Unit 1. WHAT IS ECONOMICS?

I. Vocabulary
Economics (n) - the study of how a society organizes its money, trade and industry;
(rom: ştiinţa economiei; economie);
Economist (n) - a person who studies or writes about economics; (rom: economist);
Economy (n) - the relationship between production, trade and the supply of money in a
particular country or region; (rom: economie); e.g.the economy of
Moldova;
Economic (adj.) 1. Relating to trade, industry and money of a country or region;
e.g. economic growth; (rom: economic);
2. Profitable; (rom: economic; care aduce suficienţi bani);
Economical - spending money or using something in a careful way; e.g. It is usually
(adj.) economical to buy washing powder in large quantities. (rom: economic;
economicos; chibzuit);
Economically 1.in a way connected with trade, industry and development of wealth of a
(adv.) country; e.g. Economically, the country has been improving steadily these
past ten years. (rom: pe plan economic);
2. using little money, energy, time, etc; (rom: într-un mod economicos);
e.g. As a student she lived very economically, rarely going out and buying
very few clothes.

Which word economic or economical?

Warning: choose the right adjective! To refer to the economy of a country or of a region don’t
say “economical”, say “economic”. e.g. Unemployment causes a lot of economic problems.

Vocabulary and Speaking Activities

1. Select the appropriate word. Fill in the gaps.
Economical economically economist(s) economy economics economic (2)
1. ……economist ……… study our everyday lives and the general life of our communities
in order to understand the ………economic……… system of which we are part. 2. They
try to describe the facts of the ………economy……….. in which we live, and try to
explain how it all works. 3. The government’s …… economicl …………. policies have
led us into the worst recession for years.4. The factory is no longer …………
economically…….viable. 5. It would be more …………economical …. to buy a bigger
size. 6. She is in her third year of ………economy……………. at York University.

1
2. Add the appropriate suffix to the root econom to create new words. Make up 4-5
sentences using the word family economy.

y
econom ics
ic al ly
ist

3. Discussion. a) Why can’t everybody have everything they want?

b) Do you agree with the saying “Our wants are endless, our resources are limited”? Give
examples of endless wants.

II. Read the text “What Is Economics?”. Notice the use of the following collocations in the
text:
Verb - Noun Collocations Adj. - Noun Collocations

 to allocate resources  scarce resources

 to satisfy one’s wants and needs  unlimited wants

 to make/take decisions  wise decisions

 to use resources  irrational use of resources

 to produce/manufacture goods  consumer goods

 to provide/offer services  poor services

 to purchase/buy goods  high-quality goods

 to make choices  right choice

 to cope/deal with scarcity  great scarcity

Text A: WHAT IS ECONOMICS?

Economics is the study of how a society uses its resources to satisfy its wants and needs. What
does that mean? Consider the following three scenes. First, a family works together to do the
chores. They cut wood for the fire place, cook meals, go to the store to buy food, and rent movies
at the local video store.
Second, the managers of a large firm are deciding to produce a new product for line of
electronics. They are making decisions on their best place to put their advertising dollars, either
online or in traditional television commercials.
2
Third, law makers in Washington D.C. are deciding how to spend federal money. Should they
spend money on preschool programs for minority children, or should they invest in a new
military weapon system that could make the country safer? Additionally, how much money
should the government spend on health care or what controls should be placed on the Internet?
All of these questions are about economics.
The first question that comes to mind is why don’t we fund them all? We would if we could. But
we cannot. This brings us to our first major term in economics:
Scarcity- all resources are limited and therefore are scarce. Everyone cannot have everything
they want. There is not enough stuff to go around.
To decide how funds get allocated we need to look at our wants and needs. These are our next
important terms. Needs are our basic needs to survive, food, clothes, and shelter. Wants, put
simply, are everything else and they are unlimited. I want a new car, new mp3 player, or a new
house. I don’t need any of them to survive.
Economics is the study of how we satisfy our wants and needs with the limited resources we
have.
Finally, what are the resources that we have to use to satisfy our wants and needs? There are
three basic resources known as the factors of production.
Land- this refers to all natural resources used to produce goods and services. This includes
crops that are grown on a land, minerals that are mined from land and rent that is paid to an
owner of land for its use.
Goods and services are the things that we buy like mp3 players or haircuts. A good is a physical
thing you can hold a service is something that gets used up right after it is purchased.
Labor- this is the effort that an individual person puts into making goods or services. This for
this effort the person is paid a wage. Labor includes factory workers, medical personal, and
teachers. They all provide their labor for a wage.
Capital- this is anything that is used to produce other goods and services. If you make cars you
need machines to make the metal that is used in the cars. It is also the truck that drives the cars to
the dealer who sells them, and it is the building that the cars are made in. All of these are the
resource known as capital.
Now that we know what economics is, why do we study it?
We study economics for two reasons. First, we want to be good consumers. Since our resources
are limited we have to make choices. We can only buy a limited amount of goods and services
with our limited income, right? So we study economics to be good consumers.
Consumers are the people in an economy that purchase goods and services.
We also study economics to be good citizens.
Citizens are the people in a country who hold the political power to elect new governments.
Economics affects us as a citizen through our voting decisions. If we are in agreement with
government policies then we should support them by voting in their favor. On the other hand, if
3
we do not like how the government is spending money then we have the responsibility to vote
them out of office.
We study economics for a variety of reasons. We want to have good information as consumers
to make sure we spend our limited resources in a good way. As a citizen we want to make sure
the government is spending our money in a way that we agree with. If we don’t agree with them
then we can exercise our right as a citizen and vote for change.
(Source: www.moneyinstructor.com )
Post-reading activities:
1. a. Match the term on the left with the meanings on the right.
a) Capital goods 1. Those things that come from air, land, or water.
b) Entrepreneurship 2. The things we wish we could have.
c) Factors of 3. Machines, buildings, equipment used to produce goods and
production services.
d) Goods 4. Objects that can be physically measured or weighed.
e) Labor 5. The way in which trade, industry or money is organized, or the
study of this.
f) Land
6. The natural resources, labor, capital goods and entrepreneurship
g) Scarcity used to produce goods and services.
h) Services 7. The work done by people to produce goods and services.
i) Wants 8. Tasks that people or machines perform to satisfy wants and
j) Economics needs.
9. The ability to start and manage a business.
10. The lack of something that will satisfy all our wants.

b. Try to define the same terms in your own words.

2. Comprehensive questions.
1. Why can’t everybody have everything that they want?
2. What is the best way to deal with scarcity?
3. What is the major difference between the wants and needs? Give examples of each.
4. Can a product be made without one of the factors of production? Why or why not?
5. How are the factors of production used by a household, a business and a country’s governors?

4
3. Can you remember what these expressions applied to?
In the text “What Is Economics?” what or who …
1. can vote for change
2. is used to produce other goods and services
3. are our basic needs to survive
4. are the resources people use to satisfy their wants and needs
5. are unlimited
6. purchases goods and services
7. are the things that we buy
8. is paid a wage
4. Say in other words:
- there is not enough stuff to go around
- to put one’s advertising dollars
- to vote somebody out of office
- something that gets used up right after it is purchased
- to do the chores
5. Pair work

 Think about the process of making bread. Describe how the factors of production are
used in this process. How is technology used to help the process?

 If you owned a business, explain how you would use the factors of production.

6. Group work. Read the text A again and try to represent the information provided there
in the diagram bellow showing the relationship of the main terms with each other. Try
to use as many terms as possible by adding new cells to the diagram.

Economic
s

Scarce Unlimited
Resources Wants

7. Write the text plan and the summary of the text A.

5
 SUPPLIMENTARY READING

Text B: Why is Moldova Poor and Economically Volatile?

The transition to a market economy in Eastern Europe and the former Soviet Union proved to
be more difficult and lengthy than many economists predicted. In Moldova, the ‘side effects’ of
the reforms had the worst impact on the quality of life of the population. After more than 10
years of economic experiments, Moldova is labelled ‘the poorest country in Europe’. The World
Bank classifies Moldova in the group of low-income economies. Indeed, its GDP per capita, as
measured in 2001 at purchasing power parity, was $2150, putting Moldova at the bottom of the
list of countries in Central and Eastern Europe.
The main causes of Moldova’s volatility lie in the structure of the economy, high external
debt, dependence on CIS export markets, and dependence on CIS fuel imports.
Agriculture employs the largest share of the labor force and also accounts for the largest
share of GDP, 21 per cent. Its importance is slowly decreasing, making room for growth in the
service industries. Moldova’s main exports are food, alcoholic beverages and vegetables, which
together account for over 50 per cent of total sales. All these exports are highly dependent on
variable climate conditions. High-technology products do not exceed 3 per cent of exports of
manufactures. Sales to Russia and other CIS countries dominate Moldova’s exports; these are
vulnerable to the stability of these transition economies and dependent on political relations
between Moldova and the other countries, especially Russia.
Dependence on gas, oil and electricity imports from one main supplier increases the
volatility of Moldova’s economy. The natural gas price for Moldova is also used for political
leverage. Thus, using economic leverage, Russia is able to keep Moldova in its sphere of
influence and prevent the country adopting a pro-Western orientation in its foreign policy.
Does the Republic of Moldova have any chance of preserving its political and economic
independence? How can the country achieve sustainable economic development?
… Moldova needs to reduce its economic volatility in order to prevent the damage caused
by frequent external shocks. It must increase the share in GDP of high-value-added products and
services, thereby reducing its dependence on agricultural exports prone to severe weather
conditions, fluctuating world prices and demand, and restrictive import policies for food and
beverages. High-tech industries are one of Moldova’s still unexplored avenues.
By providing more opportunities for Moldovan businesses to cooperate with companies in
the EU through transparent policies and trade and investment promotion campaigns, the
government would address another problem that makes the country vulnerable: dependence on
one market to the east and a single large investor, Russia.
Diversification is what Moldova needs most in both export and import markets. In order to
improve the quality of its products and their competitiveness on external markets, the country
needs technology transfers from the industrialized countries. Government intervention to lower
or eliminate import tariffs for technological equipment and machinery would play a crucial role
in this regard.
To reduce its external debt/GNI ratio, Moldova must take bold steps to end its subsidies to
industries that are not economically viable and constitute a burden on the state budget. Free from
the pressure of gas debt, Moldova could be more selective in choosing investment in its
economy. Diversification of foreign interests would also be to Moldova’s advantage.
Finally, the country must create a favourable environment for local and foreign investors.
Moldova’s institutions must do their best to reduce the political risk that now keeps investment
low. In sum, Moldova needs to realize that it is not only high rates of return that attract foreign
6
investment; it is equally important to ensure that investors have confidence in the country’s
institutions.
(Source: http://foundation.moldova.org/publications/eng/78/)

a) Discussion: Do you think the economy of Moldova is going to improve or worsen in the next
six months /one year/5 years? Why or why not? What arguments can you give to support your
position?

b) Debate: Students A strongly believe Moldova’s economy will soon improve; Students B
strongly disagree. Change partners again and talk about your conversations.

c) Write a letter to the Prime Minister. Ask him three questions about the debt of the Republic
of Moldova. Give him three of your opinions on how to tackle it. Read your letter to your
partner(s) next lesson.

d) Write a piece of news article about the economy of Moldova using the terminology of the
lesson.

III. Evaluation

1. Speak on the following issues:

1. Explain the importance of factors of production in producing goods and services.

2. Explain the major difference between goods and services and give examples of each.
3. Describe how the factors of production are used in the process of making popcorn/shoes/cars.
4. Give examples of irrational use of resources.
5. Explain what factors make the economy of Moldova volatile.

2. Translate the following sentences into English:

1. În domeniul ştiinţelor economice se porneşte de la ideea că nevoile oamenilor sunt

nelimitate, iar bunurile destinate satisfacerii acestor nevoi sunt limitate.
2. Astăzi nu putem citi presa, asculta la radio sau viziona programele TV fără să fim frapaţi de
volumul de informaţii despre economie.
3. Starea economiei, inflaţia, balanţa comercială fac parte din ştiri aproape în fiecare zi.
4. Datele economice sunt importante din cauza consecinţelor lor asupra vieţii noastre cotidiene.

5. Întreprinderile utilizează factorii de producţie cum ar fi munca, capitalul, progresul ştiinţific

cu scopul de a produce bunuri si servicii si a-si maximiza profitul.
6. Întreprinderile sunt extrem de sensibile la variaţiile tendinţelor economice şi la conjunctura
generală a economiei.

7. Un produs este orice lucru care poate fi oferit unei pieţe care poate satisface o dorinţă sau o
nevoie.

8. Economia este o ştiinţă socială ce studiază producţia şi desfacerea, comerţul şi consumul de

bunuri şi servicii.
9. Ultimul sfert al secolului 20 se caracterizează prin globalizarea problemelor economice.
10. Depindem de Rusia pentru importurile de petrol, gaze, numeroase materii prime.

7
11. Structura economiei, datoriile externe mari şi dependenţa de pieţele de export CSI sunt
printre principalele cauze de volatilitate ale Republicii Moldova.
12. Obiectivul nostru principal este acela de a diversifica atât piaţa internă cât şi cea externă cu
produse competitive.