3. Utility and prices.

In the beginning I would like to say that according to our basic needs and optional individual wants we require many kinds of commodities, which satisfy our wants in different ways. The characteristic of satisfying want is known in economics as utility. It should be said that the utility change is concerned with the consumer’ relation to a commodity.

I want to pay your attention to the fact that utility should not be confused with usefulness. And we also can determine utility as the relationship between a consumer and a commodity.

Now let me move to the next point of my presentation. Without a shadow of a doubt I can say that utility varies not only in relation to individual tastes and to geography but also in relation to the quantity which is available to the consumer. The utility of a commodity therefore decrease as the consumer’s stock of that commodity increases.

Now I’d like to touch upon the next topic. There are many economic systems and in some of them it’ possible for an individual to bargain over prices, because they are not fixed in advance. But generally individual can not change the price and people must accept these fixed prices. But with each successful purchase their satisfaction compensates less the loss of money. And a point in time comes when the finance sacrifice is greater than the satisfaction of commodities. Due to this we can ay about changing of the marginal utility. The consumer’s desire for a commodity tends to diminish as he buys more units of it. This tendency is called the law of Diminishing marginal Utility.

Now I want to turn to the last but not the least point. Speaking about prices I’d like to focus your attention on that they can determine the interaction of buyers and sellers. Shortage and surplus indicate that the price is too low or too high. A society may interfere in market prices by means of price control and rational stamps. In the market economy prices are the result of needs of both buyers and sellers. When the price the supply equals the price the demand we can say about the equilibrium price. Since no surplice or shortage exists there is no pressure on the price change.

4. Income and spending

Income is the money a person receives in exchange for work or property. There are five basic types of income:

• employee compensation is the income earned by working for others.

• proprietor compensation is the income that self-employed people earn.

• corporation profit is the income corporations have left after paying all the expenses.

• interest is the money received by people and corporations for depositing their money in savings account or lending it to others.

• Rent is income from allowing others to use one’s property temporarily.

The total income is the sum of 5 basic types.

One other type of income is a transfer payment – money one person or group gives to another, though the receiver has not provided a specific good or service.

Now let speak about work people. By the type of work people do workers fall into one of four broad categories:

1. White-collar workers are people who do jobs in offices, such as secretaries, teachers.

2. Blue-collar workers are people who do jobs in factories or outdoors, such as carpenters and plumbers.

3. Service workers provide services to other individuals or businesses.

4. Farm workers are people who work on their own farms.

In the market system a person’s income is determined by how the market values that person’s resources and skills

Income is not the same as wealth. Wealth is any resource that can be used to produce income. At the end I have to say that spending becomes income for someone else.