Unit 8 markets and prices

Lead-in

1. Express your opinion on the following issues.

1. How would you define the term “market” in your own words?

2. What factors influence prices in the market?

2. Finish the phrase.

- If I were a marketer, I would ……… .

Key Vocabulary

Study the following list of vocabulary.

1. arrangement n	договорённость, соглашение
2. stock exchange	фондовая биржа
3. intermediary n	посредник
4. transact v	вести дела, заключать сделки
5. on behalf of smb	от имени кого-либо
6. scope n	масштаб
7. competition n	конкуренция
8. preference n	предпочтение
9. price n	цена
10. entrepreneur n	предприниматель, бизнесмен
11. currency n	валюта
12. securities n	ценные бумаги
13. flexible adj	гибкий, эластичный
14. outcome n	итог, результат
15. take into account/consideration	принимать во внимание
16. cash n	наличные деньги

Pre-reading Activities

1. Study the meanings of the following concepts.

1. perfect competition – чистая конкуренция: рыночная структура, при которой большое число фирм предлагает однородный продукт и ни одна фирма не имеет достаточно большой доли рынка; в результате производитель не имеет контроля над ценой, по которой продаётся продукция и может манипулировать только объёмом своего выпуска.

2. monopolistic competition – монополистическая конкуренция: рыночная структура, относящаяся к несовершенной конкуренции, при которой фирмы конкурируют, но при этом имеют черты монополий, поскольку производят дифференцированный продукт.

3. monopoly – монополия: рыночная структура, характеризующаяся наличием на рынке какого-либо блага единственного продавца и большого количества покупателей, отсутствием совершенных заменителей продукции продавца, отсутствием свободы входа на рынок; в силу этих характеристик продавец обладает абсолютной властью над рыночной ценой.

4. oligopoly – олигополия: рыночная структура, характеризующаяся существованием на рынке незначительного числа продавцов при наличии большого числа покупателей.

2. Translate the sentences into Russian. Mind the words from exercise 1.

1. Monopoly is known as a situation in which one seller controls the total supply.

2. Each oligopolistic firm keeps a close eye on the activities of other firms in the industry.

3. The retail gas market is a good example of an oligopoly, because a small number of firms control a large market share.

4. The real world is widely populated by monopolistic competition.

5. The best examples of monopolistic competition come from retail trade, including restaurants, clothing stores, and convenience stores.

6. Perfect competition is an idealized market structure which achieves an efficient allocation of resources.

Reading

Read the text and answer the questions that follow it.

The study of markets and other ways of organizing production of goods and services is an important task of economics.

In ancient times a market was a place where people gathered to buy and sell goods. Nowadays the term «market» has a broader sense. According to its definition, market is a set of arrangements by which buyers and sellers are in contact to exchange goods and services. It is considered to be the institution through which buyers and sellers interact.

The interaction may be different. For example, street markets, fruit stalls and shops physically bring together buyers and sellers. At the same time, suppliers and customers can interact through more complex markets. The Stock Exchange is known to operate through intermediaries (stockbrokers) who transact business on behalf of their clients. At the century of IT boom people can make exchanges on the phone. They are in the market even if they don’t actually visit a store. Similarly, people can order goods and services by mail or on the Internet, where it is possible to make deals all over the world. And again they are in the market because they make a voluntary exchange, when both parties benefit.

As for their scope, markets can be local, national and international. Economists classify markets according to prevailing conditions and try to determine a market structure. There are specific names for different market structures. They are pure competition, monopolistic competition, monopoly and oligopoly.

The preferences of sellers and buyers are determined by the supply and demand in various markets and the outcome of these preferences is a system of prices. A price is the main index which sellers, entrepreneurs and consumers take into account while making their free choice according to their self-interests. In economics, the term “price” denotes consideration in cash for the transfer of something valuable, such as goods, services, currencies, securities, etc.

Prices perform two important functions: they ration scarce resources and motivate production. As a rule, the more scarce something is, the higher its price will be and the fewer people will want to buy it.

Prices play an important role in different markets. If there were no price system, it would be impossible to determine value of any goods or services. For example, in a market economy prices act as signals. Buyers and sellers use prices as signals to communicate their wants and then exchange money for goods and services. So, a high price is a signal for sellers to produce more and for consumers to buy less. A low price is a signal for sellers to produce less and for consumers to buy more. That is why prices serve as a link between producers and consumers. Moreover, in a market economy the price system is flexible and it can adjust to changes quite quickly.

Comprehension Check

1. Answer the following questions.

1. What was the role of market in ancient times?

2. What definition of the term “market” is given in the text?

3. According to their scope, how are markets classified?

4. What examples of market structures are given in the text?

5. What does the term “price” mean?

6. What are the basic functions of prices?

7. What do prices mean as signals?

2. Choose the paragraph, where different kinds of interaction between buyers and sellers are described.

A. 2 B. 3 C. 5

3. Choose the sentence which best summarizes the last paragraph of the text.

A. In a market economy the price system is flexible.

B. A low price is a signal for sellers to produce less and for consumers to buy more.

C. Prices play an important role in different markets.