Economics and economy Sources: M. Kaftan, l. Horáková: English in Economics www.en.wikipedia.org © Markéta Čeřovská

I. Economics a social science focuses on: a) laws of economic life b) how to satisfy people's requirements and needs c) how to produce enough valuable commodities d) how to transfer them to domestic or foreign users

asks these essential questions: how what to produce for whom how to ensure stability of economic development

Branches of economics: Macroeconomics – looks at economy as a whole (regional, national, global economy)‏ – tries to understand how the whole economy functions – focuses on topics e.g. inflation, unemployment, recession, economic stability, prosperity etc. Microeconomics – looks at single elements of economy e.g. business companies, households, markets, consumers and how their relationships influence the prices

II. Economy a complex of activities and subjects concerned with: the production the distribution of goods in a certain area the exchange the consumption

Sectors and industries – large parts of the national economy – e.g. industry, agriculture, transport, trade etc. Industry – a sector of economy a) primary – extraction of raw materials (agriculture, mining, fishing, forestry etc.)‏ – production of semi-products b) secondary – processing raw materials, manufac- turing final products (e.g. in factories)‏ c) tertiary – services (transport, healthcare, pubs,...)‏

Economic systems Traditional economy Command economy Free market economy Mixed economy Transition economy

a) Traditional economy (Custom economy)‏ the oldest economic system people make things which they need there is no division of labour there is no specialization decisions are made according to habits, religion, belief, customs etc. used in some parts of Africa, South America and Asia

b) Command economy (Centrally planned economy)‏ typical for socialistic countries all economic decisions are made by the government (what will be produced, where and how, the price of goods, selling the goods etc.)‏ T he negatives of this system are: - a shortage of some goods that people want - an excess of unsalable goods that nobody wants Cuba, North Korea, India

c) Free market economy (Market managed economy)‏ the law of demand and supply (Adam Smith, theory of the "Invisible hand" of the market)‏ prices are made acc. to the relation between the demand and the supply of the present market profitability – the main indicator what to produce

d) Mixed economy combines certain features of pure market and command economic systems e.g. business companies (enterprises) can be private or owned by the state

e) Transition economy an economy system which is in the process of being changed from the centrally planned system in the open-market system there are changes in laws, codes and regulations the government stops controlling some spheres of the economic life restitution of private ownership through privatization liberalization of prices Former Soviet Union, People's Republic of China