Demand and supply

Read the text

H. Longfellow Christmas message

The poem to enjoy. Try to learn it by heart.

Read the article without a dictionary, try to retell it.

At leisure

Word origin Mirror: used for admiration

It is quite natural that vain people should like mirrors, for when a girl confesses that she is admir ing her hair-do in a mirror, she is using two words that are based on the same Latin word mirror which means «admire». So con fessedly, mirrors are made for self-admiration. Our word miracle belongs to the same Latin family, as a miracle is an object of admiration and wonder.

2. Read and translate the proverbs, think of Russian equivalents,
give a situation using them.

— It rains cats and dogs.

— Many words hurt more than swords.

I heard the bells on Christmas Day. Their old familiar corals play, And wild and sweet The words repeat Of peace on earth, Good will to men.

Unit 8

Pre-text exercises

1. Find the transcription of new words in a dictionary: law, demand, obvious, available, exception, relationship, cause, influence.

2. Word-building Compile and translate:

to impress υ. + -ive →

dis+ to agree υ. →

to avail υ. + -able →

strong a. + -th →

un+ usual a. + -ly →

Demand is how much of the same good or service people would like to buy. The law of demand says that demand for something falls as its price rises.

The reason why the law of demand works is quite obvious: the money we have is limited. If something becomes more expensive, we shall have less money available to spend on our other needs. If the product or service is not a necessity, we shall decide to buy less of it.

Most rules have exceptions, but economists agree that there are very few exceptions to the law of demand. It even applies to basic necessities like water. When water becomes more expensive, people find ways to use less. When the government puts higher taxes on petrol, people try not to use their cars so often. The fall in demand might be very small, but it is real.

So price has an effect on demand, but the strength of the effect varies. The strength of the price-demand relationship is called price elasticity.

This helps government and companies set prices at the correct level for а particular time and plan price increases.

Don’t forget, though, that other things affect demand apart from price. For example, during a very cold winter, demand for heating fuel like gas or coal will rise at any price. If the winter is unusually warm, then demand for fuel will fall. Economists say that these situations cause a shift in the demand.

A rise or fall in people’s incomes, fashion, climate and many other things can influence demand in this way. When a company makes plans for how much to produce and what prices to set, it needs information.

The company needs to predict the level of supply that will be required to meet demand. It needs to set prices that will keep the business running. In the same way, governments need this information for the whole economy. The total level of demand for all products and services is called the aggregate demand. The total supply is called the aggregate supply.

The demand for products and services is how much is wanted. For a company, the demand comes from customers. For a whole economy, things are a little more complicated. Demand in the whole economy comes from the following:

— from consumers, because they buy products and services
(consumption);

— from companies, because they invest money to build factories and buy machines (investment);

— from the government, because they spend money on services and projects (government spending);

— from exports, because these are sales to customers in other
countries (export).

Although aggregate demand is made up of many things, it behaves in the same way as demand for a single product. For example, demand rises when incomes rise. The same applies to aggregate demand. Similarly, demand falls as prices rise. The same is true for aggregate demand.

Real national income is the value of all the services and products produced by the whole economy. It’s calculated in the same way as aggregate demand (consumption, investment, government spending and exports). You can see that national income (and therefore aggregate demand) increases as prices fall.

Changes in any of the four things which make up aggregate demand will cause a shift in demand. For example, if the government decides to spend a huge amount of money on building new hospitals and schools, this will have an effect on the whole economy. Aggregate demand will increase at all price levels.

As the company increases its supply to the market, it increases the price. But what about aggregate supply for the whole economy? This is more complex. In the short run, aggregate supply follows the same trend as the supply for a single product. Supply rises as prices rise. However, the long run is different. In the long run, supply is not affected by price.

In the long run, production is limited by the factors of production. In other words, what a country can supply depends on the number of factories it has, the number of people working and the availability of raw materials.

Words:

law — закон to affect — воздействовать

demand — спрос shift in demand — изменение

obvious — очевидный в спросе
available — имеющийся в наличии supply — предложение

exception — исключение to predict — предсказывать

tax — налог aggregate — совокупный

petrol — бензин to behave — вести себя

price — цена to apply — применять

to vary — изменяться to make up — составлять

elasticity — эластичность to cause — вызывать

income — доход long-run — длительный

Post-text exercises

Working on the text

Дата добавления: 2014-12-29