Unit 9 Supply and demand

You can make even a parrot into a learned economist - all it must learn are the two words "supply" and "demand".

Anonymous

WARMING-UP

1. Imagine you are a producer. You have goods which have cost you a lot to produce, but there are a lot of such things in the market. What would you do:

• sell them at a low price;

• stop selling them;

• throw away?

State your idea.

TEXT A

PRE-READING

1. Match these definitions with the words below:

a) The amount of something that can be produced and made available for people to buy	1. glut
b) The situation in which there is too much of something, especially goods or row materials, so that not all of it can be sold or used	2. demand
c) The quantity of a good that people will buy at any time depending on its price	3. supply

4. Read the text and check your answer.

In economics the term ‘supply’ does not mean the existing stock of a good; it refers to the amounts which traders are ready to offer for sale. The economists define it as the quantity of a commodity which is supplied at any given price over some given period of time. The amounts which firms are ready to supply will depend on the prices which people are ready to pay.

When farmers consider market prices to be too low, they may even throw away the crops, vegetables or fruit but not take these products to the market. The farmers produced vegetables and fruit, but they didn’t offer them for sale so they were not part of the supply of these things.

The Law of Supply states, ’More will be supplied at higher prices than at lower prices.’ If prices rise for a particular commodity, the rise will of course encourage producers to make more. On the other hand, if prices fall either locally or throughout the world, producers will reduce production. This can result in serious difficulties for many producers, and may cause them to go out of business completely. Over-production of any commodity can also create difficulties, because it can lead to a glut on the market, which may cause prices to fall sharply.

Supplies of many commodities can generally be adjusted to suit market conditions. This means that changes in prices lead to changes in the quantity of a particular commodity which is made available to consumers. Household goods and furniture belong to this category. In such instances supply is said to be ‘elastic’, because it can be increased or decreased rapidly in response to market prices.

PRACTICE

1. In the text find single words in italics for which these words can be substituted:

1. reserve

2. decrease

3. make happen

4. persuade

5. fast

6. absolutely

7. drop

8. think

9. excess

10. quantity