Ex. 2. Match the words with their definitions.

 

____ product a) a person who purchases goods and services for his own personal needs

____ demand b) the ability of a commodity to satisfy human wants.

____ substitute c) something produced by effort.

____ price d) a consumer's willingness and ability to buy goods and services at

a particular time.

____ consumer e) the cost at which anything is obtained.

____ utility f) a product which is bought and used in place of another product.

____ complements g) the amount of a commodity that producers are willing and able to offer

for sale at a particular price.

____ supply h) products that are often bought and consumed together.

Ex. 3. Fill in the gaps using active words and word combinations from the text.

1. The demand for a p_______________ depends on how much is c___________________ for the product. 2. The law of demand describes the r________ between the prices and the q_______ of goods and services demanded. 3. What is true for ice-cream a___________ to most everything. 4. After a certain point is reached the s________ from a good or service will begin to d_______. 5. Economists describe this effect as d________ m________ u________. 6. An increase in d_____________will result in an increase in the m_____________ p___________. 7. The law of demand is r_______ to all goods and services. 8. When the c____________ have less money to spend they will r__________ their d_____________ for products. 9. S _____________ are goods that are bought and used in place of another product. 10. C________________are goods that are often bought and consumed together.

 

Ex. 4. Make up sentences with the jumbled words.

 

1. have to / their products / charge / businesses / the market price / for.

2. is relevant / of / services / and / the law / to all goods / demand /

3. are bought / together / that / often / and / products / consumed/ /are / complements

4. in demand / result / of / the decrease / will / in / a market price / decrease

Ex. 5. Match the synonyms:

to purchase a. different

various b. on the contrary

to state c. to raise

conversly d. readiness

spending e. to declare

to increase f. to go down

to decrease g. expenditure

willingness h. to buy

Ex. 6. Find the words in the text to complete the following expressions.

demand is a consumer’s _____________________________

to charge ________________________________________

particular _________________________________________

the fifth ice-cream will make you ______________________

diminishing _______________________________________

all else ___________________________________________

consumer’s tastes or ________________________________

a successful advertising _____________________________

complements and __________________________________

 

Ex. 7. Translate into Russian.

 

1. The bigger the firm, the greater the opportunity for each worker.

2. The greater the output in previous period, the greater the firm’s experience.

3. The smaller the number of suppliers, the more control they can exercise over prices.

4. The lower the price, the fewer new firms will enter the market.

5. The more independent are the firms in an industry, the greater the competition.

6. The greater the risk associated with any financial decision, the greater the return expected

from it.

COMPREHENSION

 

Ex. 8. Match the questions to the answers below.

1. What does the law of demand describe?

2. How do the economists describe the effect when the satisfaction from a good or service begins to diminish?

3. What does diminishing marginal utility help to explain?

4. What is a change in demand?

5. What are the factors that cause the demand for any product to increase or decrease?

6. How can the changes in the prices of complements influence the demand?

7. What other factors can influence the demand for particular goods?

8. What is demand?

 

A. Economists describe this effect as “diminishing marginal utility.”

B. As there are goods that are often consumed together, a decrease in the price of one item is likely to increase the demand for the other.

C. It is a consumer’s willingness and ability to buy a product or service at a particular time and place.

D. It helps to explain why lower prices are needed to increase the quantity demanded.

E. They are changes in consumer income; changes in the price of substitutes; changes in the price of complements; changes in consumer’s tastes or fashion; changes in the number of buyers served by the market.

F. It describes the relationship between the prices and the quantity of goods and services demanded.

G. They are weather, demographic trend, government subsidies, taxes and other factors.

H. It is a change in the relationship between the price of an item and the quantity demanded.

 

 

QUESTIONS FOR DISCUSSION

 

1. Assume you sell TVs. According to the concept of diminishing marginal utility, people with one TV set would be less eager to purchase or rent a second or third set. How would you overcome this sales resistance?

2. As a consumer, you make decisions every day about how to spend your limited incomes. What motivates your choices? Why do you choose to buy another pair of jeans, and what do you sacrifice by doing so?

3. Do you think it is logical that “consumer responds to lower prices by buying more”? Think

of an example when consumer believes that prices would go even lower and doesn’t react

immediately in the expected way.

 

Text 2 THE LAW OF SUPPLY

VOCABULARY

 

to make a sale – совершить покупку to make a profit (to profit)– получать прибыль incentive – побудительный мотив, стимул in response to – в ответ на cost of production – издержки производства, себестоимость продукции production costs – затраты на производство improvement– усовершенствование tend– иметь тенденцию output– продукция, выпуск (продукции) to reduce – понижать, уменьшать, сократить shift– (n) сдвиг, смещение; (v) менять abundant supply – избыточное предложение

to reach an agreement – достигнуть соглашение equilibrium price and quantity – сбалансированные цена и предложение to equal – равняться to affect – влиять to result – являться результатом shortage– нехватка, дефицит to exceed – превышать surplus – избыток the market is cleared – на рынке – равновесие спроса и предложения equate – равнять, считать равным

 

It takes two parties to make a sale: buyers and sellers.

The law of supply describes a relationship between the price of a good or service and how much sellers will offer for sale at a specified time. This means that, other things remaining equal, at high prices businesses will naturally want to produce and sell more. At lower prices less will be produced and supplied.

Why does the quantity of a product supplied change if its price rises or falls? The answer is that producers supply things to make a profit. The higher price - the greater the incentive to produce and sell the product.

Changes in Supply. A change in supply is a change in the relationship between the price of a good and the quantity supplied in response to the changes in economic conditions. The changes that can affect the quantities supplied are as follows:

1. Changes in the cost of production

If it costs sellers less to produce their products, they will be able to offer more of them for sale and supply will increase. An increase in production costs will have the opposite effect – supply will decrease.

2. Changes in the technology available to produce the good.

Improvements in technology tend to lower the cost of production, thus increasing the output.

3. Expectations about future prices.

If producers expect prices to increase in the future, they may increase their production now to be in position to profit later. Similarly, if prices are expected to decrease in the future, producers may reduce production, and supply will fall.

4.Other profit opportunities.

Most producers can make more than one product. If the price of a product they are not producing (but could if they choose to) increases, many producers will shift their output to that product.

If supply increases, the market price will usually decrease and sales will increase. If supply falls, the market price will usually increase and sales will fall. When the product is scarce, the price will usually increase. When the product is in abundant supply, the price will usually fall.

Market Equilibrium. Now we see that buyers and sellers are in conflict: buyers will only purchase more at lower prices, while sellers will only sell more at higher prices. Can they reach an agreement? Yes. Their agreement is called the equilibrium (or market) price and quantity. It is the point at which the quantity demanded exactly equals the quantity supplied in a market. Shifts in demand or supply will affect market price. When everything else remains equal, an increase in demand will result in an increase in the market price, and sales will increase. If demand falls then the market price will fall and sales will fall. Similarly, an increase in supply will result in a decrease in the market price, and sales will increase. If supply falls, the market price will usually increase and sales will fall.

A shortage exists in a market if the quantity demanded exceeds the quantity supplied of a good over a given period. A surplus exists in a market if the quantity supplied exceeds the quantity demanded of a good over a given period.

At the market equilibrium price of a good, there can be neither surpluses, nor shortages in the market. It means that the market is cleared (the price equates the quantity supplied and quantity demanded).

WORD STUDY