Equilibrium

Text 2

B.

A.

A	B
1) пользоваться большим спросом 2) создавать спрос 3) превышать спрос 4) ассортимент товаров 5) потребительский рынок 6) доход на человека/на душу населения 7) спрос и предложение 8) большой спрос 9) доход, облагаемый налогом 10) удовлетоврять спрос	a) enormous / great demand (for) b) to be in good /great demand c) consumer market d) to create/make demand e) to exceed/outgo demand f) to meet/ satisfy demand g) demand and supply h) range of goods i) taxable income j) per capita income

A	B
1) стоимость затрат 2) быть в дефиците 3) основной поставщик 4) невыполнение обязательств поставщиком 5) объем промышленного производства 6) ежедневный выпуск продукции 7) исчерпать запас 8) текущие расходы.	a) to be in (short /low) supply b) to exhaust supply c) leading / major supplier d) a supplier default e) current inputs f) cost of inputs g) industrial output h) daily output

Ex. 3. Express in one word:

1. something that is sold for money;

2. the desire of customers for goods or services which they wish to buy or use;

3. pairs of goods that are used together;

4. an idea or a principle relating to sth abstract;

5. pairs of goods that are used in place of each other;

6. to interact (with sth);

7. the price to be paid or amount of money needed for sth;

8. that which is put in;

9. the amount of sth that a person or thing produces;

10. to give sb that is needed or useful/ to provide sb with sth;

11. to establish a connection between, e.g. ideas, events or situations; to think or associate sth with sth else.

Words for reference: compliments, concept, demand, goods, substitutes, to act or have an effect on each other, to relate, output, input, to supply, costs.

Ex. 4. Choose the words with similar meaning from two columns and arrange them in pairs.

A	B
1) concept (n) 2) interaction (n) 3) loan (n) 4) supply(v) 5) increase (v) 6) purchase (v) 7) transaction (n) 8) affect(v) 9) demand (n) 10) good (n) 11) costs (n)	a) rise (v) b) idea (n) c) expenses (n) d) cooperation (n) e) credit (n) f) buy (v) g) bargain, deal (n) h) commodity (n) i) request (n) j) influence (n) k) offer (v)

Ex. 5. Complete the sentences using the words given below.

1. The government increased prices on several basic ….

2. Computers and software, gasoline and automobiles are ….

3. … for these services is outgoing supply.

4. The … of demand and supply may be explained in the context of a market for specific goods.

5. The new model comes in an exciting … of colors.

6. We made a small charge for parking to cover the … of hiring the hall.

7. Supply, the quantity of a product that suppliers will provide, is the seller's side of a …transaction.

8. Manufacturing … has increased by 8% in two years.

9. They discussed the … of additional resources into the scheme.

Words for reference: input, range, output, concepts, demand, goods/commodities, market, compliments, cost.

Comprehension

Ex. 1. Complete the sentences.

1. A market is defined as an institution or mechanism which ….

2. Demand is the amount of the good that buyers….

3. The law of demand says that ….

4. Ceteris paribus is ….

5. The good is called an inferior good if ….

6. The good is called a normal good if ….

7. Substitutes are ….

8. Complements are ….

9. The factors which affect the amount of the good that buyers are willing and able to purchase are ….

10. The factors which affect the amount of the good that sellers are willing and able to sell are ….

11. The law of supply is ….

Ex. 2. Answer the questions on the text.

1. What is a market?

2. What is demand? What does the law of demand say?

3. What factors affect the amount of the good that buyers are willing and able to purchase?

4. What’s the difference between a normal good and an inferior good?

5. How can you define compliments and substitutes?

6. What is supply? What does the law of supply say?

7. What factors affect the amount of the good that sellers are willing and able to sell?

As you read the text, pay special attention how the activities of buyers and sellers automatically push the market price forward the equilibrium price.

Equilibrium: Mr.Demand, Meet Mr.Supply

The beauty of the market is that the competing motivations of consumers and producers interact to arrive at a price and quantity for a product that determined by impersonal market forces. Having analyzed supply and demand separately, we now combine them to see how they determine the quantity of a good sold in a market and its price. To focus our thinking, let’s keep in mind a particular good – ice cream.

The graph below shows the market supply curve and market demand curve together. Notice that there is one point at which the supply and demand curves intersect; this point is called the market’s equilibrium. The price at which these two curves cross is called the equilibrium price, and the quantity is called the equilibrium quantity. Here the equilibrium price is $2.00 per cone, and the equilibrium quantity is 7 ice-cream cones.

The dictionary defines the word ‘equilibrium’ as a situation in which various forces are in balance – and this also describes a market’s equilibrium. At the equilibrium price, the quantity of the good that buyers are willing and able to buy exactly balances the quantity that sellers are willing and able to sell. The equilibrium price is sometimes called the market-clearing price because, at this price, everyone in the market has been satisfied: buyers have bought all they want to buy, and sellers have sold all they want to sell.

The actions of buyers and sellers naturally move markets toward the equilibrium of supply and demand. To see why, consider what happens when the market price is not equal to the equilibrium price.

Suppose first that the market price is above the equilibrium price, as in panel (a).

At a price of $2.50 per cone, the quantity of the good supplied (10 cones) exceeds the quantity demanded (4 cones). There is a surplus of the good: suppliers are unable to sell all they want at the going price. When there is a surplus in the ice-cream market, for instance, sellers of ice cream find their freezers increasingly full of ice cream they would like to sell but cannot. They respond to the surplus by cutting their prices. Prices continue to fall until the market reaches the equilibrium.

Suppose now that the market price is below the equilibrium price, as in panel (b).

In this case, the price is $1.50 per cone, and the quantity of the good demanded exceeds the quantity supplied. There is a shortage of the good: Demanders are unable to buy all they want at the going price. When a shortage occurs in the ice-cream market, for instance, buyers have to wait in long lines for a chance to buy one of the few cones that are available. With too many buyers chasing too few goods, sellers can respond to the shortage by raising their prices without losing sales. As prices rise, the market once again moves toward the equilibrium.

Thus, the activities of the many buyers and sellers automatically push the market price toward the equilibrium price. Once the market reaches its equilibrium, all buyers and sellers are satisfied, and there is no upward or downward pressure on the price. How quickly equilibrium is reached varies from market to market, depending on how quickly prices adjust. In most free markets, however, surpluses and shortages are only temporary because prices eventually move toward their equilibrium levels. Indeed, this phenomenon is so pervasive that it is sometimes called the law of supply and demand: The price of any good adjusts to bring the supply and demand for that good into balance.

Ex. 1. Find words or phrases in the text which have the same meaning as the following:

1. A situation in which opposing forces, influences, etc. are balanced and under control;

2. equilibrium price;

3. a line that bends round;

4. an amount that remains after one has used all one needs;

5. a lack of sth needed;

6. an amount of money for which sth may be bought or sold;

7. moving, leading or pointing to a higher place, point or level;

8. moving, leading or pointing to what is lower or less important;

9. to become or to make sb/sth suited to new conditions; to adapt oneself/sth.

Ex. 2. Based on your understanding of the text, are the following TRUE or FALSE?

1. At the equilibrium price, the quantity of the good that buyers are willing and able to buy exactly balances the quantity that sellers are willing and able to sell.

2. There is no explanation why the equilibrium price is also called the market-clearing price.

3. Suppliers respond to the surplus by increasing their prices.

4. Sellers respond to the shortage by decreasing their prices without losing sales.

5. The price of any good adjusts to bring the supply and demand for that good into balance.

Ex. 3. Find in the text information to answer the questions on the text.

1. What is called the market’s equilibrium?

2. What is the equilibrium price?

3. Why is the equilibrium price also called the market-clearing price?

4. Do the actions of buyers and sellers naturally move markets towards the equilibrium of supply and demand? How do suppliers and buyers respond to the market surplus and shortage of goods? Can we say that the actions of buyers and sellers naturally move markets towards the equilibrium of supply and demand?

5. What does the law of supply and demand say?

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