An Overview of the Price System

As market participants, consumers and businesses play dual role. Businesses supply final output (1) of products and services - rock concerts, bananas, hair stylings - but also must hire or demand resources to produce goods and services. Consumers demand rock concerts, bananas, and hair stylings for final consumption but also supply labour and entrepreneurial ability as well as quantities of land and capital to earn income for the purchase of products and services. In other words, we speak about markets of products (output markets and markets of resources (input markets). Each market depends on the other.

Prices are the impulses of information that make the entire system of input and output markets operate. Take the prices of fad (2) goods. At times certain goods or services - such as Rubic’s cube or hula hoops - have quickly appeared and then disappeared. When a fad begins to catch on (3), prices tend to be high because there is a high and growing demand and because resources necessary to produce the goods may be scarce (4). It takes time to adopt resources, machinery, labour, and marketing channels to the production of the fad product. Initially high prices signal the scarcity of goods and resources. As more entrepreneurs and businesses understand the profit opportunities associated with the fad product and as more resources are used to produce it, prices of both the resources and the product change accordingly.

The price system reacts similarly with goods that remain in the market for a longer time. Consider the development of computer technology in the 1960s. Initial investments by producers were substantial. The wages of computer programmers and technicians were high because there was a relative scarcity (5) of workers who had skills to produce and use computers.

High demand and relative scarcity mean high wages. However, high wages are also an excellent piece of information that may cause changes that finally result in lower wages. From the 1960s to the present, many schools teaching computer technology have appeared, reducing the scarcity of this resource. Demand for computer technology, however, has grown over time. So nowadays the wages for people providing services essential to production depend on consumers’ demand for computers and supply conditions in the market for these services.

Supply and demand in all markets is at the core of economics.

 

Пояснения к тексту:

1. output выпуск

2. fad прихоть, причуда; преходящее увлечение чем-то

fad goods товары, временно имеющие огромный спрос среди

потребителей;

3. to catch on становиться модным;

4. scarce скудный, недостаточный;

5. scarcity нехватка, недостаточное количество.

 

V. Ответьте на вопросы письменно:

1. What do businesses and consumers as market participants do?

2. What happens when a fad begins to catch on?

3. Why were the wages of programmers and technicians high in the 1960s?

III вариант

 

I. Перепишите следующие предложения; подчеркните в каждом из них

глагол-сказуемое и определите его видо-временную форму и залог.

Переведите предложения на русский язык. Запишите предложения в

вопросительной и отрицательной формах.

 

1. The group has completed the statistical analysis of the data.

2. Unfortunately, things are getting more expensive.

3. The participants of the negotiations had discussed the major problems

by 2 a.m.

 

II. Перепишите следующие предложения; подчеркните в каждом из них

модальный глагол или его эквивалент. Предложения переведите.

1. The company had to lower the price of its product because it was not in great

demand.

2. You may start a business at will, but in many cases you must first obtain a

license.

3. A breakdown of the credit mechanism can lead to disastrous consequences.

 

 

III. Перепишите следующие предложения, подчеркните в них

придаточные предложения, укажите их тип (например, бессоюзное

придаточное определительное предложение или дополнительное

придаточное предложение, вводимое союзом that)

 

1. Every individual has some basic wants which usually deal with food,

clothing, and shelter.

2. The purpose of economic activity is not just to produce the greatest number of

goods but to manufacture the right mixture of all the things people really

want.

3. Some economists believe that the government is the servant of the people and

exists to promote their welfare.

 

IV. Перепишите и письменно переведите текст.

 

THE PROCESS of COMPETITION

Competition exists in every aspect of life. Students compete for grades, college football team compete for national championships, government agencies compete for budget allocations, firms compete for customers. In each case, scarcity (1) causes the competition. Funds available to support government agencies are limited: defense and social agencies therefore compete for scarce budget dollars. There can be only one national champion in college football. College teams therefore compete for this distinction. If resources were not scarce, there would be no need for competition. Everyone could have everything he or she wanted.

Most people think of competition as the conduct of competitors. So the important question is: are the firms demonstrating rivalrous (2), competitive behavior when they are competing? Do they try to outperform one another? Do they use a variety of methods - advertising, a carefully chosen location, an attractive price - to win and keep customers? Do they look for the best managers? Are they innovative? The answer is clear: competition is a process of rivalry among firms.

This process of rivalry leads to better and cheaper products for consumers. Business firms compete to make profits, but because of the competitive process firms have to meet consumer needs at the lowest possible level of profit. As Adam Smith observed more than two hundred years ago, firm’s interest is used by the competitive process to promote the general well-being of society:

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard for their own interest (3). We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages”.

In the process of competition the desire to satisfy individual self-interest leads to socially beneficial results, and for this reason economists put the study of the competitive process at the heart of their science.

Пояснения к тексту:

1. scarcity нехватка;

2. rivalrous сопернический;

3. «Мы надеемся получить свой обед не благодаря великодушию мясника,

пивовара или пекаря, а благодаря их заботе о своем собственном

интересе».

 

V.Ответьте на вопросы письменно:

1. Why does competition exist?

2. What does competition lead to?

3. What promotes the general well-being of society according to Adam Smith?

 

IV вариант

 

I. Перепишите следующие предложения; подчеркните в каждом из них

глагол-сказуемое и определите его видо-временную форму и залог.

Переведите предложения на русский язык. Запишите все предложения в

вопросительной и отрицательной формах.

 

1. The number of people in the United States has reached 300 million.

2. They were negotiating the terms and conditions of the contract the whole

month.

3. The company will have produced 500 cars by the end of the year.

 

II. Перепишите следующие предложения; подчеркните в каждом из них

модальный глагол или его эквивалент. Предложения переведите.

 

1. Profit can take many forms although it is typically a monetary reward.

2. The firm was to start its advertising campaign two weeks ago.

3. Total output must rise faster than the increase in population.

III. Перепишите следующие предложения, подчеркните в них

придаточные предложения, укажите их тип (например, бессоюзное

определительное придаточное предложение или дополнительное

придаточное предложение, вводимое союзом that).

 

1. The manufacturers of the product who want to sell it may try to influence you

through an advertising campaign, but you make the complete and final

decision on the products that will best satisfy your desires.

2. Economists realize that the solution of the problem requires objectivity.

3. All the numerical information we can gain is very helpful.

 

IV. Перепишите и письменно переведите весь текст.

 

TEAM PRODUCTION

Why do firms exist? Fundamental principle in the operation of many firms is team production. Team production is an economic activity in which workers must cooperate, as team members, to do a task. None of the individual team members produces a separate product. The classic example is the assembly line which was invented by Henry Ford.