VI. Match each term in Column a with its definition in Column b:

Column A Column B

1. free enterprise	a. Money value of a good or service.
2. price system	b. A situation where the quantity demanded is greater than the quantity supplied.
3. shortage	c. An economic system based on the private ownership of property, competition and the profit motive.
4. market price	d. Economic system in which resources are allocated as a result of the forces of supply and demand.
5. surplus	e. A consumer’s willingness and ability to buy a product or service at a particular time and place.
6. purchasing power	f. The price of a good or service at which the quantity demanded matches the quantity supplied.
7. price	g. A situation where the quantity supplied is greater than the quantity demanded.
8. market equilibrium	h. A situation where prices are relatively stable and there is neither a surplus nor shortage in the market.

7. Define which of the following items best completes

the statement:

1. «Prices act as signals to the market.» This means that

a. prices affect the kinds and amounts of goods and services offered for sale.

b. profits increase as prices rise.

c. high prices signal a healthy economy.

d. people wait for supply and demand schedules to be published before making

decisions.

2. In a competitive market, the equilibrium or market price is

a. determined by consumer decisions.

b. producers can charge the lowest price and still make a profit.

c. determined by a government agency.

d. the price at which consumers will buy all the goods producers are willing to sell.

3. All else remaining equal, an increase in demand will result in

a. a higher market price.

b. a lower market price.

c. no change in price.

d. an increase in supply.

VIII. Complete the following sentences:

1. If there were no price system ... . 2. A high price, for example, is a signal ... . 3. A low price is a signal ... . 4. The price system in a market economy is ... . 5. Unforseen events such as ... . 6. This flexibility to absorb unexpected «shocks» is ... . 7. In economic markets, buyers and sellers have ... . 8. The buyers come to the market ... . 9. The sellers come to the market ... . 10. Adjustment process must take place when ... . 11. Market equilibrium is ... .

IX. Answer the following questions:

1. What role do prices play in all economic markets? 2. Is it possible to determine a value for any goods or services without price system? 3. What characteristics do prices have in a market economy? 4. What unforseen events can affect the prices for some items? 5. What is one of the strengths of a free enterprise market economy? 6. What hopes and intentions do the buyers and sellers have coming to the market? 7. What is market equilibrium?