B. Discuss the following questions:

1. What kind of mechanism is a market? Can a retail store or a gas station be called a market?

2. How do subsidies and taxes influence supply of goods and services?

3. What is the mechanism of interaction between the demand and supply in setting a price?

4. What is market equilibrium?

5. Why is the equilibrium price called a market clearing price?

6. Is the demand for luxury goods elastic or inelastic?

7. Why is elasticity considered to be a planning tool for managers?

8. What types of elasticity are particularly useful in a business context?

Vocabulary

complement n – товар-комплемент

concept n – понятие, общее представление, идея

demand ( for) n – спрос

demand v – требовать, нуждаться

equate (to sth) v – равнять, считать

equation n – уравнение, равенство

elasticity n – эластичность, адаптационная способность (процент изменения величины одной переменной в результате изменения на одну единицу другой переменной)

price ~ – ценовая эластичность

unit ~ – единичная эластичность спроса

(cross) ~ of demand – (перекрестная) эластичность спроса

~ of supply – эластичность предложения

advertising ~ of demand – влияние рекламы на спрос

income ~ – эластичность спроса по доходу

elastic adj – эластичный

equilibrium n – равновесие

extent n – 1. размер; 2. степень меры; 3. объем; 4. протяженность

inferior good – товар низшей категории

interact (with) v – взаимодействовать

interaction (among, between; with) n – взаимодействие

infinity n – бесконечность

luxury good – предмет роскоши

necessity good – предмет первой необходимости

normal good – нормальный товар

price – цена

equilibrium ~ – равновесная цена

market ~ – рыночная цена

market-clearing ~ – санирующая цена рынка

to adjust ~s – корректировать, адаптировать цены

related goods – сопряженные товары

substitute n – зд. товар-cубститут

supply n – предложение (например, товара)

supplier n – поставщик

transaction n – сделка, соглашение

GLOSSARY

• Change in quantity demanded is a movement along a stationary demand curve caused by a change in price. When any of the non-price determinants of demand changes, the demand curve responds by shifting.

• Change in quantity supplied is a movement along a stationary supply curve caused by a change in price. When any of the non-price determinants of supply changes, the supply curve responds by shifting.

• Complements are two goods for which an increase in the price of one leads to a decrease in the demand of the other.

• Elasticity is a measure of how much buyers and sellers respond to changes in market conditions.

• Equilibrium is the unique price and quantity established at the intersection of the supply and demand curves. Only at equilibrium does quantity demanded equal quantity supplied.

• Inferior good is a good for which, other things equal, an increase in income leads to a decrease in demand.

• Law of demand states there is an inverse relationship between the price and the quantity demanded, ceteris paribus.

• Law of supply states there is a direct relationship between the price and the quantity supplied, ceteris paribus. The market supply curve is the horizontal summation of individual supply curves.

• Law of supply and demand is the claim that the price of any good adjusts to bring the supply and demand for that good into balance.

• Non-price determinants of demand are as follows:

1. the number of buyers;

2. tastes and preferences;

3. income (normal and inferior goods);

4. expectations of future price and income changes;

5. prices of related goods (substitutes and complements).

• Non-price determinants of supply are as follows:

1. the number of sellers;

2. technology;

3. resource prices;

4. taxes and subsidies;

5. expectations of future price changes;

6. prices of other goods.

• Normal good is a good for which, other things equal, an increase in income leads to an increase in demand.

• Quantity demanded is the amount of a good that buyers are willing and able to purchase.

• Quantity supplied is the amount of a good that sellers are willing and able to sell.

• Substitutes are two goods for which an increase in the price of one leads to an increase in the demand of the other.

• Surplus or shortage exists at any price where the quantity demanded and the quantity supplied is not equal. When the price of a good is greater than the equilibrium price, there is an excess quantity supplied, or surplus. When the price is less than the equilibrium price, there is an excess quantity demanded, or shortage.