efe

apple orchard.

3.The price ofpears doubles and stays very high over a number of years.

4.The apple crop is ruined by bad weather.

VIII. Here are some of the laws of supply and demand. Read them very carefully and correct the mistakes where necessary:

1.When the price of a commodity falls the quantity that is demanded will also fall.

2.When the price of a commodity rises the quantity that is supplied will increase.

3.A decreased supply lowers market price.

4.An increased demand raises price and brings about an extension of supply.

IX. Fill in the gaps with the words below:

Free, supply, quantity, fall, purchase, produce, supply, price, rise, quantity

Demand is not a particular __1__ such as six bars of chocolate, but rather a full description of the __2__ of chocolate the buyer would __3__ at every __4__ which might be charged. Even when chocolate is __5__ only a limited amount will be wanted. As the price of chocolate __6__ the quantity demanded __7__ other things being equal. Chocolate cannot be __8__ for nothing. Nobody would wish to __9__ if they received a zero price. Thus, __10__ is the quantity of a good sellers wish to sell at each conceivable price.

X. Render the text in English:

Спрос на некий товар – это количество товара, которое покупатели желают приобрести за некоторый период. Спрос зависит от цены данного товара и прочих факторов, включающих цены других товаров, в особенности альтернатив ных товаров, а также доходы покупателей и их вкусы. Предложение товара – это количество товара, которое пр одавцы желают продать за некоторый период. Объем предложения зав исит от цены товара и других факторов, прежде всего от цен используемых в производстве ресурсов и имеющихся в распоряжении продавцов производственных технологий. Цена на конечный продукт должна быть достаточно высокой, чтобы покрывать расходы и давать пр и- быль. Если не будет перспективы прибыли, никто не начнет производство. Как видим, цена играет ведущую роль в модели «спрос – предложение». Как пр а- вило, при прочих равных условиях объем спроса на товар увеличивается, когда цена товара падает, и уменьшается, когда цена растет.

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WANTS AND UTILITIES

The study of economics begins with understanding human wants. By “want” the economist means the endless succession of material “wants” which are displayed by all living things. Everyone needs air, food, and water to support life. If we live in some climates we need clothing and shelter from the weather. Everyone needs a home to call his own; some territory which is his, by right.

Even when we have these basic “needs”, other more advanced “wants” present themselves. We want comfortable homes, entertainment, education, and transport. As the things we want increase in variety and become more and more sophisticated, the economy becomes more intricate too, until thousands of men are cooperating in different countries to produce the raw materials, designs, and specialized machinery which are necessary for a single thing we “want” – such as an aeroplane or a motor vehicle.

Everyone has an individual scale of preferences, a ladder-like arrangements of things in one’s own mind with the most preferred items towards the top of the scale. Some things never climb up the scale higher than the first few rungs, for they are constantly leapfrogged by other unexpected items. Every father of a family can think of things, often quite essential things, which he has been meaning to buy for years, but repeatedly has to reject for other items which the children need if they are to make the progress he wishes them to make.

What is it that decides the position of an item on a consumer’s scale of preferences? The answer is that preferences are based upon the consumers’ view of utility of a particular good.

Utility is the ability to satisfy wants. The basic needs of mankind are called wants, the means of satisfying these wants are called utilities. The purpose of an economy is to create utilities which will satisfy mankind’s wants.

Total utility is the total satisfaction we derive from the possession of a commodity. Usually total utility will continue to rise as we acquire more and more of the same goods. This would certainly be true, for example, of a collector’s acquisition of antiques. It might not be quite so true of a smoker’s purchases of cigarettes. There might come a point with many commodities where total utility had reached a maximum and a further supply would be a positive nuisance.

Marginal utility is the utility of one unit of a good or service. In fact we have to value it in imaginary “units of satisfaction”. Take the housewife buying bread.

Her usual daily supply is two loaves, and each of these loaves will have great utility but the first loaf more than the second.

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Diminishing marginal utility sets in as soon as the first loaf is bought; each extra loaf is valued less and less. Another loaf may have negative utility and be a cause of dissatisfaction. We may say then that diminishing marginal utility sets in very soon after we have purchased a normal supply. How does the housewife choose a balanced supply of goods and services? By comparing in her mind the marginal utilities of a further unit of various goods and services, one with another, and choosing the ones which will maximize her family’s satisfaction.

The production of utilities. Satisfaction can be achieved in two ways: by the enjoyment of goods or the enjoyment of services. Goods are tangible items which either satisfy the basic requirements of human life or make that life fuller and richer. Common examples are foods, clothing, housing, furniture, books, television sets, and motor cars. The actual point of satisfaction occurs when we consume the food, or beverage, wear the clothing, make use of the furniture, and so on, so that the name consumer goods is usually applied to these tangible utilities. There is another class of goods, called producer goods. These are goods which do not yield personal satisfaction to consumers but are part of the capital assets of production. A drilling machine, or an assembly line in a factory, are examples of producer goods.

Services are intangible “utilities”, which satisfy our needs by personal attention. The dentist who extracts a painful tooth; the surgeon who sets a broken leg; the television personality who brightens an otherwise dull evening; or the hairdresser who prepares us for a social occasion are examples of people offering personal service. As with goods, there is a class of services which is not directly personal in this way, but forms part of the productive organization. Such services are commercial services; trade, banking, transport, insurance, and communications are the chief examples.

The whole purpose of production, which makes use of producer goods and commercial services in the course of its activities, is to create utilities by providing an endless flow of consumer goods and personal services. In order to achieve this production of utilities the resources available to mankind must be mobilized. These resources are called the factors of production.

TAS KS

I.Answer the following questions:

1.What does an economist mean by “want”? Is there a difference between “need”

and “want”?

2.What is a scale of preferences?

3.What is the basis of a scale of preferences?

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4.What is utility?

5.What is the purpose of economy according to the concept of utility?

6.What are the differences between marginal and total utility?

7.How do you choose “your” supply of goods and services?

8.What are producer goods?

9.What are tangible goods?

10.What are the factors of production?

II. Match the terms with their definitions:

III. Translate the words and word combinations:

Потребительская корзина, удовлетворять потребности, средства, поучать, иерархия потребностей, предельная полезность, общая полезность, уменьшающаяся предельная полезность.

IV. Are the following statements true or false? Correct the false ones:

1.If total utility reaches a maximum, a further supply is a positive nuisance.

2.A drilling machine, or an assembly line in a factory are examples of tangible

items.

3.Total utility rises while marginal utility always falls.

4.Consumers base their choice of a supply of goods on the total utility they can

obtain.

5. Utility is a subjective concept.

V. Render in the text English:

В экономической теории под полезностью понимается удовлетворение, получаемое потребителем от товаров и услуг, которые он покупает. Представление потребителя о полезности того или иного товара определяет его положение на индив идуальной шкале предпочтений. Поскольку ни один потребитель не может себе позволить все, что ему хочется, то он оказывается перед лицом выбора благ, которые он может позволить себе приобрести. Так в ы- страивается индивидуальная иерархия потребностей.

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Совокупная полезность – это полное удовлетворение, которое мы получаем от обладания товаром. Предельная полезность представляет собой прирост совокупной полезности в р езультате потребления дополнительной единицы данного блага. Как правило, предельная полезность является убывающей, что означает, что предельная полезность тем меньше, чем большим количеством блага потребитель уже обладает.

VI. Give a summary of the text.

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MARKET

A market is where buyers and sellers transact business for the exchange of particular goods and services and where the p rices for these goods and services tend toward equality. In order for a market to “clear” or function properly, the quantity of goods and services demanded and supplied must be equal at some given price. At any particular point in time, markets can be in “ equilibrium” or “disequilibrium” depending on whether or not aggregate supply equals aggregate demand at the prevailing price. M arkets may differ in scope and do not necessarily require buyers and sellers to meet or communicate directly with each other. Business may be transacted through the use of intermediaries as well.

There are two fundamental dimensions of market definition: (i) the product market, where products group together, and (ii) the geographic market, where geographic areas group together. M arket definition takes into account both the demand and supply considerations. On the demand side, products must be substitutable from the buyer’s point of view. On the supply side, sellers must be included who produce or could easily switch production to the relevant product or close substitutes. M arket definition generally includes actual and potential sellers, that is, firms that can rapidly alter their production processes to supply substitute products if the price so warrants. The rationale for this is that these firms will trend to dampen or curb the ability of firms in the market to raise price above the competitive level.

The location of buyers and sellers will determine whether the geographic market is local, regional, national or international. The e xchange of goods and services in the world, or global, market is known as international trade. There are three main benefits to be gained from this type of exchange.

First, international trade makes scarce goods available to nations that need or desire them. When a nation lacks the resources needed to produce goods domestically, it may import them from another country. For example, Saudi Arabia imports automobiles; the United States – bananas; and Japan – oil.

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Second, international trade allows a nation to specialize in the production of those goods for which it is particularly suited. This often results in increased output, decreased costs and a higher national standard of living. Natural, human and technical resources help determine which products a nation will specialize in. Saudi Arabia is able to specialize in petroleum because it has the necessary natural resource; Japan is able to specialize in the production of televisions because it has the human resources required to assemble the numerous component s by hand; and the United States is able to specialize in the computer industry because it has the technical expertise necessary for design and production.

There are two economic principles that help explain how and when special i- zation is advantageous. According to the theory of absolute advantage, a nation ought to specialize in the goods that it can produce more cheaply than its compet i- tors or in the goods that no other nation is able to produce. According to the theory of comparative advantage, a nation ought to concentrate on the products that it can produce most efficiently and profitably. For example, a nation might produce both grain and wine cheaply, but it specializes in the one which will be more profitable.

The third benefit of international trade is its political effects: nations that trade together develop common interests which may help them overcome political differences. Economic cooperation has been the foundation for many political alliances, such as the EC (Common M arket) founded in 1957.

TAS KS

I. Match the terms with their definitions:

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II.Answer the following questions:

1.What is a market?

2.When does a market function properly?

3.What are the key points of market definition?

4.How do markets differ in scope?

5.What benefits can be gained from international trade?

6.Why is specialization advantageous?

7.What political changes can economic cooperation lead to?

8.How can we balance market growth and development with conservation of natural

resources and protection of the environment?

III.Are the following statements true or false? Correct the false ones:

1.A market is where sellers raise or fix prices and reduce output in order to increase

profits.

2.A market functions properly if the quantity of goods and services demanded and supplied is equal at some given price.

3.When a market is in disequilibrium, aggregate supply equals a ggregate demand at the prevailing price.

4.M arkets are all similar in scope. There are only local markets, where buyers and

sellers must meet and communicate directly with each other.

5.To define a market, all you need is to identify the number of companies and products available in the market.

6.M arket definition takes into account supply and demand.

7.In defining a market, potential sellers are not considered.

8.Specialization brings about a rise in both output and costs.

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9.According to the theory of comparative advantage, a nation should focus on the goods that it can produce more cheaply than its competitors.

10.Economic cooperation is the best way to solve political problems.

IV. Render the following sentences in English:

Рынок – это механизм, обеспечивающий осуществление обменных операций между продавцом и покупателем.

Для нормального функционирования рынка необходимо состояние равновесия, когда совокупный спрос равен совокупному предложению.

В определении рынка учитываются два аспекта: продукция и географическая территория, на которой она реализуется.

Если ф ирма является единственным продавцом того или иного вида пр о- дукции, она может поднять цены с целью максимизации пр ибыли.

V. Give a summary of the text.

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MARKETS AND MONOPOLIES

A monopoly is a situation where there is a single seller in the market. In conventional economic analysis, a monopoly is taken as the polar opposite of perfect competition. By definition, the demand curve facing the monopolist is the industry demand curve, which is downward sloping. Thus, the monopolist has significant power over the price it charges, i.e. is a price setter rather than a price taker.

Comparison of a monopoly and perfect competition* reveals that the monopolist will set a higher price, produce a lower output and earn above normal profits (sometimes referred to as monopoly rents). This suggests that consumers will face a higher price, leading to a loss. In addition, income will be transferred from consumers to the monopoly firm.

The preceding arguments are purely static and constitute only part of the possible harm resulting from monopoly. It is sometimes argued that monopolists, being largely immune from competitive pressures, will not have the appropriate incentives to minimize costs or undertake technological change. M oreover, resources may be wasted in attempts to achieve a monopoly position. However, a counter argument advanced is that a degree of monopoly power is necessary to earn higher profits in order to create incentives for innovation.

M onopolies can only continue to exist if there are barriers to entry. Barriers which sustain monopolies are often associated with legal protection created through patents and monopoly franchises. However, some monopolies are created and sustained through strategic behavior or economies of scale. The latter are natural monopolies which are often characterized by steeply declining long-run average and marginal costs and the size of the market is such that there is room for only one firm to exploit available economies of scale or duplication of facilities would be wasteful.

* Perfect (pure) competit ion is the complete form o f competit ion. It is the market situation in which there are many buyers and sellers of a product, and no single buyer or seller is powerful enough to affect the price of the product.

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