Exercise 2.Insert a few, a little.

1. I have got …. pictures in the room, but not many. 2. There is …. bread in the cupboard. Take it. 3. There are only …. cigarettes in the box. 4. …. books are lying on the table, but there are no magazines there. 5. I have … money in my pocket. 6. Give me …. water, please, I am very thirsty. 7. I have just …. prints, but they all are very good.

 

Exercise 3. Complete the sentences with much/many/a lot of.

1. Have you got... work to do today? — Quite....

2. How... sisters or brothers have you got?

3. There isn't... useful information in this article.

4. I don't know... people here. Do you?

5. This town is too small. There aren't... tourists here.

6. Usually I don't have breakfast before my studies but I drink... coffee.

7. How... money do you spend a month?

8. Vegetarians eat... vegetables and fruit.

9. I've got... problems at this moment.

10. We visited... interesting places during our stay in London.

 

Week 11.

Text 11. Supply, demand and market price.

What? How? Who?

Grammar: Adverb.

Dialogue 3.

Text 11.

SUPPLY, DEMAND AND MARKET PRICE

What? How? Who?

Every society must provide answers to the same three questions:

•What goods and services will be produced?

•How will those goods and services be produced?

•Who will receive them?

Societies and nations have created different economic systems to provide answers to these fundamental questions. Traditional economies look to customs and traditions for their answers while others, known as command economies, rely upon governments to provide the answers. In free enterprise systems, market prices answer most of the What, How and Who questions.

Because market prices play such an important part in free enterprise systems, those systems are often described as «price directed market economies.» Supply and demand are the forces that determine what prices will be.

Prices In A Market Economy

Prices perf orm two important economic functions: They ration scarce resources, and they motivate production. As a general rule, the more scarce something is, the higher its price will be, and the fewer people will want to buy it. Economists describe this as the rationing effect of prices. In a market system goods and services are allocated, or distributed, based on their price.

Price increases and decreases also send messages to suppliers and potential suppliers of goods and services. As prices rise, the increase serves to attract additional producers. Similarly, price decreases drive producers out of the market. In this way prices encourage producers to increase or decrease their level of output. Economists refer to this as the production-motivating function of prices. But what causes prices to rise and fall in a market economy? The answer is Demand!

 

THE LAW OF DEMAND

Demand is a consumer's willingness and ability to buy a product or service at a particular time and place.

The law of demand describes the relationship between prices and the quantity of goods and services that would be purchased at each price. It says that all else being equal, more items will be sold at a lower price than at a higher price.

Demand behaves the way it does for some of the following reasons:

More people can afford to buy an item at a lower price than at a higher price.

Let's see the law of demand from the point of ice-cream selling

At a lower price some people will substitute ice-cream for other items (such as candy bars or soft drinks), thereby increasing the demand.

At a higher price some people will substitute other items for ice cream.

How many ice-creams can a man eat? One, two, more? Some people will eat more than one if the price is low enough. Sooner or later, however, we reach the point where enjoyment decreases with every bite no matter how low is the cost. What is true of ice-cream applies to most everything. After a certain point is reached, the satisfaction from a good or service will begin to diminish. Economists describe this effect as diminishing marginal utility. «Utility» refers to the usefulness of something. Thus «diminishing marginal utility» is the economist's way of describing the point reached when the last item consumed will be less satisfying than the one before.

Diminishing marginal utility helps to explain why lower prices are needed to increase the quantity demanded. Since your desire for a second ice-cream is less than it was for the first, you arenot likely to buy more than one, except at a lower price. At even lower prices you might be willing to buy additional ice-creams and give them away.

 

Elasticity Of Demand

The shape and slope of demand curves for different products are often quite different. If, for example, the price of a quart of milk were to triple, from $.80 to $2.40 a quart, people would buy less milk. Similarly, if the price of all cola drinks were to jump from $1 to $3 a quart (an identical percent increase), people would buy less cola. But even though both prices changed by the same percentage, the decrease in milk sales would probably be far less than the decrease in cola sales. This is because people can do without cola more easily than they can do without milk. The quantity of milk purchased is less sensitive to changes in price than is the quantity of cola. Economists would explain this by saying that the demand for cola is more elastic than the demand for milk.

Elasticity describes how much a change in price affects the quantity demanded.

How Elasticity is Measured

When the demand for an item is inelastic, a change in price will have a relatively small effect on the quantity demanded. When the demand for an item is elastic, a small change in price will have a relatively large effect on the quantity demanded.

Elasticity can also be measured by the «revenue test.» Total revenue is equal to the price multiplied by the number of units sold.

If, following a price increase, total revenue falls, the demand would be described as elastic. If total revenue were to increase following a price increase, the demand would be be inelastic Similarly, if total revenue increased following a price decrease, demand would be elastic. If the price decrease led to a decrease in total revenue, the demand for the item would be described as inelastic.