The Role of Production of Material Values

Man’s conscious labour and his first tools marked the beginning of the establishment of human society. Human beings embarked upon an entirely new way of life, unlike the life led by animals. Animals can only make use of those benefits which nature provides for them. Labour freed man from this complete dependence upon nature.

With the aid of his new tools man was able to get benefits from nature that were formerly inaccessible to him. He was also able to change these natural benefits and to make them more useful to himself. Tools of stone and wood made it possible for primitive man to considerably extend his use of material values.

Man began to kill large, strong animals and thus added quantities of nourishing meat products to his diet. He learned to work the skins of animals and used them to protect his bode from the cold. Man also used his tools to build shelters. It was the production of material values that became the basis of life in human society.

As production developed man increased his active influence n nature. He found that he could satisfy his needs more readily through the material values he himself created.

The production of material values is not stationary; it grows, develops and is perfected constantly. In order to exist mankind must constantly produce material values in ever-increasing quantities.

The development of production is an objective necessity, independent of the will and desire of people. It is a law of social existence. (1258 t.un.)

 

Factors of Production

The resources that go into the creation of goods and services are called the factors of production. The factors of production include natural resources, human resources, capital and entrepreneurship. Each factor of production has a place in our economic system, and each has a particular function. People who own or use a factor of production are entitled to a “return or reward”. This generates income which, as it is spent, becomes a kind of fuel that drives the economy.

Natural resources or land. Natural resources are the things provided by nature that go into the creation of goods and services. They include such things as mineral, wildlife and timber resources, as well as the air we breathe. Economists also use the term “land” when they speak of natural resources as a factor of production.

The price paid for the use of land is called rent. Rent becomes income to the owner of the land.

Human resources or labour. Economists call the physical and mental effort that people put into the creation of goods and services labour.

The price paid for the use of labour is called wages. Wages represent income to workers, who own their labour.

Capital. To the economist, physical capital (or “capital” as it is commonly called) is something created by people to produce other goods and services. A factory, tools and machines are capital resources because they can be used to produce other goods and services. So too is the truck that delivers gasoline to the local service station. The term “capital” is often used by business people to refer to money they can use to buy factories, machinery and other similar productive resources.

Payment for the use of someone else’s money, or capital, is called interest.

Entrepreneurship. Closely associated with labour is the concept of entrepreneurship, the managerial or organizational skills needed by most firms to produce goods and services. The entrepreneur brings together the other three factors of production. When they are successful, entrepreneurs earn profits. When they are not successful, they suffer losses.

The reward to entrepreneurs for the risks, innovative ideas and efforts that they have put into the business are profits, whatever remains after the owners of land, labour and capital have received their payments. (1930 t.un.)

 

Allocation of Products And Resources

The pure market economy, without any government control whatsoever, allocates (distributes) products and resources to get maximum profits. The quest for profit, or the profit motive as it is often called, is the force that drives the free enterprise economic system.

As to the command economy, it allows the government to act as a dictator.

In a mixed economy three quarters of production is carried out by the private sector through the market, though subject to varying degrees of government control. For the other quarter the government is directly responsible through the public sector. Thus the government influences the allocation of the goods and services produced.

(599 t.un.)

 

Types of Business Firms

Microeconomics studies particular firms, households, banks, etc. Business organizations may be considered as firms or companies. They produce goods and render services. They also rent or purchase buildings, land, equipment. They market and advertise their products. They deal with government and courts, as well as with banks, insurance companies.

From the legal point of view there are three basic kids of business firms: 1) proprietorships, 2)partnerships and 3) corporations. A proprietor is responsible for all personal and business debts and losses, he provides the capital and executes the total management. To start the business of this kind it is necessary to obtain licenses required by the law.

The proprietorship form has several advantages, such as: simplicity of organization, freedom to make all decisions, tax advantages, etc. Among disadvantages the following are worth mentioning: possible lack of ability and experience, difficulty in raising capital.

Partnerships are firms owned jointly by two or more persons who are co-owners of business. Partnerships are based on agreement, which should cover all areas of possible disagreement among the partners. Advantages of the partnership may be combined talents, judgements, skills as well as larger capital and tax advantages. Disadvantages of this form are divided authority, danger of disagreement, etc.

Corporation is a firm owned by a group of people, called stockholders, and given rights, privileges and liabilities by law. Advantages of the corporation is a variety of skills, abilities and ideas, ease of expansion. Disadvantages of this form of ownership may be as follows: government regulation, profit sharing, taxes.

Corporation has the right to conduct business as if it were one person. (1520 t.un.)

 

Второй год обучения

Семестр

The consumer goods industry is concerned with producing goods bought and used by the people, e.g. foods, furniture, clothes, domestic appliances, etc.

Consumer goods may be perishables, consumer durables or non-durables.

The capital goods industry is concerned with manufacturing durables, e.g. machinery, equipment and vehicles.

Commerce is concerned with the distribution and exchange of goods and services.

Distribution covers getting goods from the producer to the consumer. Exchange covers the buying and selling of goods and services, goods are exchanged for money and money is exchanged for goods. Between the producer and consumer there may be many layers of buyers and sellers.

Manufacturers buy raw materials from commodity markets and sell in bulk their products to wholesalers. To wholesale means to sell in large quantities. To sell in small quantities means to retail.

Very primitive trade may be the exchange of goods for other goods. It is called barter. The difficulties of barter do not allow for trade to develop widely.

What is needed for trade to develop is something that people are prepared to accept in exchange for anything. The value of goods was first measured by shells, herds, metal pieces and other things. Finally metal money proved most suitable. Thus money was used as measure of value.

Today each country has its own money, or currency, which is acceptable inside its frontiers, but not outside.

This is the way money goes round: 1) People earn wages for producing goods and services. 2) Their wages are spent in shops, etc. on goods and services. 3) Shops bank their profits. 4) Banks lend money to industries.

(1374 t.un.)

Retailing

The retailer performs the last stage of the production process for it is he who puts the goods in the hands of the actual customer. His work is “to have the right goods in the right place at a right time”.

There are four types of retail institutions: 1)specialty stores, 2) supermarkets, 3) general merchandise stores, 4) nonstore retailing.

Often specialty stores sell one type of product, such as clothing, jewelry, furniture, books. These stores, having a better feeling of their market, compete against giant department stores. They can adjust more quickly to market conditions.

Big supermarkets are usually well located. All the goods are arranged on trays and shelves. All the prices are clearly marked. The goods are ready-weighed and beautifully packed. There you can find everything you need. The prices are responsible.

General merchandise stores (GMS) carry a wide variety of products. There are three types of GMS, a) department stores, b) discount stores, c) hypermarkets. Big department stores started in America more than 50 years ago, and then the idea was brought to European countries. These stores are wonderful places. People can do all their shopping under one roof. All the things for sale are displayed so that they can be easily seen, and the customers walk around and choose what they want.

The store is divided into departments: women’s clothes, men’s clothes, shoes, toys, sport goods, china and glass, etc. There may be a restaurant with an orchestra and sometimes a tea-room as well. You will also find a room where you can rest if you are tired. There’s an office where you can book seats for the theatre or arrange to travel anywhere in the world.

Low price is a major attraction of the discount stores. These stores sell the most popular items, colours and sizes. The stores keep long hours and usually open on Sundays. Hypermarket is a type of discount store that was developed in Germany. They are very large stores with low-price and high-turnover products. Hypermarkets achieve cost savings by simplifying their unpacking and display.

There are three major types of nonstore retailing: a) vending machines, b) door-to-door sales, and c) catalogue sales. (1830 t.un.)

NOTES: to book – заказывать; discount store – розничный магазин, торгующий по сниженным ценам; door-to-door sales – продажа через торговых агентов на дому; general merchandise store – магазин со смешанным товаром; hypermarket – гигантский супермаркет; non-store retailing – продажа помимо магазина; specialty store – специализированный магазин розничной торговли; turnover – оборот, товарооборот; vending machine – торговый автомат

 

Wholesaling

Wholesalers e the institutions which stand between the manufacturer and the retailer. The wholesaler buys goods in bulk from producers and sells them in small quantities to retailers. In doing so he helps to the production process. If you had an intention to be a successful manufacturer, you would make high quality products at a reasonable price for selected markets. If you intended to be a wholesaler, you would learn how to serve the market.

Wholesaler economizes the distribution. The most important function of a wholesaler is to contact manufacturers and potential customers.

Wholesalers are used for information and advice. Suggestions which customers make to the retailer are passed to the wholesaler who conveys them to the manufacturer. Thus the latter can improve his product.

The wholesaler keeps stocks. Shoppers like to obtain goods immediately. This requires stocks. Often, however, neither the producer nor the retailer has extensive storage facilities and responsibility falls on the wholesaler.

The wholesaler cannot rely on retailers visiting him to see goods and place orders. Representatives, or travelers, go out to visit retailers with catalogues, price lists and order forms. They also carry samples.

Moreover he arranges imports from abroad. Foreign manufacturers can rarely bother to ship small parcels to individual retailers abroad. They prefer to deal with a wholesaler, an import merchant with established trade connections.

The wholesaler normally allows a certain period of credit. Not to delay payment, cash discount is allowed within a month. A trade or quantity discount, which increases with the amount of goods ordered, encourages retailers to place large orders.

Wholesalers may be classified into three groups: manufacturer-owned operations, merchant wholesalers and merchandize agents and brokers. Manufacturers can establish their own wholesaling office or branch, the latter providing more services to its customers. Depending on the industry or geographical location merchant-wholesalers are called distributors, jobbers, or dealers. Among merchandize agents there are selling agents, brokers, commission agents and action companies. They are all compensated by either a commission or a brokerage fee. (1925 t.un.)

NOTES: jobber – человек, работающий сдельно, посредник; merchant-wholesaler- оптовик; merchandize agent – торговый агент

 

Семестр

Money and Banking

Money is important to the operation of the economy at two levels. First, it is the means of financing the purchases of goods and services and of storing values. Second, the quantity of money in the economy helps to determine total spending and the general level of price.

Almost every society now has a money economy based on coins and paper bills. However, this has not always been true. In primitive societies a system of barter was used. Barter was a system of direct exchange of goods. Somebody could exchange a sheep, for example, for anything in the market-place that they considered to be of equal value. Barter, however, was a very unsatisfactory system because people’s needs seldom coincided. People needed a more practical system of exchange, and various money systems developed, based on goods such as cattle, grain, shells, salt, etc. Precious metals gradually took over, because, when made into coins, they were portable, durable and divisible into larger and smaller units of value.

A coin is a piece of metal, usually discshaped, which bears lettering, designs or numbers showing its value.

Most governments now issue paper money in the form of bills, which are really “Promises to pay”. Paper money or “bank-notes” are easier to handle and much more convenient in the modern world. Checks and credit cards are being used increasingly.

At the end of the U. K. Banking system is the Bank of England, which is also known as the Central Bank. It is also the Government’s Bank and holds all surpluses of the various government departments. (1306 t.un.)

 

The Stock Exchange

If you are a shareholder and you want to get back the money you have put into a company, you must sell your shares at the Stock Exchange. The Stock Exchange is a place where shares are bought and sold.

The price of shares is controlled by the amount of people willing to pay for them.

If the company is making a profit, other people may want to buy shares in it, so you may be able to sell the shares at a higher price than you paid for them. If you bought 100 shares at $ 1.00 each and you sold them later at $ 1.50 each, you would make $ 50 profit on the 100 shares, as well as keeping any dividend paid during the period when you owned the shares.

But if business is not going well, other people may not be willing to pay as much as $ 1.00 a share. If they think the company may do well in the end, they might pay 80 p. A share. If the business is really failing no one will buy the shares at all and you risk losing all your money.

The first Stock Exchange was established in 1773 in London. It was the biggest in the world until 1914. Now it is the third to Tokyo and new York. The building as it stands today dates from 1969. (916 t.un.)