V. Answer the following questions:

1. What is the rationing effect of prices?

2. What are the functions of prices?

3. How are prices determined in a free market economy?

4. What causes prices to rise and fall in a market economy?

5. What is demand?

6. What does the low of demand describe?

7. When is demand described as elastic?

8. Why is the demand for some goods and services inelastic?

9. What does supply refer tp?

10. What is equilibrium or market price?

VI. Define the terms:

market price

rationing effect of prices demand

perfectly competitive markets buyers

production-motivating function of prices sellers

VII. Translate into English:

1. Ціни управляють ринковою економікою. 2. Ціни спо­нукають виробників до збільшення або зниження рівня ви­пуску товарів. 3. У вільній ринковій економіці ціни визнача­ються взаємодією чинників пропозицій і попиту. 4. Ціна, за якою фактично продають товари та послуги, називається ринковою ціною. 5. Зміни в попиті та пропозиції впливати­муть на ринкові ціни. 6. Ринкова ціна — єдина, яка може існувати протягом певного часу в умовах цілковитої кон­куренції. 7. Попит — це бажання та спроможність спожи­вача купити товар чи послугу в певний час і в певному місці.

VIII. Read and dramatize the following dialogue:

Maurice: Haven't seen you for a long time. What have you been busy with?

Lusy: I've been pretty busy. Do you know my friend Susan?

M.: Yes, I do.

L.: I went into business with her.

M.: Really? How is it going on?

L.: Fine, thank you.

M.: What kind of business is it?

L.: We developed our own special recipe for homemade ice-cream, and we decided to sell ice-cream cones to students every day after school.

M.: How much does your ice-cream cost?

L.: It costs $1.60 per cone.

M.: How did you define the cost of your product?

L.: Oh, it was not very difficult. First of all we decided to learn the demand of our consumers. For this purpose we conducted a survey to see if students were interested in the idea. Each student was asked the following question: «Would you spend $.50 to have an ice-cream cone for and after school snack?» This question was repeated using higher and higher prices up to $25 per cone. The results of the survey were assembled in a demand schedule, a table showing the quantities of a product that would be purchased at various prices at a given time.

M.: Oh, it is very interesting. I'd like to see this demand schedule for ice-cream cones.

L.: If you wonder I can show it to you. I've got it with me. Look here!

Demand schedule for ice-cream cones

Price Per Cone Quantity Demanded

$.50 190

.75 175

1.00 125

1.25 85

1.50 65

1.75 50

2.00 40

M.: The survey results illustrated the law of demand in action, didn't they?

L.: You are right. We also made the demand curve, which illustrated the demand for ice-cream cones. It also enabled us to estimate what the demand would be for those prices falling in between the prices we surveyed. Although the students were not questioned about how many cones they would buy if the selling price were $1.60, the curve lets us estimate the number would be about 55.

M.: Nice for you. Now you seem to know a lot about business.

L.: Not everything yet. The subject becomes quite technical. M.: I'm glad to hear it. It's time to go now. See you later. Bye!