UNIT I.

MARKET ECONOMY

Objectives:

 -students will become familiar with economic system terminology

 -reading comprehension and writing practices
 -verb grammar, word order
I. Define economic system before reading the text. Oral group work

Reading comprehension
Skim the following text and answer the questions:
1. What are the main factors of production?
2. Find the main element that makes the difference between market economy and command
economy.
Most developed nations are technically mixed economies because they blend free markets with
some government interference. However, they are often said to have market economies because
they allow market forces to drive both the economy and the society, typically engaging in
government intervention only to the extent it is needed to provide stability.
Land, labor, capital and entrepreneurship are required to produce wealth. In a capitalist economic
system, people, or in economic terms, households, own privately all the factors of production as
opposed to being owned by the state in a command system. That is why, a capitalist free system
is organized from the bottom up, as the consumer gives the orders. They are transmitted to
retailers, dealers, and so on. By an elaborate division of labor, economic activity is carried on by
a system of market competition ordered by the consumer's choice itself. Consequently, private
enterprise is characterized by decisions that are taken in the market place, as opposed to the state
planned and owned economic system. Prices function signal what should and what should not be
produced, because market economy system is governed by the laws of competition and regulated
by supply and demand. The consumer is the one that benefits from competition because he gets
better products and services for lower prices. Competition in business is a sort of competition in
sports or competition in any thing in life, as it keeps you on your toes, you have to keep
improving, and it helps the producer sharpen. This is also the way of obtaining profit that
encourages the private enterprise system to look for those cost-cutting technologies, for lowering
the prices and for improving quality. Profit helps fuel the system, and generates progress as it
grows people who are likely to come up with new ideas, new technologies, goods and services
on the market. In the command economy, the government makes all the decisions concerning
production, distribution, and consumption, as it owns all the major factors of production. The
consumer is not the one to decide for himself, but only the state.

1
 Speaking
1. Derive the definition of profit according to the following spider structure:
How do you get it?

what it is good
for? profitWho is to get it?

when do you get

it?

2. What are market forces? Watch the video https://marketbusinessnews.com/financial-

glossary/market-forces / and compare the two different statements in terms of market
economy vs. command economy.

“Every individual necessarily labors to render the annual revenue of the society as great
as he can. He intends only his own gain, and he is in this, led by an invisible hand to
promote an end which was no part of his intention. By pursuing his own interest he
frequently promotes that of the society more effectually than when he really intends to
promote it. I have never known much good done by those who affected to trade for the
public good.” Adam Smith

“If we care about universal principles such as freedom, democracy, and the rule of law,
we cannot leave them to the care of market forces; we must establish some other
institutions to safeguard them.” George Soros

3. Debate the opposition between market economy and command economy in terms of the
market forces: private ownership, competition, supply and demand, price vs. quality.
Draw your own explanatory diagram to highlight the differences found.

Writing
Write a 50 word essay on the following subjects and give it an appropriate title:
The relationship between human resources education and economic development.
The role of culture, tradition, and history in the development of an economic system
typology.
4. The relationship between human resources education and economic development.
5. The role of culture, tradition, and history in the development of an economic system
typology.

2
 Vocabulary
Fill in the blanks the missing words:
annual income, consumerism, demand, job security, retirement benefits, market society

Market economy can be prevented from endangering a ………. ……. by voiding it of fear. There
is no mystery about the sorts of measures to accomplish this. They include a guaranteed ……..
……….., full employment through job creation and training, adequate health and old age care
programs, and the like. Removing fear from the market would inhibit selfishness at least to the
extent that people could afford to be moral. It would enable people safely to see themselves as
trustees of possessions and of their own talents rather than as their private owners. Removal of
fear would permit people to engage in work and life outside work that is meaningful to them,
thus inhibiting greed and …………….
Employment is certainly subject to market forces too. If there were low …………. for services,
there would be a low demand for new employees. Yet, most of us enjoy …… …….. in the form
of tenure, and earn high enough incomes to lead dependably comfortable and possess some form
of ………. ……….. and protection against high health care costs. The result is that we are able
to put our talents to personally meaningful and socially beneficial use.

Grammar bite

1. Put the verbs in brackets in the correct form of the present tense simple or continuous;
make the necessary changes when needed.

1. He just _______ a telephone call right now to his management accountant for an advice.
(make)
2. We often __________ our partners for a negotiation. (meet).
3. Our president _________ a speech today at the conference (deliver).
4. They __________ software package from firms specializing in them saving a considerable
amount of time and money instead of developing their own. (buy)
5. I always _________ share holders to pay off their shares. (advise)
6. The members of the board ____________ all our meetings (attend)
7. I __________ all my business correspondence this morning (write).
8. The management of the planned shopping center _________ the groups of businesses,
primarily retailers sharing the building. (control).
9. The government ___________ the activities of the firms and _____________ productive
resources in command economy (direct/allocate)
10. The command system philosophers __________ that the system prevents the exploitation of
workers by capitalists. (argue)

3
2. Put the verbs in brackets in the right form of the present perfect tense simple or continuous:
1. Western economists _____________ that planned economy is likely to lead to inefficiency.
(point out)
2. The bureaucrats running the command systems _____________ never sufficient information
to allocate resources in a way to satisfy consumer demands. (have)
3. Occupying the square mile on the north of the River Thames between Waterloo Bridge and
Tower Bridge, the City of London _____________ an international merchant center since
medieval times. (be)
4. The head offices of the most important banks, money markets, foreign exchange markets,
commodity exchanges, insurance market, London Stock Exchange and offices of foreign
financial institutions ______________ always the financial district of London. (represent)
6. They _____________ all the raw materials they needed this week in the Commodity
Exchange. (trade)
7. This week the wholesaler ___________ to retailers at discount prices on condition that they
pay in cash, collect the goods by themselves and buy in bulk. (sell)
9. Today the board ______________ their company capital structure, i.e. shares, loan stock.
(analyze)
10. The accountant ____________ the capital equivalent to the assets that yield a regular income.
(calculate)

6. Put the verbs in brackets in the right form of the Past Tense or Past tense Continuous:

1. Adam Smith (1723-1780) __________ the concept of working capital. (introduce)

2. He ____________ the origins of wealth creation _____________ the benefits of free
trade. (explain/advocate)
3. He ___________ the economic relationship between the classes: workers, who
______________ their living by wage labor; capitalists who ____________ income from
profits. (analyze / earn / derive)
4. The supply and demand relationship _________ prices. (determine).
5. He always ____________ his agent the commission in time. (pay).
6. Last century the same companies ____________ soft commodities, such as grain, coffee,
cocoa, wool, cotton, jute, rubber on commodity markets. (trade)
7. When we began the meeting the accountants still _________ the loss. (calculate)
8. When I called, the new board members ___________ to setting out the new priorities.
(work)

Supplementary reading
Make yourself familiar with sharing economy. Is it a command type of economy or a market
economy? Find examples and explain their working mechanism.

Translation
A) "... adevărata libertate de expresie a cetățeanului se realizează numai când se respectă
dreptul la proprietate care asigură, în timp, independența economică a individului față

4
 de stat."
(Ovidiu Lazar,"Antreprenorul", Fort Ross Inc., New York, USA, 1994)

"Trebuie să înțelegi libertatea pentru a te bucura de adevăratul ei preț." (H.Balzac)

"Fără libertate, nu există comerț." (Adam Smith)

B) Economia de piață se caracterizează printr-un mecanism adecvat de funcționare

ale cererii, ofertei, concurenței și prețurilor. Proprietatea individuală reprezintă
baza economiei de piață și suportul fundamental al liberei inițiative, al liberei
întreprinderi. Intr-o societate democratică, egalitatea în fața legii a agenților
economici este proclamată juridic și susținută de statul de drept, printr-un proces
natural de selecție.

C) Tăblițele de lut (clay tables) găsite stau mărturie că mai înainte încă de legiferarea
lăsată de Hammurabi, templele din Babilon aveau o activitate ce poate fi asemănată,
în unele privințe, cu aceea a instituțiilor bancare moderne. Așezămintele (settlements)
închinate (dedicate) zeilor acumulaseră mari bogății imobiliare (real estate) și
mobiliare (securities), aveau pământuri, cirezi, ateliere, unelte, sclavi, depozite de
cereale, stocuri de lingouri din metale prețioase. Aceste avuții nu conteneau să fie
sporite atât prin munca sclavilor cât și prin împrumuturi purtătoare de dobânzi mari,
(high interest loans) condițiile tranzacțiilor fiind precis stabilite prin înscrisuri
(writings). S-au găsit dovezi convingătoare că operațiunile de credit erau frecvente și
că templele din Babilon țineau evidențe contabile (keep books) amănuntite. De
remarcat, că în înscrisurile pe lut se întâlnesc multe din enunțurile ce prefigurează
(anticipate) cadrul juridic modern, precum ipoteca (mortgage) asupra bunurilor
debitorului, girul (endorsment) asupra unor persoane considerate solvabile, (solvent)
urmărirea (legal pursuit) în caz de neplată. Templele acceptau să efectueze decontări,
(settlements) chiar în locuri îndepărtate pentru clienții care le încredințaseră depozite.