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The system of market economy (Listen and read)
1. Listen carefully:
2. Read and translate the text:
In a true market economy the government plays no role in the management of the economy. The system is based on private enterprise with private ownership of the means of production and private supplies of capital, which can be defined as surplus income available for investment in new business activities.
The market economy adjusts automatically to meet changing demands. No planners have to be employed, which allows more resources to be available for production. Firms tend to be highly competitive in such an environment. New advanced products and low prices are good ways to increase sales and profits. Since all firms are privately owned they try to make the largest profits possible. In a free market individual people are free to pursue their own interests.
Nevertheless there are also problems.
Some goods would be underpurchased if the government did not provide free or subdivized supplies. Examples of this type of good and service are health, education, defense and policing.
A cornerstone of a market system is that production alters swiftly to meet changing demands. The resulting unemployment could lead to many social as well as economic problems.
In a market economy there might be minimal control on working conditions and safety standards concerning products and services. It is necessary to have high-scale government intervention to pass laws to protect consumers and workers.
Finally, firms have to have confidence in future sales if they are to produce new goods and services. At certain times they tend to lack confidence and cut back on production and the development of new ideas. This can lead to a recession. A recession means less spending, fewer jobs and a decline in the prosperity of the nation.
3. Answer the following questions:
1. What is a market economy?
2. What is the mechanism of producing goods and services in a market economy?
3. In what way do changing demands affect production in a market economy?
4. What is the main difference between a market economy and a planned economy?
5. What are the advantages of a market economy?
6. What are the disadvantages of a market economy?
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