Demand and supply

Demand is the quantity of a good that buyers wish to buy at each price. Other things equal, at low prices the demanded quantity is higher.

Supply is the quantity of a good that sellers wish to sell at each price. Other things equal, when prices are high the supplied quantity is high as well.

The market is in equilibrium when the price regulates the quantity supplied by producers and the quantity demanded by consumers. When prices are not so high as the equilibrium price there is excess demand (shortage) raising the price. At prices above the equilibrium price there is excess supply (surplus) reducing the price.

There are some factors influencing demand for a good, such as the prices of other goods, consumer incomes and some others.

An increase in the price of a substitute good (or a decrease in the price of a complement good) will at the same time raise the demanded quan­tity.

As consumer income is increased demand for a normal good will also increase but demand for an inferior good will decrease. A normal good is a good for which demand increases when incomes rise. An inferior good is a good for which demand falls when incomes rise.

As to supply, some factors are assumed as constant. Among them are technology, the input price, as well as degree of government regulation. An improvement in technology is as important for increasing the supplied quantity of a good as a reduction in input prices.

Government regulates demand and supply, imposing ceiling prices (maximum prices) and floor prices (minimum prices) and adding its own demand to the demand of the private sector.

Active vocabulary

demand [dI'ma:nd] n спрос

supply [sq'plaI] n предложение

buyer ['baIq] n покупатель

seller ['selq] n продавец

equilibrium ["i:kwI'lIbrIqm] n равновесие

surplus ['sE:plqs] n излишек, избыток

shortage ['SO:tIdZ] n нехватка, дефицит

excess [Ik'ses, 'ekses] n избыток, излишек

reduction [rI'dAkS(q)n] n снижение, сокращение

complement goods ['kPmplImqnt gVdz] взаимодополняемые

товары

inferior goods [In'fI(q)rIq gVdz] товары низкого качества

normal goods ['nO:m(q)l gVdz] товары обычного качества

substitute goods ['sAbstItju:t gVdz] товары-заменители, суррогаты

input price цена ['InpVt praIs] производственного фактора

to regulate ['regjVleIt] v регулировать

to assume [q'sju:m] v принимать, предполагать

to increase [In'kri:s] v увеличиваться, повышаться

to decrease [di:'kri:s] v уменьшаться

to reduce [rI'dju:s] v снижать, сокращать

to add [1d] v прибавлять, добавлять

equal ['i:kwql] n равный

Exercises

1. Read the following words. Mind the stress:

a) the first syllable is stressed

quantity, equal, shortage, surplus, influence, substitute, complement, constant, input, private;

b) the second syllable is stressed

demand, increase, decrease, inferior, improvement.

2.Read the words and say what part of speech they belong to. Translate the words.

Producer, information, development, situation, growth, productive, productiv­ity, investment, important, agriculture, importance, health, agricultural, indus­trial, wealth, worker, active, activity.

3. Find the words with the same root. Translate them.

To fall, consumer, to stabilize, organization, demand, to sell, buyer, influ­ence, to invest, to improve, consumption, fall, improvement, stabiliza­tion, to intervene, to organize, investment, seller, to consume, to buy, to demand, increase, to reduce, reduction, to influence, to increase, inter­vention.

4. Form nouns from the following words by adding the suffix – tion.

Consume, produce, introduce, intervene, reduce.

5. Form Participle I and II from the following verbs.

Demand, produce, supply, consume, impose, develop, buy, sell, decrease, reduce, increase.

6. Translate the following sentences into Russian. Pay attention to the constructions with Participle I and Participle II.

1. In East European countries consumers couldn't get goods, and factories couldn't buy inputs at prices held low by governments.

2. Governments intervene controlling the supply of money, limiting monopolies and helping private industries.

3. An improvement in technology will increase the supply of a good, increasing the quantity supplied at each possible price.

4. Governments regulate economic activities imposing some restrictions.

5. The high price for a good is the market mechanism telling suppliers it is now time to increase production.

6. Income is money of all kinds coming in regularly to a person, family or organization.

7. Active money is money going from man to man and used by the peo­ple in buying and selling goods and services.

8. Reducing our imports, we decrease the exports of others.

9. At prices above equilibrium we have a situation known as excess sup­ply, or surplus.

7. Open the brackets. Choose the suitable words to complete the sentences.

1. The fashion for mini-skirt (increased, reduced) the demand for textile materials.

2. Government regulations sometimes (decrease, impose) a change in (technology, quantity) that producers do not want to use.

3. Stabilization of prices is of great importance to industrial nations (as well as, as well) the Third World countries.

4. Freeing up prices leads to their (decrease, increase).

5. (Inferior, normal) goods are usually low-quality goods for which there are higher-quality (improvements, substitutes) sold at higher prices.

6. A decrease in (complement, input) prices makes the production less expensive.

8. Use the suitable words to complete the sentences: normal, inputs, buy, the same, consumers, fell.

1. … are the factors of production that are put into a business to produce goods and services.

2. When all goods are …, lower consumer income reduces the demanded quantity for all goods.

3. When the Beatles and Rolling Stones first became popular, the demand for haircuts suddenly … .

4. When incomes rise, consumers … more of everything.

5. Japanese … pay as much as eight world prices for beef.

6. Workers in poor countries having no resources for health and education are often less productive than workers using … technology in rich counties.

9. Answer the questions:

1. What is demand?

2. What is supply?

3. When are the demanded supplied quantities of goods high?

4. How are prices and the supplied and demanded quantities regulated by the market?

5. Which factors influence demand?

6. Which factors influence supply?

7. How can governments regulate demand and supply?

10. Translate into English.

1. Положение в странах с низким доходом улучшилось с 1965 года.

2. Задача максимальной цены состоит в том, чтобы уменьшить цену для потребителей, а задача минимальной цены заключается в том, чтобы поднять цену для производителей и поставщи­ков.

3. Увеличение предложения ведет к повышению равновесного ко­личества и понижению равновесной цены.

4. Когда цены будут уменьшены до равновесной цены, не будет товарных излишков.

TEXT B.