UNIT IV

I. Practise the pronunciation of the following words.

a) stress the first syllable:

willingness, purchase, schedule, curve, downward, upward, common, feature, status, revenue, increase, decrease, substitute, relatively, rapidly, influence, complement;

b) stress the second syllable:

analysis (pi. analyses), ability, alternative, consumer, refer, specific, inverse, relationship, example, conspicuous, consumption, affect, particular, to increase, to decrease, necessity, delay, inferior, afford, acquire, determinant, bestow;

c) stress the third syllable:

economic, represent, illustration, elasticity, inelastic, inexpensive, transportation, expectation, opportunity.

II. Before reading the text answer the following questions.

1.What gives buyers signals to buy or not to buy goods and services?

2.What do you think causes prices to change in a market economy?

3. How can you explain the term „market price”?

III. Read and memorize the following words and word- combinations.

to bestow — надавати, дарувати, давати

ceteris paribus (hat.) (other things being equal) — за інших рів­них умов

complement — супутній товар

conspicuous — ефектний, разючий

demand (п) — попит, потреба, вимога

demand (v) — вимагати, потребувати, робити запит

demand curve — крива попиту

demand schedule — графік попиту

determinant — визначник, вирішальний фактор

Giffen good — товар Гіффена

the good in question — товар, про який йде мова

inferior goods — неповноцінні товари (товари, попит на які при зрості доходів споживачів падає)

normal goods — нормальні товари(товари, попит на які збільшу­ється із зростом доходів споживача)

opportunity cost — альтернативна вартість

to plot a graph — креслити графік

IV. Text А

Demand

One of the most important building blocks of economic analysis is the concept of demand. Demand — the ability and willingness to buy specific quantities of a good at alternative prices in a given time period, ceteris paribus (other things being equal). A demand exists only if someone is willing and able to pay for the good — that is, exchange money for a good or service in the marketplace. For example, a consumer maybe willing to purchase 2 lb of potatoes if the price is $ 0.75 per lb. However, the same consumer may be willing to purchase only 1 lb if the price is $1.00 per lb. These changes we can reflect on the demand schedule. A demand schedule can be represented on a graph as a line or curve by plotting the quantity demanded at each price. A demand curve is a graphical illustration of a demand schedule. Each point on the curve refers to a specific quantity that will be demanded at a given price. A common feature of demand curves is their downward slope. As the price of a good falls, people tend to demand more of it. This inverse relationship between price and quantity is so common we refer to as the law of demand. Thus, the law of demand can be stated formally as follows: in any market, other things being equal, the quantity of a good or service that buyers demand tends to rise as its price falls and to fall as its price rises.

As mentioned above, the general form of a demand curve is that it is downward sloping. But there may be rare examples of goods that have upward sloping demand curves. A good which demand curve has an upward slope is known as a Giffen good. The existence of Giffen goods can be explained by conspicuous consumption; that is the desire to own/buy a good due to the social status its ownership implies and bestowes.

It is necessary to say about the movements along the demand curve and shifts in the demand curve.

Economists speak of a movement along demand curve as a changein quantity demanded. Such a movement represents buyers* reaction to a change in the price of the good in question, other things being equal. The degree to which price changes affect demand will depend upon the elasticity of demand for a particular item.

If total revenue increased following a price decrease, demand would be elastic. If the price decrease led to a decrease in total revenue, the demand for the item would be described as inelastic. The demand for some goods and services will be inelastic for one or more of the following reasons:

—They are necessities.

—It is difficult to find substitutes.

—They are relatively inexpensive.

—It is difficult to delay a purchase.

Economists speak of a shift in the demand curve as a changein demand. Such a shift represents a change in buyers* plans caused by some factors other than the price of the good in question. The determinants of demand include:

—Tastes (desire for this or that good).Sometimes these changes happen rapidly, as is the case in such areas as popular music, clothing styles and fast foods. The demand curves for these goods shift often.

—Income (of the consumer). As real income rises, people buy more of some goods (which economists call normal goods) and less of what are called inferior goods. Urban mass transit and railroad transportation are classic examples of inferior goods. That is why the usage of both these modes of travel declined so dramatically as postwar incomes were rising and more people could afford automobiles.

—Other goods (their availability and price).Another influence on demand is the price of substitutes.

For example, when the price of Toyota Tercels rises, other things being equal, demand for Tercels falls and demand for Nissan Sentras, a substitute, rises. Also important is the price of complements, or goods that are used together. When the price of gasoline rises, the demand for cars falls.

— Expectations(for income, price, tastes). If people expect the price of a good to rise relative to the prices of the goods or expect the opportunity cost of acquiring the good to increase in some other way, they will step up their rate of purchase before the change takes place.

V. Match the terms on the left with their Ukrainian equivalents on the right.

VI. Answer the following questions.

1. What is demand?

2. What does the law of demand describe?

3. What is a demand curve? What is its common feature?

4. How can you explain the existence of Giffen goods?

5. When is demand described as elastic?

6. Why is demand for some goods and services inelastic?

7. What is the difference between a change in a quantity demanded
and a change in demand?

8. What are the determinants of demand?

VII. Make up your own 5 sentences using word combinations from Ex.VI

1. Give the synonyms to the following words.

Ability(n), willingness (n), purchase(v), rare(adj.), imply(v), affect(v), item(n), increase(v), expensive(adj.), rapidly(adv.), elastic(adj.), own(v), formally(adv.), conspicuous(adj.),consumer(n), demand(v), expect(v).

VIII. Fill in the blank each of the statements with the appropriate term.

1.What is a buyer willing and able to buy at various prices is called _____.

2.The relationship between prices and the quantity a buyer is willing and able to purchase at those prices is shown in tabular form as _______.

3.A Latin phrase meaning “all other things remaining equal” is _____.

4.The idea that quantity demanded increases as price falls, ceteris paribus, is known as .

5. The quantity that buyers are willing and able to buy at various prices are shown graphically in a _____________.

6. The degree to which price changes affect demand will depend upon ________ .

7. Changes in tastes, income, or prices of other goods may cause a ___________ .

8. If the price decrease led to a decrease in total revenue, the demand is ________ .

9. A good which demand curve has an upward slope is known as a _________ .

IX. Choose the correct answer.

1. The determinant of demand that does not shift a demand curve is.

a) Income

b) Taste

c) The price of the good itself

d) The price of other goods

2. According to the law of demand the quantity of a good demanded
in a given period.

a)Increases as its price rises, ceteris paribus

b)Decreases as its price falls, ceteris paribus

c)Increases as its price falls, ceteris paribus

d)Does none of the above

3. A change in the price of a good corresponds to a:

a)Change in the quantity demanded of the good

b)Shift in the demand curve of the good

c) Change in the consumer's taste

d)None of the above

4. Market demand is:

a)The sum of individual demands

b)The total quantity of a good or service people are willing and able to buy at alternative prices over a given period of time, ceteris paribus

c)a and b

5. Which of the following would generally cause an increase in the
demand for automobiles?

a)A decrease in the price of automobiles

b)An increase in consumer's income

c)Consumer expectation that the price of automobiles will be lower next year

d)A fall in the price of gasoline

6. Which of the following would you expect to cause a decrease in
the demand for automobiles?

a) A rise in the price of gasoline

b) Consumer expectation that the price of automobiles will be lower next year

c) Consumer expectation that a significant recession will develop that could last for a year

d) All of the above

7. A good for which an increase in consume income results in a
decrease in demand is:

a) A consumer good

b) A normal good

c) An inferior good

d) A Giffen good

8. A pair of goods for which an increase in the price of one causes
an increase in demand for the other are:

a) Complements

b) Substitutes

c) Capital goods

d) Necessities

X. Translate into English.

1. На будь-якому ринку, за інших рівних умов, кількість товарів і послуг, які покупці потребують, має тенденцію до зростання із зниженням їх ціни і до спаду із підвищенням ціни.

2. Обсяг попиту — це кількість товару або послуг, яку покупець хоче і здатний купити протягом даного періоду, наприклад, місяця або року.

3. Фраза «за інших рівних умов» означає, що зміна ціни про­дукту є єдиною зміною з числа речей, які впливають на кількість людей, які хочуть щось придбати.

4. Переміщення кривої попиту говорить про зміну в попиті, а саме зміни доходів покупців, зміни в смаках або зміни в цінах то­варів, які є замінниками або супутніми товарами.

5. Збільшений попит може бути представлений на графіку як крива, переміщена вправо.

6. Те, наскільки зміни в ціні вплинуть на попит, буде залежати від еластичності попиту на певний товар.

7. Нормальні товари — це товари, на які збільшення доходів споживачів веде до збільшення попиту.

8. Загальною характерною рисою кривої попиту є її нахил до­низу.

9. Однією з причин, коли попит на деякі товари буде нееластичним, є те, що ці товари є товарами першої необхідності.

XI. Text В

Supply and market price

Supply is the quantity of goods that producers are willing and able to sell at alternative prices in a given period, ceteris paribus. The determinants of supply include:

— Technology

— Factor costs

— Other goods

— Taxes

— Expectations

— Number of sellers

Word processors, for example, are a technological improvement over standard typewriters. By making it easier to «produce» typing, they induce people to supply more typing services at every price.

When tax rates are high, people get to keep less of the income they earn. This reduction in after-tax income may make some people less willing to supply goods and services.

Expectations are also important. If you expect higher prices, lower costs, or reduced taxes, you may be more willing to perfect your skills. On the other hand, if you have bad expectations about future, you may find something else to do.

Supply shifts when the determinants change.

The law of supply states that the quantity of a good supplied in a given time period increases as its price increases, ceteris paribus.

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

According to the law of supply the general form of a supply curve is upward sloping and it indicates that larger quantities will be offered at higher prices. An increase in supply implies a rightward shift of the supply curve.

The point where the supply curve and demand curve intersect is the equilibrium (market) price. Thus, equilibrium or market price is the price at which the quantity of a good demanded in a given time period equals the quantity supplied.

At any higher price there will be a surplus — the quantity supplied exceeds the quantity demanded and at any lower price a shortage — the quantity demanded exceeds the quantity supplied at a given price. Only the equilibrium price clears the market. At that price, everyone who is willing to buy may do so, and everyone who wants to sell at that price may do so.

Shifts in demand or supply will affect market price. When everything else is held constant, an increase in demand will result in an increase in market price, and vice versa. Similarly, an increase in supply will result in a decrease in price, and vice versa.

Vocabulary notes:

to induce — змушувати, спонукати, схиляти до чогось, стимулю­вати

after-tax income — дохід після сплати податку

equilibrium — рівновага

upward sloping — похила направлена догори

surplus (Syn. excess) — надлишок

shortage (Syn. lack) — нестача, дефіцит

XII. Answer the following questions.

1. What is supply?

2. What are the determinants of supply?

3. What does the law of supply state?

4. What is the general form of a supply curve? What does it mean?

5. What is market price?

6. How do shifts in demand and supply affect prices?

XIII. Re-read the text to find out which of the following statements are correct.

1.The determinants of supply do not include the cost of factors of production.

2.The law of supply indicates that the quantity of good supplied increases as its price decreases.

3.The general form of a supply curve is upward sloping.

4.If the cost of computer components falls, then the supply curve for computers shifts to the left.

5.The price at which there is neither surplus nor shortage is called equilibrium price.

6.Shortage is the quantity supplied exceeds the quantity demanded.

7.An increase in supply will result in an decrease in price.

8.At the equilibrium price, sellers receive signals to increase
production rates while buyers receive signals to increase purchases in
a given time period.

XIV. Match the following English word combinations with their Ukrainian

equivalents.

1.be in excess supply а. загальний об'єм пропозиції

2. be in low supply b. вичерпати запас

3. bulk supply c. грошова маса

4. direct supply d. наявний запас

5. electric supply e. бути з лишком

6. exhaust supply f. постачання електроенергією

7. fresh supply g. водопостачання

8. money supply h. постачання крупними партіями

9. floating supply і. повсякденна пропозиція

10. rival supply j. бути дефіцитним

11. total supply k. прямі поставки

12. supply a gap 1. нові поставки

13. water supply m. пропозиція зі сторони конкурентів

14. to store supply n. заповнити прогалину

15. supply on hand о. робити запаси

XV. Choose the correct answer.

1. The supply curve is upward sloping because:

a) As the price increases, so do costs

b) As the price increases, consumers demand less

c) As the price increases, suppliers can earn higher levels of profit or justify higher marginal cost to produce more

d) None of the above.

2. When university students leave for the summer holiday, the
demand for meals at the local cafe declines. This results in:

a) A decrease in equilibrium price and increase in quantity

b) An increase in equilibrium price and quantity

c) A decrease in equilibrium price and quantity

d) An increase in equilibrium price and a decrease in quantity

3.A change in the price of a good corresponds to a:

a) A change in the quantity demanded of the good

b) A shift in the supply curve of the good

c) A shift in the demand curve of the good

d) None of the above

4. A shift of supply is defined as a change in the:

a) Quantity demanded

b) Quantity supplied due to a change in price

c) Quantity supplied at alternative prices

d) Equilibrium quantity

5.A downward shift in the supply curve and a rightward shift in the supply curve are both characterized by:

a) A smaller quantity supplied and a greater price

b) A greater quantity supplied and a greater price

c) A smaller quantity supplied and a lower price

d) A greater quantity supplied and a lower price

6. Equilibrium price:

a) Is determined by aggregate supply

b) Is set by price ceiling

c) Is market-clearing

d) Is unaffected by taxes

7. In a market economy, when there is a surplus in a market a firm
has an incentive to:

a) Raise prices

b) Lower prices

c) Raise production

d) None of the above

XVI. Text C

Why prices are important in a market economy

Prices are key ingredients in our economy because they make things happen. If buyers want to own some items badly enough, they will pay more for them. When sellers want to sell some items badly enough, they will lower their prices. Prices play such an important role in economic life that the United States is often described as a price-directed market economy. Let us see why.

1.Act as Signals to Buyers and Sellers. One of the things that prices do is carry information to buyers and sellers. When prices are low enough, they send a «buy» signal to buyers (consumers), who can now afford the things they want. When prices are high enough, they send a «sell» signal to sellers (retailers), who can now earn a profit at the new price.

2.Encourage Efficient Production. Prices encourage business people to produce their goods at the lowest possible cost. The less it costs to produce an item, the more likely it is that its producers will earn a profit.

Firms that are efficient will produce more goods with fewer raw materials than firms that are inefficient. Producers strive for efficiency as a way of increasing their profits. While these efforts are in the best interests of the sellers, all of us may benefit because we are provided with the things we want at lower costs.

3. Determine Who Will Receive the Things Produced. Finally, prices
help to determine who will receive the economy's output of goods and
services. The price that a worker receives for doing a job is called a wage.
The amount of this wage determines how much the worker has to spend.
What the worker can buy with those wages will depend, in turn, upon
the prices of the goods and services the worker would like to own.

XVII. Match the synonyms.

to fix prices, to increase prices, reasonable price, arrive at a price, to raise prices, at any price, to be without price, to bring down the prices, fair price, price increase, to set prices, cheap at a price, price rise, to be beyond the price, to undercut prices.

XVIII. Find Ukrainian equivalents for the following phrases.

1.above price а. максимальна (офіційно) ціна

2.advanced price b. виробнича ціна

3.all-inclusive price c. договірна ціна

4.at a give-away price d. безцінний

5.average price e. зниження ціни

6.ceiling price f. роздрібна ціна

7.cost price g. підвищена ціна

8.keep up prices h. повна ціна

9.knock-down prices і. утримувати ціни на одному рівні

10.price floor j. оптова ціна

11.price reduction k. мінімальна ціна

12.wholesale price 1. викидні(втратні) ціни

13.retail price m. не допускати падіння цін

14.bargain price n. середня ціна

15.to maintain prices о. за дуже низькою ціною

XIX. Act as an interpreter for A. and B.

A.: Could you explain me what these curves mean?

В.: Звичайно. На цьому графіку ми бачимо криві попиту і про­позиції. Рух вздовж цих кривих відображає зміни в обсягах попиту і пропозиції. А це відбувається, коли змінюється ціна на товар чи послугу за інших рівних умов.

A.: Well, prices...I know that the prices are the key ingredients in our economy. But what actually does it mean?

В.:Так, дійсно, ціни відіграють важливу роль в економічному житті, оскільки, по-перше, вони діють як сигнали для покупців і продавців, по-друге, вони спонукають до ефективного виробництва і врешті-решт, вони визначають хто отримає вироблені товари.

A.: Is there difference between the terms «рrісе» and «market рrісе»?

В.: Так, термін «ціна» означає кількість грошей, за які щось продається, купується або пропонується. В той же час як термін « ринкова ціна» — це ціна, за якої обсяг попиту у певний період часу відповідає обсягу пропозиції.

A.: And on this schedule the point where the supply and demand curves are intersected is the market price.

В.: Так. Ти, я бачу, розумієш все з півслова.

A.: Thank you.

В.: Бажаю успіху!

Unit V

I. Practise the pronunciation of the following words:

a) stress the first syllable:

money, market, human, indicate, barter, services, goddess, temple, adequately, effort, output, spices, increase (n), absence, havoc, emerald, nominal, privilege;

b) stress the second syllable:

consider, essential, extent, society, apartment, directly, tobacco, increase (v), available, sufficient, avoid, rely, derive, evolve, accept, commodity, provide, liquidity, depend (upon), apparent, majority, transfer, convert.