Vocabulary notes:

a market hall – критий ринок;

arrangement – організація, установа;

a “small ads” – короткі рекламні оголошення;

dealer – посередник;

to reconcile – узгоджувати;

scarce resources – обмежені ресурси;

the rent – орендна плата;

scarce supplies – дефіцитні ресурси;

part-time job – робота з неповною зайнятістю;

foreign exchange market – валютний ринок;

to reduce the economy’s ability – знизити можливості господарства;

Answer the following questions:

1. Where do buyers and sellers meet to do business with one another?

2. What do modern systems of communications enable dealers?

3. Why do prices adjust?

4. What problems do markets and prices solve for society?

5. Why is the cafe owner in business?

6. What does the term “resources” comprise?

7. In what way can prices guide your decisions to buy some goods?

8. Can prices guide a person’s decision to take a job?

Free Market System

A free market system is one in which decisions about what to produce and in what quantities are decided by the market, that is, by buyers and sellers negotiating prices for goods and services. Consumers vote in the marketplace with their purchases. Consumer demand either raises or lowers prices, and those price changes signal sellers about what to produce and how much. The market controls production. The mechanisms that control the free market are supply, demand, and prices. Supply refers to the quantity of products that manufactures or owners are willing to sell at different prices at a specific time. Demand refers to the quantity of products that people are willing to buy at different prices at a specific time. As prices rise, quantity demanded falls and quantity supplied increases, and vice versa.

A supply curve indicates the relations between price and the quantity supplied. A demand curve shows the relationship between quantity demanded and price. Where they intersect is called the equilibrium point; it is the point where the quantity supplied and the quantity demanded are equal. The market price is determined by supply and demand forces.

The free market system, with its freedom and incentives, was a major factor in creating the wealth that advanced countries now enjoy. It was truly an economic miracle. On the other hand, free market does not satisfy everyone's needs. Rich people can buy almost everything that they need, and poor people often cannot. That is why there are no totally free market systems. Some government programs seem necessary. In the search to create more equality in the United States, the government has intervened in the free market system to create more social fairness and a more even distribution of wealth.

In a free market, competition takes place among sellers of the same commodity, and among those who wish to buy that commodity. Such competition influences the prices prevailing in the market. Prices inevitably fluctuate, and such fluctuations are also affected by current supply and demand.

Whenever people who are willing to sell a commodity contact people who are willing to buy it, a market for that commodity is created. Buyers and sellers may meet in person, or they may communicate in some other way: by letter, by telephone or through their agents. In a perfect market, communications are easy, buyers and sellers are numerous and competition is completely free. In a perfect market there can be only price for any given commodity: the lowest price which sellers will accept and the highest which consumers will pay. There are, however, no really perfect markets.