Exercises Ex. 1 Find definitions to each of the given terms :

wholesaling	- any document giving the holder a right to money, goods or other property not actually in his possession.
retail	- that variable amount in the currency of one country which, at any given date, is offered for a fixed sum in the currency of another country.
retailers	- buying and selling in large quantities only.
security	- those who sell goods in small quantities only.
market overt	- a market in which goods are openly displayed for sale to all who may wish to buy.
rate of exchange	- the sale of goods in small quantities or in single articles.
piece goods	- is made up of the cost of material to the works, labor, together with the direct expanses of production.
profit	- a list issued by merchants to their customers, showing the various articles and the current market price of each.
returns	- the amount of a merchant’s sales during a state time.
commission	- is the gain resulting from the employment of capital.
price current	- means those goods which are sold by the piece (as carpets, hand-kerchiefs).
prime cost	- a charge of so much per cent made by an agent for buying or selling goods to another or for transacting any other business for his principal

Ex. 2 Complete the following sentences, using words and word combinations from the given below:

wholesaling, supplies, a market, ultimate consumer, surplus, advertising, wage rates, a price, retail markets, market research, a price

1. Every good has … in which … are bought and sold.

2. … is a region in which buyers and sellers are in a free intercourse with one another.

3. … … are centered in a single town.

4. … is the amount paid for a specified quantity and quality of any good or service.

5. A situation in which the price is being held above equilibrium is called … .

6. As the demand for labor rises during an economic upswing … rise.

7. If the product is differentiated, you will have to spend a lot on … to force your way into the market.

8. … … helps the producer to predict what the people will want.

9. … provides channels of distribution which help to bring goods to the market.

10. Retailing is selling goods and services to the … … .

Ex. 3. Translate the following sentences:

1. На рынке часто сталкиваешься со сговором продавцов о фиксировании цены. 2. Цель рекламы – привлечь внимание потенциального покупателя к товару. 3. Четыре «пи» (Р) маркетинга включают продукт (товар), цену, продвижение (стимулирование) и место (сбыта товара). 4. Идеальный конкурентный рынок возможен только для продукции сельского хозяйства. 5. Изменение цены на какой-либо товар сигнализирует о необходимости перевода производственных ресурсов в эту сферу деятельности. 6. Как дефицит товара на рынке, так и его избыток являются следствием неправильной политики ценообразования. 7. Существует несколько типов посредников, некоторые из них получают комиссионные.

Ex. 4. Answer the following questions :

1. Does every good have its market?

2. How did Antoin Cournot define the market?

3. What types of the market do you know?

4. Which goods enjoy the worldwide market?

5. Markets for which goods are national in scope?

6. What does the size of labor market depend on?

7. What are the main requirements to the competitive market?

8. Can you explain the difference between the wholesale market and the retail market?

9. Which of these two links in the chain of distribution is more expensive?

10. In which way are markets linked?

11. How can the market economy be visualized?

12. What is “the market structure”?

13. What does marketing include?

14. Why is market research very important for producers and sellers ?

Ex. 5. Get ready to speak on the topic “Market”.

Ex. 6. Answer the following questions :

1. What is a price?

2. How is an equilibrium price defined?

3. Is the price of a good or service equal to its cost or value?

4. What does the price provide?

5. What functions of the price do you know?

6. How can the incentive function be illustrated?

7. What does the rationing function require?

8. What is the final function of the price?

9. Under what conditions does surplus of goods take place?

10. What kind of situation is shortage?

11. In which way are the prices of different goods interrelated?

12. How is the market price formed?

13. Does market conduct effect the economic performance of an industry? How?

Ex. 7. Get ready to speak on the topic “Price”.

TEXT V

WORLD TRADE

World trade is a special form of trade, because it transcends state boundaries. Regardless of who the seller and who the buyer is (individuals, private firms, cooperative enterprises, or state agencies), all goods that enter a country as a result of foreign trade transaction constitute that country’s import, whereas all goods that leave the country form its export. Combined, the country’s export and import constitute its foreign trade turnover. The difference between import and export is called the country’s trade balance. This balance is active (favourable) if exports exceeds imports and adverse (negative) if imports are greater than exports.

Foreign trade constitutes a special branch of the economy because its functioning requires a special network of organizations (export-import companies, commercial firms, etc.) that maintain contacts with counterpart organizations in other countries; a developed infrastructure that includes storage facilities, refrigerators, loading equipment, transport facilities (above all, seagoing vessels, because the bulk of goods in foreign trade is transported by sea); finance and credit agencies which underwrite all goods entering into foreign trade (insurance companies); effect all financial operations involved, crediting of foreign trade, currency exchange, etc. (banks).

To be able to take part in world trade on equal terms, a country must not only have the requisite export resources and the foreign currency to pay for imports, but must enjoy free access to the entire above-mentioned infrastructure, without which the goods cannot make their way from seller to buyer. In the industrialized countries almost the entire bank system and material infrastructure is owned or controlled by private capital which fact places the developing countries at a great disadvantage, because they are compelled to secure the services of well-established commercial firms, shipping companies, insurance companies and banks. Payment for all these services takes a large part of their export revenues, constituting for the developing countries a kind of ”invisible import”, which imposes a heavy burden on the trade balance.

The world market is a field of merciless rivalry among producers of similar goods in different countries. With the development of world production this rivalry escalates as a result of changes in the international division of labor, specialization of countries is being made universal. For a whole century, while Britain enjoyed the role of ”the world’s workshop”, British manufactured goods (textiles, especially cotton goods, metalwares and first-generation machinery, including various steam engines), met with almost no competition in the world market. But as the industrial revolution spread to other countries, they too started selling similar products. Today it would be difficult to find a country that would not have its own textile industry and would not sell textiles and textile products on the world market. In the context of scientific and technological progress, more and more countries, including some developing ones, are mastering the manufacture of technically sophisticated and science-intensive industrial goods, including household electronic appliances, electronic equipment from color television sets to industrial robots. Such production is in no way associated with the mineral resources and climatic conditions of the countries concerned, since the necessary facilities can be set up on a tiny island as well as in a major continental country.

As the international division of labor becomes more dynamic, international trade links become increasingly unstable. Escalating competition between countries assumes a character similar to international warfare; not surprisingly, the greatest trade conflicts were called ”the textile war”, ”the automobile war”, ”the computer war”. In such conditions, of great importance is wise trade policy, which in one form or another has always been pursued by national governments throughout the entire history of world trade.

The principal agency that conducts its government’s foreign trade policy is the customs authority. Any commodity imported or exported from a country must first go through the customs, where it is registered, where observance of national regulations is checked, and where customs duty is paid. (Customs duty is a fee charged by the state from individuals and organizations for permission to import or export goods - import or export duty, respectively. Most often, the amount of customs duty is a certain fixed percentage of the cost of the good). Secret import or export of goods by-passing the customs is called smuggling and is considered a serious criminal offence.

As a rule, governments conduct flexible and differentiated foreign trade policies, striking a happy medium between the two extremes: free trade and protectionism. Complete free trade implies that the customs only register all the goods imported and exported, but charge no duty and impose no bans. Such a policy is not conducted by any country. Protectionism can assume various forms ranging from a complete ban on the import or export of a certain commodity to the imposition of certain limits and the introduction of taxes and duties - from relatively light to prohibitive (a very high prohibitive tax or duty renders the import or export of a given commodity totally unprofitable). As the name of such foreign trade policy suggests, its aim is to protect the country’s economy against competition from foreign producers of similar commodities. Other aim of protectionism includes efforts to alter the structure of production in the country, limit or modify the consumption level of the population or certain sections of it, regulate the country’s financial situation, generate additional state revenues, etc.

In conducting a specific foreign trade policy, the government substantially affects above all the interests of its own people or any specific class or stratum. Therefore, all conflicts over foreign trade issues - specifically between proponents of free trade and advocates of protectionism - have often been in the focus of internal political struggle. The difficulty in determining a foreign trade policy best suited to a concrete period is that its results are always multiple and complex. Its effect is different not only for different social classes and sections of the population in a given country, but literally for every individual. For example, duty-free import of a certain commodity is, on the one hand, welcomed by the population since it brings down the retail price. But on the other hand, this undermines the relevant domestic industry and as a result, people employed by that industry suffer wage cuts or lose their jobs.

Protectionism meets the interests of national industrialists protecting them against foreign competition, on the one hand, but threatens their industry with technological stagnation, on the other. Some countries abuse the policy of protectionism to such an extent that they not only shield their domestic economy against all foreign competition, but conduct a massive export of low-priced commodities to other countries, thereby damaging the corresponding industries there. Such a foreign trade policy is called ”aggressive protectionism”.

A separate country’s foreign trade policy invariably affects the interests of other countries. Besides customs barriers foreign trade policy includes various restrictions and bans (embargoes), often applied to some particular countries, which are thereby discriminated against. These discriminatory restrictions are used to achieve military, political and strategic ends, to interfere in other countries’ domestic affairs, or to penalize a certain country. The present-day customs system operating in the industrialized countries is basically disadvantageous to their Third World trading partners, obstructs the modernization of their economic structure and keeps them from improving their position in the international division of labor. Under that system, the amount of import duty as a rule rises in direct proportion to the degree to which the import commodity has been processed. In recent years the trend towards lower import duties has been compensated by a system of non-tariff import restrictions, including: complication of the customs and administrative procedure for imported goods; special requirements for packing and marking; often unjustified requirements for ecological purity; imposition of unnecessary quarantines, and so on.

Prices in World Trade. The pricing of goods on the world market is of crucial importance to the economic status and development conditions of all participating countries. To a great extent, the correlation between the prices of imported and exported goods and the dynamics of these prices determine the role of foreign trade, which in some cases can stimulate economic development, technological growth and accumulation of rational wealth, while in other cases it can pump the national wealth out of a country and encourage international exploitation, thus bringing the country to economic ruin.

World market prices are determined by a number of factors and can fluctuate sharply within certain period of time. The world market is flooded by similar commodities produced in different countries under different economic conditions, but they all have the same price at any particular moment. This price is based on the international cost, which is regulated by economic conditions in countries producing the bulk of that particular commodity. Countries with better economic conditions will reap additional profit from the sale of their goods, while countries with worse conditions will suffer losses. Based on international cost, prices keep going up and down under the influence of the current correlation of supply and demand. Since the developing countries act in world trade chiefly as suppliers of raw materials, their export revenues largely depend on the fluctuating demand for raw materials in the industrialized countries. The predominating trend, however, which in recent years has stabilized even further, was a relative fall in demand for agricultural products, raw materials and mineral fuels from the developing countries.

The world market is characterized, by a variety of prices of one and the same commodity, which fact enables the major corporations to manoeuvre in order to reap extra profits at the expense of the developing nations. Any commodity produced in the developing countries and sold on the world market acquires a number of successive prices. The lowest price, totally divorced from the export price, is paid by the middleman to the peasant farmer for the harvested crop. When it is exported from the country, it fetches a higher price, the receipts going to the country’s balance of payment.

Of special importance are quoted prices on the stock exchange, which are largely shaped in the process of speculation. Finally, the retail price which the consumer pays for the imported goods is much higher than the price paid to the producer in the developing country. On the other hand, in exporting goods from an industrialized countries, corporations often set two prices: a relatively low price is set on goods exported to other industrialized countries, whereas a higher price is set on the same goods when exported to the developing countries. In order to obtain equitable prices on their goods, the leading exporters in the Third World have united in various associations for the purpose of influencing the process of pricing (e.g. OPEC). Today world trade turnover maintains its long-term trend of growth at a higher rate than that of world production.