Exercises
1. Answer the questions:
1. What word in paragraph 1 suggests that labor should be understood in a
exact sense, related to economics?
2. Which word can be taken as the opposite of objective?
3. What word in paragraph 2 indicates that a man is working only for
himself?
4. What word in paragraph 3 means regular payments for accommodation
and equipment?
5. What word in the same part of paragraph 3 means regular expenses?
. What verb is used in paragraph 3 to show that a business risk has been
worthwhile?
7. What phrase in the fourth paragraph is taken to suggest that a surplus
return to the system from which it came, order to make business grow
faster?
8. What word in paragraph 5 represents a set of conditions and not a
geographical location?
9. What noun is used between lines 56-66 to refer to middlemen or special
representatives doing work for a businessman?
10. What word in the same section indicates that market competition
should be completely free?
11. What verb in the same paragraph can be replaced by prevailing or
operating?
J v
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12. What word in the next to last paragraph refers to a very limited group
of sellers working together to restrict trading opportunities?
13. What adverb in the same paragraph suggests that monopolistic profits
may be kept high by unnatural means?
14. What adjective in the last paragraph shows that such services as
national airlines have great social value?
2. Which of the following is true:
1. The money standard used by economics is essentially an ethical
standard.
2. Employees enjoy the surplus in industry that we usually call profits.
3. The future is often financed by the past.
4. Although the accumulation of capital is generally considered a strictly
capitalistic activity, it also takes place in communist economies.
5. Although the term “market” originally referred to a fixed locality, today
it need not do so.
6. The four types of monopoly are not possible in a perfect market.
3. Retell the text
UNIT 7
MONEY AND BANKING
All values in the economic system are measured in terms of money. Our
goods and services are sold for money, and that money is in turn
exchanged for other goods and services. Coins are adequate for small
transactions, while paper notes are used for general business. There is
additionally a wider sense of the word “money” covering anything which
is used as a means of exchange, whatever form it may take. Originally, a
valuable metal (gold, silver or copper) served as a constant store of value,
and even today the American dollar is technically “backed” by the store of
gold which the US government maintains because gold has been
universally regarded as a very valuable metal, national currencies were for
many years judged in terms of the so-called “gold standard”. Nowadays
however national currencies are considered to be as strong as the national
economies which support them.
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Valuable metal has generally been replaced by paper notes. These
notes are issued by governments and authorized banks, and are known as
“legal tender”. Other arrangements such as cheques and money orders are
not legal tender. They perform the function of money substitute and are
known as “instruments of credit”. Credit is offered only when creditors
believe that they have a good chance of obtaining legal tender when they
present such instruments at a bank or other authorized institution. If a
man’s asserts are known to be considerable, then his credit will be good. If
his asserts are in doubt, then it may be difficult for him to obtain larger
sums of credit or even to pay for goods with a cheque.
The value of money is basically its value as a medium of exchange,
or, as economists put it, its “purchasing power”. This purchasing power is
dependant on supply and demand. The demand for money is reckonable as
the quantity needed to effect business transactions. An increase in business
requires an increase in the amount of money coming into general
circulation. But the demand for money is related not only to the quantity of
business but also to the rapidity which the business is done. The supply of
money, on the other hand, is the actual amount in notes and coins available
for business purposes. If too much money is available, its value decreases,
and it does not buy as much as it did, say, five years earlier. This condition
is known as “inflation”.
Banks are closely concerned with the flow of money into and out of
the economy. They often co-operate with governments in efforts to
stabilize economies and to prevent inflation. They are specialists in the
business of providing capital, and in allocating funds on credit. Banks
originated as places to which people took their valuables for safe-keeping,
but today the great banks of the world have many functions in addition to
acting as guardians of valuable private possessions.
Banks normally receive money from their customers in two distinct
forms, on current account, and on deposit account. With a current account,
a customer can issue personal cheques. No interest is paid by the bank on
this type of account. With a deposit account however, the customer
undertakes to leave his money in the bank for a minimum specified period
ot time. Interest is paid on this money.
The bank in turn lends the deposited money to customers who need
capital. This activity earns interest for the bank, and this interest is almost
always at a higher rate than any interest which the bank pays to its
depositors. In this way the bank makes its main profits.
We can say that die primary function of a bank today is
t o a c t
as an
intermediary between depositors who wish to make interest on their
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savings, and borrowers who wish to obtain capital The bank is a reservoir
of loan able money, with streams of money flowing in and out. For this
reason, economists and financiers often talk of money being “liquid”, or of
the “liquidity” of money. Many small sums which might not otherwise be
used as capital are rendered useful simply because the bank acts as a
reservoir.
The system of banking rests upon a basis of trust. Innumerable acts
of trust build up the system of which bankers, depositors and borrowers are
part. They all agree to behave in certain predictable ways in relation to
each other, and in relation to the rapid fluctuations of credit and debit.
Consequently, business can be done and cheques can be written without
only legal tender visibly changing hands
Exercises
1. Answer the questions:
1. How are all values in the economic system measured?
2. What kind of money is used for general business?
3. What is the wider sense of the word “money”?
4. What originally served as a store of value?
5. What backs the US dollar?
6. How are national currencies judged nowadays?
7. Who can issue paper notes?
8. What name is given to arrangements like cheques?
9. When is credit offered?
10. When is a man’s credit good?
11. What phrase do economists use for the value of money?
12. How do we reckon the demand for money?
13. What word is used to describe the flow of money round the economic
system?
14. What is inflation?
15. In what way do banks co-operate with governments?
2. Which of the following is true?
1. The US dollar is constant store of value.
2. Instruments of credit are accepted because they can be converted easily
into substitute money.
3. The purchasing power of money depends upon supply and demand.
4. The demand for money who need capital.
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5. You can earn interest ob a current account.
6. Banks lend money to depositors who need capital.
7. The main profits of a bank come from lending money at a fixed rate of
interest.
8. Money is described as “liquid” because it is compared to flowing water.
9. Legal tender must change hands when we do business and we must see
it change hands.
UNIT 8
World Bank
The
World
Bank
is
the
world's
foremost
intergovernmental organization concerned with the external financing of
the economic growth of developing countries. The official title of the
institution is the International Bank for Reconstruction and
Development
(IBRD). Before recommending a Bank loan, the staff of the Bank must be
reasonably satisfied that the productivity of the borrowing country will be
increased and that the prospects for repayment are good. A country
must be judged creditworthy.
Engineering
investigations
are
frequently earned out to determine the probable relation of a proposed
project to benefits and costs. Increasingly, however, the Bank has shifted
somewhat away from project lending (e.g., for a dam or a highway or a
port); it has become concerned with education and other human services,
the environment, and, through structural adjustment loans, the modification
of governmental policies that are thought to have impeded long-run
growth. The Bank has also paid increasing attention to the evaluation of
previous lending. Recently, moreover, it has acceded to the requests of the
American secretary of the treasury to help to ease the huge, outstanding»
largely commercial-bank debt.
Voting power in the Bank (as well as in the Fund), is determined by the
size of each member nation's subscription. Subscriptions, in turn are based
on a formula that takes into account such variables as the value of each
nation's foreign
trade and its total output. Ultimate power, through weighted voting, rests
with the Board of Governors of the Bank (and the Fund). The
governors
meet annually in September. The day-to-day affairs of the Bank are
etermined, however, by executive directors who live permanently 'п
as ington, D.C. They hire a president, who, in turn, hires a staff. By
m
tradition, rather than law, the president of the Bank is an American, usually
a banker, proposed by the President of the United States.
Because of the size of their subscriptions, five nations— the United
States, Japan, Germany, the United Kingdom, and France—are entitled to
appoint executive directors; the remaining seventeen directors are elected
by some combination of the votes of the other nations. There are 156
member nations, but, with the independence of the Baltic states and the
devolution of the Soviet Union into separate republics, the membership
could increase to over 170, thereby including all the independent nations in
the world.
The Soviet Union was one of the forty-four governments whose
representatives signed the original Bretton Woods agreements, but along
with the other members of the Warsaw Pact, it chose not to join the Bank
or the Fund when these organizations were formally incorporated in 1946.
(Poland and Czechoslovakia joined the Bank and the Fund initially but
withdrew when the cold war began in earnest and a loan to Poland was
blocked by the United States.
World Bank Group
In 1954, an International Finance Corporation was
.tablished to supplement the World Bank by participating in
juity financing in member countries, and in 1960, a third rganization, the
International Development Association DA), was created. These three
organizations constitute the /orld Bank Group. The IDA has the same
officers and staff s the World Bank, but its separate charter enables it to
offer Dans to low-income member countries repayable at 0.75 tercent
interest over 50 years (including 10 years' grace).
Soft or concessionary assistance is made possible by ;ontributions to
(replenishments of) the IDA by the governments of high-income
(industrial) countries. The management of the World Bank Group is thus
enabled to offer rates of interest and loan maturities which take into
account the nature of the projects financed and the presumed ability of
borrowing governments to service their debt. The initial capitalization of
IDA for the 5 years 1960 to 1964 was less than $1 billion in hard
currencies. By 1992, the ninth replenishment for 3 years will be over $11
billion. Today, the World Bank Group is a far cry from what it was when
the World Bank began in 46 under President Eugene Meyer—with three
floors of rented office space at 1818 H Street NW and a few dozen
employees. Even in the final days of the presidency of George Woods, in
1968, the group had fewer than 1500 employees and four buildings. As of
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August 31,1991, however, on the eve of the accession to the presidency of
Lewis Preston, former chairman of the board of
J- P. Morgan & Co., the
Worid Bank Group had 3 senior vice presidents, 14 vice presidents, and
6500 employees scattered
through 18 separate buildings in" Washington, D.C.; 2 large offices in
Paris and Tokyo; and 50 regional offices. The World Bank Group has had
a significant positive effect on the flow of capital to the poorer countries of
the world, both directly and indirectly, and knowledge o f Third World
problems has increased enormously. Still, the record o f growth is spotty. In
much of East Asia, per capita income is rising rapidly, but in Africa south
of the Sahara, in South Asia, and in much of Latin America, the growth of
per capita income has been discouragingly slow.
1) Ответьте на вопросы.
I .What is the World Bank1?
2. What is the procedure of getting a loan from the World
Bank?
3.What are the latest trends in the policy of the World bank?
4.How is the voting power determined?
5.What are the largest subscribers of the World Bank?
UNIT 9
The Role of the Market
Markets bring together buyers and sellers of goods and services. In
some cases, such as a local fruit stall, buyers and sellers meet physically - In
other cases, such as the stock market, business can be transacted over the
telephone, almost by remote control. We need not go into these details.
Instead, we use a general definition of markets.
A market is a shorthand expression for the process by which
ouseholds decisions about consumption of alternative goods, firms
ecisions about what and how to produce, and workers’ decisions about
how much and for whom to work are all reconciled by adjustment of
prices.
Prices of goods, and o f resources, such as labor, machinery and
an , a just to ensure that scare resources are used to produce these goods
and services that society demands.
Much of economics is devoted to the study how markets and prices
enable society to solve the problems of what, how, and for whom to
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produce. Suppose you buy a hamburger for your lunch. What does this
have to do with markets and prices? You chose the cafe because it was
fast, convenient and cheap. Given your desire to eat, and your limited
resources, the low hamburger price told you that this was a good way to
satisfy your appetite. You probably prefer steak but that is more expensive.
The price of steak is high enough to ensure that society answers the “for
whom” question about lunchtime steaks in favor of someone else.
Now think about the seller’s viewpoint. The cafe owner is in the
business because, given the price of hamburger meat, the rent and the
wages that must be paid, it is still possible to sell hamburgers at a profit. If
rents were higher, it might be more profitable to sell hamburgers in a
cheaper area or to switch to luxury lunches for rich executives on expense
accounts. The student behind the counter is working there because it is a
suitable part-time job which pays a bit of money. If the wage were much
lower it would hardly be worth working at all. Conversely, the job is
unskilled and there are plenty of students looking for such work, so owner
of cafes do not have to offer very high wagers.
Prices are guiding your decision to buy a hamburger, the owner’s
decision to sell hamburgers, and the student’s decision to take the job.
Society is allocating resources- meat, building, and labor- into hamburger
production through the price system. If nobody liked hamburgers, the
owner could not sell enough at a price that covered the cost of running the
cafe and society would devote no resources to hamburger production.
People’s desire to eat hamburgers guides resources into hamburger
production. However, if cattle contracted a disease, thereby reducing the
economy’ s ability to produce meat products, competition to purchase
more scarce supplies of beef would bid up the price of beef, hamburger
producers would be forced to raise prices, and consumers would buy more
cheese sandwiches for lunch. Adjustments in prices would encourage
society to reallocate resources to reflect the increased scarcity of cattle.
Unit 10
Macroeconomics and microeconomics
Text A What is Macroeconomics.
The world macroeconomics means economics in the large. The
macroeconomist’s concerns are with such global questions as total
production, total employment, the rate of change of overall prices, the rate
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of economic growth, and so on. The question asked by the macroeconomist
are in terms of broad aggregates - what the spending of all consumers as
opposed to the microeconomic question of how the spending decisions of
individual households are made; determines the capital spending of all
firms combined as opposed to the decision to build anew factory by a
single firm; what determines total unemployment it the economy as
opposed to why there have been layoffs in a specific industry.
Macroeconomists measure overall economic activity; analyze the
determinants of such activity by the use of macroeconomic theory: forecast
future economic activity; and attempt to formulate policy responses
designed to reconcile forecasts with target values o f production,
employment, and prices.
An important task of macroeconomics is to develop ways of aggregating
the values of the economic activities of individuals and firms into
meaningful totals. To this end such concepts as gross domestic product
(GDP), national income, personal income, and personal disposable income
have been developed.
Macroeconomic analysis attempts to explain how the magnitudes of the
principal macroeconomic variables are determined and how they interact.
And through the development of theories of the business cycle and
economic growth, macroeconomics helps to explain the dynamics of how
there aggregates move over time.
Macroeconomics is concerned with such major policy issues as the
attainment and maintenance of full employment and price stability.
Considerable effort must first
be expended determine what goals could be achieved. Experience teaches
that it would not be possible to inflation entirely without inducing
recession combined with high unemployment. Similarly, an overambitious
employment target would produce labor shortages and wage inflation.
During the 1960s it was believed that unemployment could be reduced to 4
percent of the labor force without causing inflation. More resent
experience suggests that reduction of unemployment to 5.5 percent of the
labor force is about as we can do.
Exercises 1
General understanding
1. What does the world macroeconomics men?
2. What are the concerns of the macroeconomist?
3. What is the difference between the questions asked by
macroeconomists and microeconomic?
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4. What is, according to the text, the important task of
macroeconomist?
5. What does macroeconomic analysis attempt to explain?
6. What are the concepts of macroeconomist?
7. What are the most important theories of macroeconomics?
8. What is said about the correlation between the inflation and
unemployment?
Exercises 2
Translate into Russian:
a) The question asked by the macroeconomist are in terms of broad
aggregates
b) What determines the capital spending of all firms combined as
opposed to the decision to build a new factory by single firm?
c) Macroeconomists measure overall economic activity by the use of
macroeconomic theory
d) Macroeconomic analysis attempts to explain how the magnitudes of
the principal macroeconomic variables re determined.
e) Considerable effort must first be expended to determine are
determined.
f) More resent experience suggest the reduction of unemployment to
5.5 percent of the labor force.
g) Experience teaches that it would not be possible to eliminate
inflation entirely.
Text B.
Microeconomics
The word “micro” means small, and microeconomics means
economics in the small. The optimizing behavior of individual units such
as households and firms provides the foundation for microeconomics.
Micro economists
may investigate individual markets or even the
economy as a whole, but their analyses are derived from the aggregation of
the behavior of individual units. Microeconomic theory is used extensively
in many areas of applied economics. For example, it is used in industrial
organization, labor economic subfields. The tools and analyses of
microeconomics provide a common ground, and even a language, for
economists interested in a wide range of problems.
At one time there was a sharp distinction in both methodology and
subject matter between microeconomics and macroeconomics.
The methodological distinction became somewhat blurred during the 1970s
as more macroeconomic analyses were built upon microeconomic
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foundations. Nonetheless, major distinctions remain between the two major
branches of economics. For example, the micro economist is interested in
the determination of individual prices and relative prices (i.e., exchange
ratios between goods), whereas the macroeconomist is interested more in
the general price level and its change over time.
Optimization plays a key role in microeconomics. The consumer is
assumed to maximize utility or satisfaction subject to the constraints
imposed by income or income earning power. The producer is assumed to
maximize profit or minimize cost subject to the technological constraints
under which the firm operates. Optimization of social welfare sometimes is
the criterion for the determination o f public policy.
Opportunity cost is an important concept in microeconomics. Many
courses of action are valued in terms of what is sacrificed so that they
might be undertaken. For example, the opportunity cost of a public project
is the value of the additional goods that the private sector would have
produced with the resources used for the public project.
General understanding
1. What is, according to the text, microeconomics?
2. What is meant by “economics in the small’?
3. What economic phenomena are о microeconomics attentions?
4. Where is microeconomic theory used?
5. What is “optimization”?
6. What is the concept of the theory of consumer?
7. What is the major difference between the theory of consumer and the
theory of producer?
UNIT 11
Demand and supply
Text A.
The law of Demand.
emand is a key concept in both macroeconomics and
microeconomics. In the former, consumption is mainly a function of
income, w ereas in the latter, consumption or demand is primarily, but not
exc usive y, a function of price. Tbis analysis of demand relates to
microeconomic theory.
The th eo^ of demand was mostly implicit in the writings of classical
ore the late nineteenth century. Current theory rests on the
n s S S j r u i ? Marshall (1890), Edge worth (1881), and Pareto
(1896). Marshall viewed demand in a cardinal context, in which utility
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could be quantified. Most contemporary economists hold the approach
taken by Edge worth and Pareto, in which demand has only ordinal
characteristics and in which indifference or preferences become central to
the analysis.
Much economic analysis focuses on the relation between prices and
quantities demanded, the other variables being provisionally held constant.
At the various prices that could prevail in a market during some period of
time, different quantities of a good or service would be bought. Demand,
then, is considered as a list of prices and quantities, with one quantity for
each possible price. With price on the vertical axis and quantity on the
horizontal axis, the demand curve slopes downward from left to right,
signifying that smaller quantities are bought at higher prices and lager
quantities are bought lower prices. The inverse relation between price and
quantity is usually called the law of demand. The law rests on two
foundations. One is the theory of the consumer, the logic of which show
that the consumer responds to lower prices by buying more. The other
foundation is empirical, with innumerable studies of demand in actual
markets having demonstrated the existence of downward-sloping demand
curves.
Exceptions to the law of demand are the curiosa of theorists. The best-
known exception Geffen effect — a consumer buys more, not less. Of a
commodity at higher prices when a negative income effect dominates over
the substitution effect.
Another is the Vein effect - some commodities are theoretically wanted
solely for their higher prices. The higher these prices are, the more the use
of such commodities fulfills the requirements of conspicuous consumption,
and thus the stronger the demand for them.
General understanding
1. What is “demand”?
2. What is the current theory of demand based on?
3. What prominent economists contributed to the development or the
theory of demand?
4. How is it possible to show the interrelation of price and quantities
consumed?
5. What is “Geffen effect”?
6. What is Vein eff
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UNIT 12
Marketing research and channels of marketing
Text A.
Philip Kilter defines marketing as “a social and managerial process
by which individuals and groups obtain what they need and want through
creating and exchanging products and values with other”. Marketing
research is used to assess the market’s response to the firm’s marketing
inputs which include promotional activities such as price discounting,
placement of in-store displays, multimedia advertising, and coopering;
expanding distribution; and product development and enhancement. The
goal of marketing research is to assist the firm in determining the most
effective, i.e. most profitable, mix of marketing inputs given knowledge of
the marketplace.
As a formal scientific discipline marketing research began in the
early twentieth century with most analyses being based on survey data. In
the 1930s, the A.C. Nielsen Company began collecting in-store data using
manual audits. Today, with the advent of scanning technology, the amount
of timely data available from stores and household has grown
exponentially. Coincident with this data explosion, used data delivery
systems and the techniques used to analyze the data have become
increasingly sophisticated. Marketing research is an integral part of
organizations in both the consumer durable and nondurable goods sectors,
and in resent years the use of marketing principles has become increasing
prevalent among nonprofit and government sectors.
Marketing research is interdisciplinary requiring the knowledge of
economists, operations researchers, psychologists, and statisticians. For the
economist, the economic theory of consumer behavior and the theory of
the firm provide basic building blocks. Marketing research can be viewed
as an operational or tactical activity and as a strategic activity. Although
both activities require knowledge of the workings of the marketplace at
both the macroeconomic and microeconomic levels, tactical analysis focus
on monitoring a product’s performance and testing the working
effectiveness of marketing programs relative to competitors. Strategic
research involves selecting and optimizing marketing opportunities.
In order to understand the marketplace, the researcher must define the
market in terms of both the geographic unit and the product class and
collect data Data on consumer purchases permit an analyst to determine
what was sold and how particular brands performed relative to each other.
In addition to sales and price information, causal data assist the analyst in
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understanding the reason that sales took place. Examples of causal data are
newspaper advertising which indicates the extent of retailer advertising
support source of information for understanding the source of sales is
television advertising. Measuring the effects of television advertising is
relatively difficult owing to the dynamic effects such advertising has on
consumer behavior, however.
Once the data are collected, the analyst may choose to evaluate the
information by simply looking at the raw series together over time or
compute straightforward measures such as market share in order to arrive
at a qualitative assessment of market activity. Statistical models might be
estimated in order to address issues such as temporary price reduction,
effectiveness, the extent of cannibalization due to promotion activity, i.
e...the extent to which sales of one specific product decline as a result of
promoting another similar product produced by the same manufacturer, the
competitive effects of promotions, differences between markets,
competitive pricing points, long-term price elastic ties.
Forecasting is an activity likely to be undertaken by a business economist
working in a marketing research department. Conventionally, business
economists have been responsible for producing forecasts for the
macroeconomic environment or for activity within industry groups. More
recently, forecasting movements in mature product categories, in segments
within categories, and in brands has increased in importance.
Forecasting the success or failure or new product introductions is also
important. New product introductions require a considerable amount a
firms resources, and failure to read the market place correctly and early in
the development process can lead to costly errors. The development of a
new brand begins with the identification of new market opportunities.
Consumer survey research directed at identifying the market response to
the brand concept and elements of the marketing mix, e.g. , pricing, is
typically conducted. On the basis of the survey a firm may decide to
continue with the development plans for the brand, revise current plans in
response to the survey results, or cancel development plans completely.
Comparisons may also be made between attitudes toward the new concepts
and exiting products.
General understanding:
1) How does Philip Kittler define marketing?
2) What is marketing research used for?
3) What is the goal of marketing research?
127
4) When did marketing research begin as a “formal scientific
discipline”
5) What knowledge does marketing research require?
6) What are basic steps of marketing research?
7) According to the text, how can market research are viewed?
8) What are the sources of information of marketing researcher?
UNIT 13
Management: Six basic steps in Decision M aking
Text A
William F. Samuelson Stephen G. Marks
Step 1: Define the Problem
Decisions do not occur in a vacuum. Many come about as part of the
firm’s planning process. Others are prom pted by new opportunities or
new problems. It is natural to ask: What brought about the need for the
decision? What is the decision all about? In all kinds of textbooks
examples, the decision problems is stated and is reasonably well defined.
In practice, however, managerial decisions do not come so neatly
packaged; rather, they are messy and poorly defined. Thus, problem
definition is prerequisite for problem management. A key part of problems
definition is identifying the setting or context..
Identifying the decisions context and the decisions maker represents a large
step toward understanding the choices process. The particular setting has a
direct bearing on both the decisions maker’s objectives and the available
courses of action. The next two steps considers each of these aspects in
turn.
Step 2. Determine the Objective When it comes to economics decisions, it
is a truism that “you can’t always get what you want”. But to make any
progress at all in your choice, you have to know what you want. In most
private sector decisions, the principal objective o f the firm - and barometer
of its performance - is profit: the difference between the firm’s total
revenues and its total costs. Thus, among alternative courses of action, the
manager will select the one that will maximize the profit of the firm-
Attainment of maximum profit worldwide is the natural objective of the
multinational steel company, the drug company, and the
m anagem ent
and
shareholders of Disney, Canon, Time Inc., Texaco, and Pennzoil-
128
Sometimes the manager focuses on the narrower goal of minimization cost.
For instance, the firm may seek to produce given level of output at the
least cost or to obtain a targeted increase in sales with minimal expenditure
on advertising. In a host of settings, measures that reduce costs directly
serve to increase profits. The objective in a public sector decision, whether
it be building an airport or regulating a utility, is broader than the private
profit standard. In making its choice, the government decision maker
should
weigh all benefits and costs, not solely those that accrue as revenue
or are incurred as expenses. According to this
benefit-cost criterion, the
airport may be worth building even if it fails to generate a profit for the
government authority. The optimal
means of regulating the production
decisions o f the utility depend on a careful comparison of benefits (mainly
in the from of energy conservation) and costs (in material and
environmental terms).
In practice, profit maximization and benefit - cost analysis are not
always
unambiguous guides to decision making. One difficulty is posed
by the timing of benefits and costs. Should a firm (the drug company, for
example) make an investment (sacrifice profits today) for greater profits
five or ten years from now? Are the future benefits to air travelers worth
the present capital expense of building the airport? Both private and public
investments involve trade-offs between present and future benefits and
costs. Thus, in pursuing its profit goal, the firm must establish a
comparable measure of value between present and future monetary returns.
Uncertainty poses a second difficulty. In many economics decisions,
it is
customary to treat the outcomes of various actions as certain. For
instance, a fast-food chain may know that it can construct a new outlet in
21 days at a cost of $90 per square foot. The cost and timing of
construction are not entirely certain, but the
margin of error is small
enough to have no bearing on the company’s decisions and thus can be
safely ignored. In contrast, the cost and date of completion of a nuclear
power plant are highly uncertain (due to unanticipated design changes, cost
overruns, schedule delays, and the like).
At the best, the utilities that share ownership of the plant may be able to
estimate a range of cost outcomes and competitions dates and assess
probabilities for these possible outcomes. (With the benefit of
hindsight,
one now wishes that the utilities had recognized the risk and safety
problems of nuclear plants 10 and 20 years ago, when construction on
many plants was initiated).
The presence of risk and uncertainty has a direct bearing on the way
the decision maker thinks about his or her objective. The drug company
129
seeks to maximize its profit, but there is no simple way to apply the profit
criterion to determine its best R&D choice. The company cannot use the
simple rule “choose the method that will yield the greater profit,” because
the ultimate profit from either method cannot be pinned down ahead of
time. In each case, there are no profit guarantees; rather, the drug company
faces a choice between two risky options. Similarly, public programs and
regulatory policies will generate future benefits and costs that cannot be
predicted with certainty.
What is the decision maker’s goal? What end is he or she pursuing?
How should the decision maker value outcomes with respect to this goal?
What if he or she is pursing multiple, conflicting objectives?
General understanding:
1. What is the difference between the book examples and practice?
2. What role does the problem of definition play for the problem
management?
3. What role does context play for problem definition?
4. What is “truism”?
5. What is the difference between the objective in a public and the private
sector decision?
6. What are the difficulties of the decision making?
UNIT 14
MARIE CURIE AND THE DISCOVERY OF RADIUM
1. Marie Curie was born in Warsaw on7 November 1867. Her father
a teacher of science and mathematics in a school in the town, and from him
little Maria Sklodowska-which was her Polish name —learned her first
lessons in science. Maria's wish was to study at the Sorbonnein Paris, and
after many years of waiting she finally left her native land in 1891.
2. In Paris Maria began a course of hard study and simple living .
She determined to work for two Master's degrees- one in
Physics,
the other
in Mathematics. Thus she had to work twice as hard as the ordinary
student. Yet she had scarcely enough money to live on. She lived in the
poorest quarter of Paris. Night after night, after her hard dae's work at the
University, she got to her poorly furnished room and worked at her books
steadily for hours. Sometimes she had no more then a bag of cherries.
130
Though she was often weak and ill, she worked inthis way for four years.
She had chosen her course and nothing could turn her fron it.
3. Among the many scientists Maria met and worked with in Paris
was Pierre Curie. Pierre Curie, bom in 1859 in Paris, was the son of a
doctor, and from early childhood he had been fascinated by science. At
sixteen he was a Bachelor of Science, and he took his Master's degree in
Physics when he was eighteen. When he met Maria Sklodowska he was
thirty-five years old and was famous throughout Europe for his discoveries
in magnetism. But in spite of the honour he had brought to France by his
discoveries, French Government could only give him a very little salary as
a reward, and the University of Paris refused him a laboratory of his own
for his researches.
4. Pierre Curie an Maria Sklodowska 6 both of whom loved science more
than anything else, very soon became the closest friends. They worked
together constantly and discussed many problems of their researches. After
little more than a year they fell in love with each other, and in 1895 Maria
Sklodowska became Mme. Curie. Theirs was not only to be a very happy
marriage but also one of the greatest scientific partnerships.
Marie had been the greatest woman - scientist of her day but she was a
mother too, a very one. There were their two little girls, Irene and Eve.
5. By this time Mme. Cure had obtained her Master's degree in Physic an
Mathematics, and was busy with researches on steel. She now wished to
abtain a Doctor's degree. For this it was necessary to offer to the examiners
a special study, called a thesis.
6. For some timePierre Curie had been interested in the work of a French
scientist named Becquerel. There is a rare metal called uraniun which, as
Becquerel discovered, emits rays very much like X-rays. These rays made
marks on a photographic plate when it was wrapped in black paper. The
Curies got interested in these rays of uranium. What caused them? How
strong were they? There were many such questions that puzzled Marie
Curie and her husbend. Here, they decided, was the very subject for
Marie's Doctor's thesis.
7. The research was carried out under great difficlty. Mme. Curie had to
use an old store-room at the University as her laboratory - she was refused
a better room. It was cold, there was no proper apparatus and very little
space for research wore. Soon she discovered that the rays of uranium were
like no other known rays.
8. Marie Curie wanted to find out if other chemical substances might
emit similar rays.So she began to examine every known chemical
substance .Once after repeating her experiments time after time she found
131
that a mineral called pitchbende emitted much mor poverful rays than any
she had already found.
9. Now, an element is a chemical substance which so far as is known
cannot be split up into other substances. As Mme. Curie had examined
every known chemical element and none of them had emitted such
powerful rays as pitchblende she could only decide that this mineral must
contain some new element.
Scientists had declared that every element was already known to them.
Bull all Mme. Curie's experiments pointed that it was not so.
Pitchblende must contain some new адц unkllOwn element. There
was no other explanation Уог the powerful rays which it emitted. At that
moment Pierre Curie stopped his own investigations on the physics of
crystals and joined his wife in her effort to find tliose more active
unknown chemical elements.
Scientists call the property of giving out such rays "radioactivity”, alld
Mme. Curie decided to call the new element "radium", because it was more
strongly radioactive thah any known metal.
It is known now that Мте. Curie has given the real basis far the
industrial methods of separating radium and other elements from the
pitchblende and from other minerals. ІПІ903 Marie and Pierre together
with Henry Becquerel were awarded the Nobel Prize in Physics. In 1911
Marie received the Nobel Prize in Chemistrv. But the second prize went to
her alone for in 1906 Pierre ha (1 died tragically in a traffjc
a c cid en i-.М те.
Sklodowska-Curie, the leadillg woman-scielltist, the greatest woman of
her generation, has become the first person to receive a Nobel Prize twice.
UNIT IS
EDUCATION
1.
As long as we .live we continue to learn, and the education we
receive wheh we are young helps us to continue learning. We are taught to
read and write, and are taught many of the essential facts about the world
and shown how to sort them out so that later in life, we shall be able to find
out things ourselves and not to ask other people.
The first teachers were fathers and mothers, but very early in the
istory о man children began to be taught by people other than their
!ath^
and mothers- 11 is thought that schools first started in Egypt 5,000-
o
,
years ago, and that it was the invention of writing which made
them necessary. Reading and writing were quite different from the skills
132
used in everyday life, and writing made it possible to store up knowledge
which grew with eahc generation. Specially trained people were therefore
needed to teach it.
2. Only the sons of nobles 2 attended the first Egyptian schools,
which taught reading, physical education and good behaviour. In ancient
India the priestly caste decided what should be taught to each of the four
castes, or groups, into people were divided.
Only the priestly caste was allowed to learn the Hindu scriptures. In China,
until the 19th century, education was organized according to social classes,
and consisied largely of learning the scipturcs by heart.
3. A clear example of the way in which even neighbouring peoples
produce different types of education comes from ancient Greece. Sparta
and Athens were two Greek states. The Spartans, a hard and warlike
people, gave a purely military education. At fhe age of seven all boys of
noble families were taken from their homes and were sent to live in
groups. They were kept under a very strict discipline and were taught hunt
ing, military scouting, swimming and the use of weapons. The Spartans
despised literature, and some people think they could not even read.
At the veiy same time, also for the nobles only, the Athenians were
building what we call a liberal education - one that helps man to develop
all sides of his nature, helps him to make and appreciate beautiful things
and helps him to find the best way of life. They thought it important to
educate the body as w ell as the mind, and had a programme of physical
training which consisted of running, jumping, wrestling and throwing the
discus. As time went on Athenian education paid special attention to
reading, writing and literature and these were taught by a special teacher,
known as the "grammatist". Common people were not educated, they were
trained in craftsmanship, workmanship, trades.
Greek philosophers, or thinkers, always discussed what education should
try to do and what it should include. Plato wrote a book called The
Republic, which is one of the best books ever written on education, and
since those days Greek ideas have influenced European education,
especially secondary and university education.
4. The Romans were very good at organizing, and they were the first
people to have schools run by the government free of charge. Throughout
their great empire there was a network of these schools which provided for
three stages of education.
At six or seven a l l boys (and some girls) went to the primary school,
where they learned "three R’s"; reading, writing, and arithmetic. Most
133
children were not taught more than this, but at 120r 13 boys of the rkh
families went on to the "grammar" school to study the Greek and Latin
languages and their literatures, that is, what had been written in those
languages. At 16, young nobles who wanted to enter politics 'or the
service of their countiy went to the schools of rhetoric to be trained in
rhetoric, or public speaking.
5. In Great Britain the first teachers we read about were craftsmen.
They taught children to read, write and count, to cook and mend their own
shoes. In the early 19th century the main system of teaching was the
"Monitor" system, a The teacher could manage a class of 100 or more by
using older pupils or "monitors" to help him. The schools had long desks
which were sometimes arranged in tiers so that the teacher could see every
child in a large class.
UNIT 16
THE HISTORY OF LAND TRANSPORT
INTRODUCTION
1. The word "transport" means to carry people or goods from place to
place. It is also used for the vehicles that carry people от goods - for
example, motor transport includes buses, lorries, motor coaches and motor
cars. The American word for the same thing is transportation, and the
remark transportation is civilization" was made by an American, the
motor-car manufacturer Henry Ford.
The history of transport is divided into two stages. The first stage is that in
wh-ich all forms of transport depended directly on the power of men or
animals or on natural forces such as winds and current. The second stage
began with tile development of the steam engine, which was ysources of
power for transport.
UNIT 17
LAND TRANSPORT
PORTERS AND PACK ANIMALS
1.
The most ancient peoples were probably wanderers. They did not
ive in settled homes because they did not know how to till the soil. As
t ey moved from place to place they had to carry their goods themselves.
134
The porters were usually the women, probably because the men had to be
ready to beat off attacks by wild beasts or enemies. Even now; to carry the
household goods is the job of women in back, ward wandering tribes.
The next step was the use of pack animals for carrying goods. The kind of
animal used varied in different places, but the general idea was the same -
the bundles or baskets were carried by the animals on their backs. The dog,
although too small to carry much, was probably one of the first transport
animals used because it is so easily trained. Dogs are still to be trained for
dragging sledges in the Arctik because of their light weight.
2. The next advance in land transport came with the invention of the
wheel. The wheel at once led to the development of two-wheeled carts and
four-wheeled waggons and carriages, but before these could be used for
carrying goods over long distances, a system of roads was necessary.
These roads had to be wide enough to take a cart and paved, for unless
their surface was paved the wheels sank in and the cart stuck. In Britain,
and also over much Europe, the first long-distance paved roads were made
by the Romans, chiefly so that troops could be marched without delay from
place to place. The roads made it possible to use wheeled
traffic. However, when the Roman Empire collapsed, the roads gradually
got in to a very bad state.
3. There were two problems to be solved - first, how to make good
roads, and, second, to decide who was to pay for them. In Great Britain
these problems were solved in the 18th century. Stretches of roads were
handed over to groups called trusts. The trusts borrowed money for repair
ing and improving the roads, paying it back from the sums they collected
from road users. This method of paying for new roads and bridges is still
used, especially in the United States. Then it became possible to travel
rather comfortably by coaches. In cities like London, rich people had their
own carriages, while poor people went on horseback or walked. Then
appeared carriages that could be hired for short distances. They correspond
to the modern taxis. The word is short for "taxi cab" which in turn comes
from the words taximeter and cabriolet. A cabriolet is a light twowheeled
carriage introduced from France .in the 19th century. The taximeter is a
mechanical device connected with the wheels which, by measuring the
distance travelled, shows the fare due at any moment. It is also controlled
by a clock so that waiting time too is charged for.
135
UNIT 18
THE EARLY DAYS OF THE AUTOM OBILE
1. One of the earliest attempts to propel a vehicle by me chanical power
was suggested by Isaac Newton. But the first self-propelled vehicle was
constructed by the French military engineer Cugnot in 1763. He built a
steam-driven engine which had three wheels, carried two passengers and
ran at maximum speed of four miles. The carriage .was a great
achievement but it was far from perfect and extremely inefficient. The
supply of steam lasted only 15 minutes and the carriage had to stop every
100 yards to make more steam.
2. In 1825 a steam engine was bult in Great Britain. The vehicle carried 18
passengers and covered 8 miles in 45 minutes. However, the progress of
motor cars met with great opposition in Great Britain. Further development
of the motor car lagged because of the restrictions resulting from
legislative acts. The most famous of these acts was the Red Flag Act of
1865, according to which the speed of. the steam-driven vehicles was
limited to 4 m iles per hour and a man with a red flag .had to walk in front
of it.
3. In Russia there were cities where motor cars were outlawed altogether.
When the editor of the loeal newspaper in the city of Uralsk bought a ear,
the governor issued these instructions to the polis: "When thevehiele
appears inthe streets, it is to be stopped and eseorted to the police station,
where its driver is to be prosecuted."
4. From 1860 to 1900 was a period of the application of gasoline engines
to motor ears in many countries. The first to perfeet gasoline engine was
N. Otto who introdueed the four-stroke cycle of operation. By that time
motor cars got a standard shape and appearance.
hi 1896 a procession of motor ears took place frorn London to Brighton to
show how reliable the new vehieles were, to faet, many of the ears broke
for the transmissions were still unreliable and constantly gave trouble.
The ears of that time were very small, two-seated cars with no roof, driven
у an engine placed under theseat.. Motorists had to carry large cans of
and
spare tyres, for there were no repair or filling stations to
serve them.
After World War I it became possible to achieve greater reliability of
motor ears, brakes became more efficient. Constant efforts were made to
stan ar lze common components. Multi-eylinder engines came into use,
most commonly used are four-cylinder engines.
136
5. Like most other great human achievements, the motor car is not the
product of any single inventor. Gradually the development of vehicles
driven by internal combustion engine - cars, as they had come to be
known, led to the abolition of earlier restrictions. Huge capital began to
flow into the automobile industry.
From 1908 to 1924 the number of cars in the world rose from 200 thousand
to 20 million; by 1960 it had reached 60 million! No other industry had
ever developed at such a rate.
6. There are about 3,000 Americans who like to collect antique cars. They
have several clubs whieh possess great influenee sueh as Antique
Automobile Club and Veteran Motor Car Club, which specialize in rare
models. The clubs practise meetings where members can exhibit their cars.
Collectors can also advertise in the magazines published bytheir clubs.
Some magazines specialise in a single type of car such as glorious Model
"T". A number of museums have exhibitions of antique automobile models
whose glory rings
in automobile history. But practically the best collection
100 old cars o f great rarity - is in possession of William Harrah. He is very
influential in his field. The value of his collection is not only historical but
also practical: photographs of his cars are used for films and
advertisements.
7. In England there is the famous "Beaulieu Motor Museum" - the home
for veteran cars.
The founder of the Museum is Lord Montague, the son of one of England s
motoring pioneers, who opened it in 1952 in memory of his father. Lord
Montague's father was the first person in England to be fined by. the police
for speed'ing. He was fined 5 pounds for going faster than 12 miles per
hour!
In the Museum’s collection there is a car called the Silver Ohost which
people from near and far go to see. It was built by Rolls-Royce in 1907,
and called the Silver Ghost because it ran so silently and was painted
silver.
There is a car called The Knight. It is the first British petrol-driven
car. Its top speed was only 8 m.p.h.!
In the Museum there is also a two-seater car, built in 903.
137
UNIT 19
WATER TRANSPORT
1.
One of the most important things about water transport is the small
e ort needed to move floating craft. A heavy boat or a barge weighing
Severn tons can be moved through the water, slowly but steadily, by one
horse
аеГОр1апе of the same we’ght as the barge needs engines of 1,000
power or more in order to fly.
of boat
Га^ made
woo Rafts seem to be clumsy vessels, although the Norwegian
scienUst
or Heyerdahl and his five companions in 1947 made a voyage
on the raft Kon-Tiki from Peru to Tuamotu
Islands - a distance of 4,500 miles.
^cnow ,^e waler transport in ancient times to have been
to гяп-v th m° St r?pldly on £reat rivers. The ancient Romans used vessels
g
a
C
S
S
” РР““ “
ТҺе“ 8ЫР5’
-
be used in the Mediterranean till 1750.
be madp^fthntr° d|!Cti0n of
ma§net‘c compass allowed long voyages to
ёГ 1ег safety- At fte end of the 15th
sailin*
Africa to India
° ^
Cam
men ^ om Europe to America and round
Pf0Ved 10 ^ Ше * * * Р0ІПІ ІП Ле
to have been^e^H ^.01^ ^ P s,‘ ®ne of
earliest steam boats is known
cross
Z S ™
“ J * c end 0f Л е 18th centulX The first steamship to
made the crossing in
98' foot shiP built at New York>which
well as paddles 1 Bv fh*» J
a m
* *
* е early steamships, it had sails as
build much lareer «hi
f
19ttl century it became possible to
6. The rapid i i J f °Г •Г° u ^ Steei began to replace timber.
the industrial revolution^The ind
Г * POWer ° f ShlpS WaS Pr0m0ted Ьу
of goods which were carried ," , T countries Produced great quantities
return voyages the shins h
u
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