Text 5 - applied fields of economics

There is a basic theory and facts in economics, in which аll economists are interested. However, economics has some main applied fields that deal with specific topics, such as industrial economics, agricultural economics, economics of energy, economics of education, labour economics, etc.

Industrial organization and structure are studied by industrial economics, which also analyzes markets for manufactured goods as well as policies of various enterprises. The degree of concentration and barriers against new competitors in the market have already been analyzed by industrial economics for such important branches of economy as mining, gas development, and oil industries, etc. The behavior of enterprises and supporting companies in industry is influenced by the structure of the industry. Both profits and losses in any industry are affected by the behavior of market players engaged in the industry to be considered.

The economics of energy is known as another important field of applied economics that is closely connected with industry economics. A lot of energy has been used by modern economies in recent decades. Farms, factories, plants, transportation as well as individual families have greatly increased the consumption of various sources of energy since modern equipment and technologies were introduced.

Alone with the apparent shortage of adequately qualified personnel, power deficiency has recently been faced by farm and industrial producers. In the past, wood and coal were used as the main sources of energy. Then, these sources were replaced by gas and oil in industries. However, in the 1970s energy sources became scarce and there was a rise in energy prices. Since that time serious adjustments have been made by industrial economies in order to cope with the energy scarcity.

For the past few decades the problems of energy economics have been discussed by specialists and governments in many countries. Regular meetings are held by OPEC in order to regulate oil prices.

Text 6 - national balance of payments

The different kinds of trade that a nation is engaged in are varied and complex, they are a mixture of some visible and invisible trade. Most nations are more dependent on export than on any other activity. The earnings from exports pay for the imports that they need. A nation’s balance of payments is a record of these sophisticated transactions. By reflecting all of these transactions in monetary terms, a nation is able to combine the income it receives, for example, from exports, tourists’ expenditures, and immigrants’ remittances. This combined income is then spent on such items as manufactured goods from other countries, travel for its citizens to the overseas land, and the hiring of civil and agricultural engineers.

The two most important categories in any nation’s balance of payments are its visible and invisible trade sectors. A third very important category is investments. Investments are the means by which nations utilize the capital of other nations to build factories and develop mines for their own industrial base. For example, the railroads of the United States and of South America were built by the British capital. This capital paid for the costs of construction included materials and wages of the workers too.

Investments can have a crucial impact on a nation’s balance of payments. When an investment is made, capital enters a country, enabling it to import manufactured materials. When the plant is operative, it provides both jobs and taxes for the host country and, over some time, produces new manufactured goods for export. In subsequent years, an investment should yield a profit. Dividends, sums of money paid to shareholders of a corporation out of its earnings, can be remitted to the investing country. From the perspective of the balance of payments, in the year the investment is made, the host country receives certain income to its balance of payments, and the investing country records a debit. Next year the dividends may represent an expense for the host country and income for the investing country.

After calculating all of the entries in its balance of payments, a nation has either a net inflow or a net outflow of money. The most direct means of correcting a deficit in the balance of payments and having an immediate impact is by imports’ reduction. This can be accomplished by imposing additional taxes, or quotas, or both.