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  1. Language skills

  2. Ex.12. Ask questions to which the following statements may be answers.

  1. The market (everyone, producers and consumers together) determines the price of a product.

  2. Demand is comprised of three things: desire, ability to pay and willingness to pay.

  3. Another factor that affects such decisions is income.

  4. Economists refer to the behaviour of sellers as the market force of supply.

  5. Demand refers to how much (quantity) of a product or service is desired by buyers.

  6. In market economy theories, demand and supply theory will allocate resources in the most efficient way possible.

  7. Because supply and demand can shift and change, equilibrium in a standard market is also fluid.

  8. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.

  9. When supply and demand are equal, the economy is said to be at equilibrium.

  10. A good or service is considered to be highly elastic if a slight change in price leads to a sharp change in the quantity demanded or supplied.

  1. Ex.13. Answer the questions:

  1. What kind of choices does every society need to make?

  2. What defines the price of a product under condition of competition?

  3. Prove that the terms demand and supply not always mean the amount of goods actually sold or bought.

  4. What do micro economists usually try to explain?

  5. What is demand comprised of?

  6. When is demand real?

  7. Explain the termutility.

  8. What is demand?

  9. What is supply?

  10. What does the Law of Demand state?

  11. What does the Law of Supply state ?

  12. How do supply and demand shape the market?

  13. When is the economy said to be at equilibrium?

  14. Does equilibrium exist in the real market place?

  15. What concept helps to understand supply and demand theory?

  1. Ex.14. Make a presentation of the topic.

  2. Writing

  3. Ex.15. Make up a plan for a summary of text A.

  4. Ex.16. Using your plan as a base write a brief summary (25-30 sentences) of the text.

  5. Ex.17. Using the information from the text, write an essay on one of the following topics:

      1. An increase in demand raises the price of a particular good. An increase in price cuts demand for that good.

      2. How does a rational consumer allocate a fixed income between the purchase of two commodities? Would the consumer always use an increase in income to buy more of both goods?

  1. Discussion points

  2. Ex.18. With your group mates do the following.

  1. Analyze the effect, in the short run only, on the price of coffee of (i) a severe frost; (ii) a fall in the rate of VAT; (iii) the introduction of rationing.

  • You are not expected to have a detailed knowledge of the coffee industry.

  • Apply your understanding of general supply and demand analysis.

  • Make assumptions about the price elasticity of supply and demand for coffee and then draw flat or steep curves to match.

  1. Explain why the prices of some commodities fluctuate more than those of others.

  • Explain why unstable conditions of supply and demand result in price changes.

  • Explain why price inelasticity amplifies the effect on price of changes in supply and demand.

  • Make use of graphs and relevant examples.