SUPPLY AND DEMAND

1. In a market economy, the actions of buyers and sellers set the prices of goods and services. The prices, in turn, determine what is produced, how it is produced, who will buy it, and what will be the mix of consumer and capital goods. Supply, the quantity of a product that suppliers will provide, is the seller's side of a market transaction. Suppliers usually want the price that allows them to make the most money. Demand, the quantity of a product consumers want, is the buyer's side of a market transaction. Buyers want the price that gives them the most value for the least cost.

2. One place to see how demand works is an auction, a market where goods are sold to the highest bidders. Because the items are sold one at a time, buyers must quickly decide what prices they are willing to pay. If not, they risk seeing the item go to someone else who is willing to pay more. Imagine now that you are at the auction with about 100 other people. The auctioneer brings out a used electric popcorn maker, and you decide you would like to own it. In order to get it you will have to outbid all the others who want it.

3. Consumers are more sensitive to some price changes than to others. You may not want to buy a car if its price goes up 10 %. But if the price of salt goes up 10%, chances are you will pay extra amount rather than go without salt. The degree to which changes in price cause changes in quantity demanded is called elasticity of demand. The number of cars demanded changes greatly as car prices change; so the demand for cars is highly elastic. The demand for salt is more inelastic: people buy nearly the same amount even though the price of salt changes.

4. There are two basic reasons for elasticity of demand. The first concerns the re­lationship between income and the cost of the product. A car, for example, may easily cost 50% of your annual income. Salt probably costs less than 50% of your annual income. The smaller the proportion of your income that a product costs, the more inelastic is its demand. The second reason why demand is elastic concerns whether or not substitute product is available.

II. Ответьте на следующие вопросы:

1. What are the reasons of suppliers when determining the price of a product?

2. What price do buyers prefer?

3. What do we call the quantity of a product that suppliers provide?

4. Why is demand the buyer’s side of a market transaction?

5. What do you have to do at an auction in order to get a thing you’d like to own?

6. What are the reasons for differences in the elasticity of demand?

III. Найдите в абзацах 1, 2, 3 словосочетания, в которых определения выражены существительными. Выпишите их и переведите на русский язык. Укажите, какие существительные являются определениями.

IV. а) Найдите в абзацах 1, 2, 3 и выпишите предложения, в которых прилагательные употреблены в одной из степеней сравнения. Подчеркните эти прилагательные, определите степень сравнения.