VOCABULARY. to make a sale – совершить покупку to make a profit (to profit)– получать прибыль incentive – побудительный мотив

It takes two parties to make a sale: buyers and sellers.

The law of supply describes a relationship between the price of a good or service and how much sellers will offer for sale at a specified time. This means that, other things remaining equal, at high prices businesses will naturally want to produce and sell more. At lower prices less will be produced and supplied.

Why does the quantity of a product supplied change if its price rises or falls? The answer is that producers supply things to make a profit. The higher price - the greater the incentive to produce and sell the product.

Changes in Supply. A change in supply is a change in the relationship between the price of a good and the quantity supplied in response to the changes in economic conditions. The changes that can affect the quantities supplied are as follows:

1. Changes in the cost of production

If it costs sellers less to produce their products, they will be able to offer more of them for sale and supply will increase. An increase in production costs will have the opposite effect – supply will decrease.

2. Changes in the technology available to produce the good.

Improvements in technologytend to lower the cost of production, thus increasing the output.

3. Expectations about future prices.

If producers expect prices to increase in the future, they may increase their production now to be in position to profit later. Similarly, if prices are expected to decrease in the future, producers may reduce production, and supply will fall.

4.Other profit opportunities.

Most producers can make more than one product. If the price of a product they are not producing (but could if they choose to) increases, many producers will shift their output to that product.

If supply increases, the market price will usually decrease and sales will increase. If supply falls, the market price will usually increase and sales will fall. When the product is scarce, the price will usually increase. When the product is in abundant supply, the price will usually fall.

Market Equilibrium.Now we see that buyers and sellers are in conflict: buyers will only purchase more at lower prices, while sellers will only sell more at higher prices. Can they reach an agreement? Yes. Their agreement is called the equilibrium (or market) price and quantity. It is the point at which the quantity demanded exactly equals the quantity supplied in a market. Shifts in demand or supply will affectmarket price. When everything else remains equal, an increase in demand will result in an increase in the market price, and sales will increase. If demand falls then the market price will fall and sales will fall. Similarly, an increase in supply will result in a decrease in the market price, and sales will increase. If supply falls, the market price will usually increase and sales will fall.

A shortageexists in a market if the quantity demanded exceeds the quantity supplied of a good over a given period. A surplus exists in a market if the quantity supplied exceeds the quantity demanded of a good over a given period.

At the market equilibrium price of a good, there can be neither surpluses, nor shortages in the market. It means that the market is cleared (the price equatesthe quantity supplied and quantity demanded).