Economic Issues 1 Concepts in Economics.

Market Economy and Centrally Planned Economy

1. Work in pairs. Place the words or phrases under the appropriate heading in the table
below. The box contains words or phrases that are associated with market economy or
centrally planned economy:
competition

state ownership of main enterprise

competitive management of enterprises

bankruptcy of unprofitable companies
unemployment
overstaffing

private ownership

badly managed enterprises

subsidising of unprofitable companies

intolerance of low quality of goods and services

employment of staff according to real necessities
merging of companies

price established by interaction of supply and demand

Market economy

Now add other characteristics that you can think of.

Centrally planned economy

2. Match the following words/ phrases/ concepts with their equivalents listed below:
1. Bankruptcy
2. Competition
3. Consumer
4. Demand
5. Entrepreneur
6. Investment
7. Laying off
8. Market share
9. Monopoly
10. Owner
11. Profitability
12. Property
13. Setting
14. Subsidy
15. Supply
16. Unemployment
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
1

a market where there is one single seller;

a payment made by a government to unprofitable companies;
an economic situation in which people willing to find jobs are not able to get them;
an individual who supplies goods or services to the market for making a profit;
dismissing; making redundant;
establishment; fixing of;
one of the market forces which can cause a drop in the price of certain goods if it is
dominant;
one of the market forces which can cause an increase in the price of certain goods if it
is dominant;
rivalry between suppliers providing goods or services for a market;
someone who has the right over property;
something capable of being owned;
the end user of a product;
the percentage of total sales of all brands competing in the same market held by a
specific brand;
the placing of monetary resources into the creation of assets in order to produce goods;
the return on capital employed that a company gets on a market;
the state of an individual or company who has become insolvent and is deprived by a
court of his/ their property.
2

10

11

12

13

14

15

16

3. Fill in the gaps with the suitable form of the words in the box. There are more words
than you need.
bankruptcy; competition; consumer; demand; entrepreneur; investment; laying off; market
share; monopoly; owner; profitability; property; setting; subsidy; supply; unemployment.
Market economy is characterized by private ___________(1) over the economic
resources. The private ___________(2) may obtain, control, employ and dispose of property
and resources as they see fit. This type of property rights encourages ___________(3),
innovation, exchange and economic growth.
Freedom of enterprise and of choice are closely linked to private property in a market
economy. That means there are no artificial obstacles imposed by government to an
___________(4)s choice to enter or leave a particular industry or market; it also signifies that
workers are free to work wherever they choose according to their skills, and most important
of all, ___________(5) are free to buy, within the limits of their incomes and money
resources, the goods and services that are most appropriate for meeting their needs. The
consumer ultimately decides what should be produced in an economy.
___________(6) is a fundamental feature of market economy. This implies the
existence of a large number of buyers and sellers operating in a market for a particular product
or resource. Each of the competitors tries to obtain as big a ___________ ___________(7) as
possible to the detriment of the other competitors. The fact is of fundamental importance for
the quality of goods and services supplied, for if consumers are dissatisfied with the
assortment or quality supplied by a company, they switch over to a competitor. This means
loss of market share hence a loss of ___________(8), and if the management is unable to find
a solution it might lead to huge losses so that unprofitable companies face ___________(9).
Company management when faced with lower demand from consumers often has to increase
productivity by laying off idle workers, a fact which gives rise to ___________(10).
There is no government interference for the ___________(11) of prices, which are the
outcome of the interaction of ___________(12) and demand.
In a command economy state property is dominant. The state actively interferes in the
setting of prices and instead of competition there is ___________(13). Unprofitable
enterprises get state ___________(14), so there is practically no bankruptcy. Therefore
unemployment is not usual in a command economy, as there is no real reason for increasing
productivity and profitability, as long as wages and salaries can be paid, not necessarily from
the revenue obtained by the company, but from the state subsidies. On the other hand,
consumers are not privileged in a command economy. They have no choice so the quality of
goods and services is often quite below standard.

4. Fill in the gaps with words from the list:

bankrupt; compete; competition; customers; inefficiency; manage; monopolies; overstaffing;

ownership; quality; share; staff; state; subsidized.
A market economy is based on private ___________(1) in contrast to planned economy,
where ___________(2) ownership prevails. In a free market economy efficiency is the key
word, while on the other hand command economy most likely leads to ___________(3). In a
free market economy inefficient businesses go ___________(4), whereas in a command
economy businesses are ___________(5), thus allowing them to survive in spite of their nonsatisfactory economic performance. This enables the latter type of economy to resort to
___________(6), that is employing more personnel than actually required. Market economy
leads to high ___________(7) of goods and services, while on the other hand planned
economy will not focus on offering high quality goods and services to ___________(8). This
is due to the fact that in the latter type of economy there is actually no ___________(9), as
there are state ___________(10) and therefore the options of customers are severely
restricted. On the other hand, in a market economy companies freely ___________(11) for a
larger market ___________(12), and are thus forced to be efficient and employ
___________(13) according to real necessities and ___________(14) their resources with
utmost care.
5. Work in groups of 4-6 people. List the positive and negative aspects of market
economy (from various perspectives: business owners, employees, consumers, etc.).
Choose a representative of your group whos going to sum up your groups discussions
and present them to the whole class.