Ex.6. Make up adjectives from the following verbs as in the model.

Model: verb + - ive → adjective

e.g. to produce → productive

Create, decide (d→s), innovate, protect, impress, attract.

Ex.7. Form adjectives adding prefix in- (im- before p, il- before l, ir- before r) as in the model. Explain what new meaning the prefix adds to adjectives.

Model: possible → impossible

Complete, capable, correct, definite, sensitive, patient, perfect, legal, logical, liberal, regular, rational, relevant.

TEXT A: WHAT IS FREE ENTERPRISE?

Active Vocabulary

Just as people are different, so are economic systems. The world has scores of economic systems, no two of which are identical. All have different blends of traditions, commands and markets, that is why they are called mixed economies. Even though they deal with the same economic problems – What to produce? How to produce? For whom to produce? - each system does so in a unique way. For example, market mechanisms have been utilized in a handful of socialist states, such as Cuba, to a very limited extent. The People's Republic of China is run by the Communist Party, but its economy involves considerable private enterprise and market forces in both private and public sectors. In the United States there are more market economy traits than in Western European countries. These differences occur because economic systems are more than simply means of turning resources into goods and services. They are ways of life, and they reflect the differences in the social values and objectives of each nation.

Many states which are said to have a market economy have a high level of market freedom, therefore they are often called free market or free enterprise economic systems. In this system, no one forces people to be creative and productive. Instead, people themselves pursue what they believe to be best for them. By producing the goods and services that society values most highly, a free enterprise system results in the greatest efficiency, or lowest costs, of any economic system. This system is most compatible with individual freedom and political democracy.

What Is Free Enterprise? Free enterprise means that men and women have the opportunity to own economic resources, such as land, minerals, manufacturing plants and computers, and to use these resources to create goods and services for sale. If nobody but a person himself decides what is best to create, what motivates him in this decision-making? In the free enterprise system economic incentives help people determine which course of action will be the most beneficial for them. Businessmen seek high profits. Property owners want the highest price possible for their resources. Workers seek the highest salary possible for a given occupation. Consumers search for the lowest price for a given product. The system of incentives is an extremely important feature of free enterprise. The promise of rewards stimulates employees to produce more and employers to use resources efficiently. People are willing to do this because they, personally, benefit from it. Economic incentives also serve to direct scarce resources to the production of the goods and services people value the most.

The system of incentives also includes punishments. People may face unpleasant consequences when they fail to do something. In the free enterprise system, punishments usually take the form of losses (or failure) for businesses and low salaries (or perhaps unemployment) for individuals. They indicate that the "what to produce" and/or the "how to produce" questions are not being answered properly, for example, the business or individual is using scarce resources to provide too much of a product or a product not wanted at all.

Four components of most free enterprise systems are households, businesses, markets and governments.

Households—the Owners.In a free enterprise system, households own most of the country’s economic resources and decide how to use them. One of the resources that households possess is their labour. They can sell it to existing firms or use to form new businesses. In addition to selling their resources where they can get the highest price or largest profit, households also act as consumers. The wages and salaries of households purchase about two-thirds of all the production in a typical free enterprise economy. Choosing how to spend their money, consumers influence production directing it toward the goods and services they want to get. This is called consumer sovereignty.

Businesses—the Organizers.Businesses organize economic resources to produce a good or service. The people who start businesses are called entrepreneurs. They are the organizers and innovators, constantly discovering new and better ways to bring resources together in the hope of making a profit. Like some fuel, profit makes the engine of business work. Entrepreneurs, guided by the potential for profits, create new businesses to satisfy consumers’ needs and desires. The inability to make profits signals businesses to close or to reorganize their resources more efficiently. Efficiency means that resources are being used to produce the goods and services that society most desires at the lowest economic cost. In a competitive industry, the presence or absence of profits sends an important signal about the industry’s economic efficiency.

Markets—the Agents. Buying and selling activities take place in markets. Although markets are not necessarily people, they act as agents to bring buyers and sellers together. Over time, markets have become increasingly complex. Now, buying and selling can occur 24 hours a day from anywhere in the world via the Internet. A market is any place or any way that buyers and sellers can use to exchange goods, services, resources or money. There are three categories of markets in a free enterprise society: resource markets, product markets and financial markets. Households go through resource markets to sell their labour to businesses. Businesses go through product markets to sell goods and services to households. And both households and businesses use financial markets to borrow and save money. Typically, businesses borrow money that households save, using financial institutions as the intermediary.

Governments—the Protectors.The cornerstone of a truly free enterprise economy is the absence of government interference in economic matters. However, the government still plays an important role in any free enterprise system. This is because unlimited freedom is impossible: one person’s freedom may sometimes conflict with another’s. So, the main role of government in a free society is to define and enforce the rules of society. Government has the power to maintain law and order and protect people’s right to own property. In essence, government provides the umbrella under which the free enterprise system operates. Governments also provide goods, such as national defence, that the private market alone would have a hard time producing.

What connects consumers, producers and markets? This linking function is performed by the price system. Prices tell people about the demand for a good, and they also tell them how scarce or abundant the good is. Prices provide information that is vital to making economic decisions. Without market prices, it would be very difficult for people to measure the value to society of each good and the scarcity or abundance of our resources. If a system tries to make decisions without prices, as the command system does, then it probably produces too many of some goods and too few of others. In the first case surplus occurs, when there are more goods than demanded in the market. The opposite of surplus is shortage, that is the situation when there are not enough goods and services that are needed. In the free enterprise system, the market itself regulates the situation with the help of price change. In the case of government intervention in the market, shortages may result in so-called black markets, artificial controls on demand, such as rationing, and price discrimination.

But if we say that all people seek their own benefit, how does free enterprise result in such beneficial outcomes for society? That’s where competition plays its great role. It helps to channel scarce resources into the production of goods and services that consumers value highly and away from those of low value. For example, when a business makes a large profit, there is incentive for other individuals to enter that business. On the other hand, if a business is losing money or members of an occupation receive a low wage, there is incentive to enter a different line of business or a different occupation. In this way, resources are guided toward the production of goods and services receiving economic rewards and away from those receiving economic punishments.

Language notes:

scores of... – безліч;

a handful of ... – невелика кількість ч-н;

consumer sovereignty – суверенітет споживача (право вибору благ);

intermediary – посередник;

the coercive power – примусова сила;

without market prices, it would be very difficult… - без системи ринкових цін було б важко…;

price discrimination – цінова дискримінація (продаж одного і того ж товару або послуг різним покупцям за неоднаковими цінами).