Unit 5 demand and supply

Lead-in

1. Discussing in groups or pairs, try to identify the factors that influence:

a. consumer’s decisions to demand goods or services

b. producer’s decisions to supply goods or services

2. Do you know how the law of demand and supply works?

Key Vocabulary

Study the following vocabulary.

1. buyer n	покупатель
2. seller n	продавец
3. demand n	спрос
4. supply n	предложение
5. have an influence on smth	оказывать воздействие на что-либо
6. competitive adj	конкурентоспособный, конкурентный
7. interact v	взаимодействовать
8. support v	поддерживать
9. pay v	платить
10. commodity n	продукт, товар
11. law n	закон
12. quantity n	количество
13. consumer n	потребитель
14. substitute n	заменитель
15. complementary adj	дополняющий (о товаре)
16. increase n	увеличение, рост
17. profitable adj	прибыльный
18. tend v	иметь тенденцию
19. encourage v	побуждать, стимулировать
20. influence smth v	влиять на что-либо
21. equal adj	равный, одинаковый
22. attain v	достигать
23. state of equilibrium	состояние равновесия

Pre-reading Activities

1. Mind the pronunciation of the following words. Learn this vocabulary.

increase (n) - ['inkri:s] – увеличение, рост

increase (v) - [in'kri:s] – возрастать, усиливаться

decrease (n) - ['di:kri:s] – уменьшение, спад

decrease (v) - [di'kri:s] – уменьшаться, сокращаться

Equal (adj) - ['I:kwəl] – равный, тождественный

equal (v) - ['i:kwəl] – быть одинаковым, равным

2. Use one of the words from Task 1 to complete the sentences. Mind grammar forms.

1. Our company provided … employment opportunities.

2. We divided the profits into three … shares.

3. Unfortunately, sales … by five percent this year.

4. They will soon … the price from $50 to $60.

5. These changes will … our expenses.

6. His salary … mine.

Reading

Read the text and single out the following notions:

• a competitive market

• the law of demand

• the law of supply

A market is defined as a group of buyers and sellers of a particular product or service. Competitive markets are markets with many buyers and sellers, so that each has a very small influence on the price. Supply and demand is the most useful model for a competitive market, and shows how buyers (citizens) and sellers (businesses) interact in that market.

The first thing to understand is that demand is not the same as desire, or need, or want. When desire is supported by the ability and willingness to pay the price, it becomes an effective demand and has an influence in the market.

Demand, in economics, may be defined as “the quantity of the commodity which will be demanded at any given price over some given period of time”. According to the law of demand, price has a significant effect on demand. Consumers will buy less at higher prices and more at lower prices.

Among the factors which influence consumers to buy more or less of a product, even when the price of the product does not change are:

• Income

• Tastes and preferences

• Substitutes

• Complementary goods

Supply is not the same thing as “amount available”. We are only concerned here with the amounts actually brought to market and these amounts depend on the ruling market price. The basic law of supply says “More will be supplied at a higher price than at a lower price”. An increase in price usually means that production will become more profitable. In addition, an increase in price would tend to encourage new firms to enter the industry.

In addition to price, there are other factors that will strongly influence the amount of a good or service supplied to the market:

• Number of producers

• Resource prices

It is possible for supply and demand to be equal. In this case, the amount of supplied products or services must equal the demand for those products and services. If this relationship between supply and demand is attained, the economy is balanced in a state of equilibrium.

Remember!

If supply continues to increase and demand softens (or even remains constant), prices will continue to fall.

Comprehension Check

1. Answer the questions.

1. What is a market? What is a competitive market? 2. What does “supply and demand” model show?

3. When does desire become an effective demand?

4. Do prices have any effect on demand? Why?

5. What factors influence consumers to buy more or less of a product?

6. What do the basic laws of demand and supply say?

7. What influences the amount of a good or service supplied to the market?

8. Is it possible for supply and demand to be equal? In what case?

2. Complete the following statements.

1. Buyers and sellers in a competitive market … .

2. … is not the same as desire.

3. “The quantity of the commodity which will be demanded at any given price over some given period of time” is … .

4. According to the law of demand, consumers … .

5. Production will become more profitable if … .

6. A state of equilibrium is … .

3. Do you agree with the following statements? Use the given vocabulary to explain your choice.

In my opinon, … (на мой взгляд…)

It would be more correct to say that … (было бы правильнее сказать, что…)

I’m afraid, I disagree with… (боюсь, я не согласен с…)

1. Supply and demand is a model for a competitive market, which shows how buyers and sellers influence prices.

2. Demand is the ability and willingness to pay the price.

3. According to the law of demand, price has a great influence on demand.

4. More goods will be supplied at a higher price than at a lower price.

5. If supply and demand are equal, the economy is balanced in a state of equilibrium.