Basic Economic Problem
Talking points:
- What is the basic economic problems like
- In how many ways has society answered this problem
- Give examples of economic systems and compare them. Do they exist in their poor form
- What is Economics and how can be divided
- What is the basic law of Microeconomics
- What does Macroeconomics deal with
- Basic economic problems are three questions:
What – goods/services are to be produced, in what quantities
How – are the goods/services to be produced, in which technologies
Who – will receive and consume those goods/services, whose wants will be satisfied - The society has answered these questions in several ways and so now we can speak about economic systems. These economic systems, as they are called, generally fall into one of three categories: traditional, command and market economies.
The Traditional Economy
The answers to the “what – how – who” questions are decided by traditions. It’s typical for isolated tribes in which people are engaged in agriculture, fishing and hunting. Working methods are handed down from one generation to another and tend to change very slowly.
The Command Economy
The answers to the “what – how – who” questions are decided by commands.(China, Russia) It’s typical for these economies where political leaders decide what will be produced and the economy is based on their plans.
The Market Economy
The market (free enterprise) economy is the only one in which to the “what – how – who” questions are decided by buyers and sellers. (Western economies). - Economics is a science that has developed for more than 200 years. The Wealth of Nations written in 1776 by the Scotch thinker. Adam Smith is considered to be the early beginning of economics. Economics deals with production, distribution and consumption of goods and services. Economics is divided into two groups: Microeconomics and Macroeconomics.
- The basic law of the Microeconomics is the law of supply and demand.
Supply is the quantity of goods and services that producers plan to sell at a particular price within a particular period of time.
Demand is what people want and need. Demand is the desire to buy that is backed up by the ability to obtain goods or services at a particular price within a particular period of time. - Macroeconomics studies the economy as a whole and deals with terms like unemployment and inflation.
Unemployment means that people don’t have a job. Unemployment means that there are fewer jobs than people, there are always some people who are out of work for various reasons but they are looking for a job. There are several reasons why unemployment is a part of society. The most important ones are structural factors. These factors cause structural unemployment.And how can we describe and explain this structural unemployment?
– in most countries there are fewer jobs than there are people to fill them
– industry has changed, it has become mechanised and automated, what was done by people can be done by machines – we can speak about technological unemployment
– there were done reductions in industrial base, these reductions have affected the traditional industries such as heavy, coal mining….most of all.
For example during winter reason there is a large number of unemployed construction workers, because it is impossible to build anything due to the weather.
Inflation is a rise of prices in the economy. It occurs when demand for goods and services growns faster than their supply and this causes an increase in the prices. Inflation can also be caused when production prices go up. The increase in the price of the basket over 12-month period is called “Rate of Inflation”.
There are two possible causes of inflation:
costs – prices rise as a result of increased industrial costs
2. demand – demand increases faster than industry’s ability to satisfy that demand and it causes that prices increasetribe – třída lidí
engaged – zadaný, zapojený, zasnoubený, zaměstnaný, obsazený, obsazen
hand down – odkázat
tend – mít sklon, směrovat, hlídat, dávat pozor na, dohlížet na, pečovat o, hledět si
enterprise – podnik, podnikání, podnikavost, odvaha, závod, iniciativa, zřídit, založit
particular- jednotlivý, podrobnost, podrobný, zvláštní, důkladný, přesný, speciální
desire – přání, přát si, touha
ability – schopnost, způsobilost, důvtip, inteligence
obtain – získat, obdržet
fill – plnit, naplnit, splnit, plnění, náplň
reduction – zmenšení, redukce, snížení, přeměna, srážka
base – základ, základna, opěrný bod, báze, východisko, podklad
impossible – nemožný
due – přesně, splatný, povinnost, dlužnost, způsobený, příslušný díl, odměna
occur – stát se, přihodit se ( i náhodou); přijít na mysl, napadnout
consumption – spotřeba
receive – dostávat, obdržet