховий внесок, що підлягає сплаті, insurance premium – N t 3/4 ae @ >
























gd=c¤ сплачений страховий внесок.

14. Reimburse v. – to compensate for – відшкодовувати, компенсувати,

покривати, сплачувати. Syn. to cover, to offset, to repay.

15. Risk n. – a chance or possibility of danger, loss, injury, etc –
ризик. All risks –

від усіх ризиків, insurable risk – ризик, що страхується, insurance
risk –

страховий ризик. Syn. peril.

Balance n. – anything that remains or left over – залишок, сальдо.
Balance in one’s favor – залишок на чиюсь користь, balance of an account
– залишок рахунку, balance of debt – залишок непогашеної заборгованості,
cash balance – запас готівки, касовий залишок. Syn. rest.

Bargain n. – something offered at a cheap or specially-reduced price –
товар за зниженою ціною. To buy at a bargain – дешево купувати. Syn.
sale-priced item, sales item.

3. Bill n. – a written statement of money owed for goods or services
supplied – рахунок до сплати. Bills payable – рахунки до сплати, utility
ball – рахунок за комунальні послуги, to pay a monthly bill – сплатити
місячний рахунок.

4. Borrow v. – to obtain something from somebody with the promise or
intention of returning it – брати в борг. To borrow at interest – брати
в борг під проценти, to borrow money on mortgage – брати гроші в борг
під заставу.

5. Borrower n. – a person who borrows – позичальник, отримувач позики,

6. Charge n. – price asked for services or goods – плата, ціна,
нарахування. Charge account – кредит по відкритому рахунку, finance
charge – вартість кредиту (фінансові витрати на кредит), free of charge
– безкоштовно, interest charges – платежі процентів, loan charge –
плата за позику, service charge – плата за обслуговування.

7. Credit n. – a/ a sum of money lent by a bank – кредит, позика.

b/ belief of others that a person, business company can pay debts or
will keep a promise to pay – довіра. Consumer credit – споживчий
кредит, credit costs – витрати на кредит, вартість кредиту, credit
history – відомості про кредитоспроможність, credit rating – оцінка
кредитоспроможності, credit purchase (purchase on credit) – покупка в
кредит, credit worthiness – кредитоспроможність, надійність
позичальника, sales credit – продаж в кредит, to buy/sell on credit –
купляти/продавати в кредит, to give credit – надавати кредит, to obtain
credit – отримувати кредит. Syn. loan, lend.

8. Creditor n. – a person to whom money is owed – кредитор. Syn. lender.

9. Lend v. – to give or allow the use of something temporarily, on the
understanding that it will be returned – давати в борг, позичати гроші
під відсотки, кредитувати. To lend money – озичати гроші, to lend on
collateral – позичати під заставу, to lend something to somebody, to
lend somebody something – давати комусь щось в борг. Syn. to credit, to

10. Lender n. – a person who gives somebody the use of money for a
period of time, on the understanding that it or its equivalent will be
returned – позикодавець, заїмодавець, кредитор. Syn. money lender,

11. Loan n. – a sum of money lent at interest – позика, кредит. Business
loans – позики підприємствам, loan applicant – особа, яка звертається за
позикою, loan credit – позичковий кредит, loan against pledge – позика
під заставу, loan against securities – позичка під цінні папери, loan at
bearing interest – позика під проценти, loan policy – кредитна політика,
consumer (consumption) loan – позика на споживчі цілі, споживча позика,
long-term/short-term loan – довгострокова/короткострокова позика, to
contract/ make/raise a loan – отримувати позику, to repay/meet/redeem a
loan – погашати позику.

Advertise v. – to call attention to a product or business so as to
promote and increase sales – створювати рекламу, рекламувати,
розміщувати рекламне оголошення. To advertise for something – робити
рекламне оголошення, to advertise one’s goods – рекламувати товар.

Advertisement n. – a public notice or announcement in the press, TV,
etc., offering goods or services for sale – реклама, рекламне

Advertiser n. – a person who advertises – рекламодавець.

Advertising n. – the business of preparing or distributing
advertisements – рекламна діяльність, рекламування, реклама. Bandwagon
advertising – реклама, що покладається на ефект стадності, benefits of
advertising – економічний ефект реклами, direct mail advertising – пряма
поштова реклама, informative advertising – інформативна реклама,
misleading advertising – реклама, що вводить покупця в оману.

Appeal n. – the power to arouse or stimulate desire – заклик, звернення,
апеляція, привабливість. Advertising appeal – рекламна концепція,
привабливість реклами, emotional appeal – звернення до емоцій,
popularity appeal – апеляція до популярності, rational appeal –
звернення до розуму.

Convince v. – to persuade by argument or proof – переконувати,
запевняти. Syn. to assure, to persuade.

Hazard n. – a risk or chance associated with danger – ризик, небезпека.
To take hazards – ризикувати, йти на ризик. Syn. risk, peril.

8. Protection n. – keeping from harm or injury – захист, охорона,
запобігання. Consumer protection – захист споживача, health protection –
охорона здоров’я, quality protection – охорона якості.

9. Tempt v. – to try to persuade someone to do something wrong or
foolish – спокушати. Syn. to over-persuade.

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