ECONOMIC CONSIDERATIONS.

SUPPLY, DEMAND AND MARKET PRICE

The aim of the lesson is to make you feel more confident while talking about economic issues and
matters of the kind.
1. Read the words:
efficient output to exert himself
available consumer to benefit
impressive curve to gain the profit
limited demand to enact laws
shift

b) Fill in the blanks with the words above in the correct form.
Governments sometimes support industry by _______enacting laws______________________designed to keep
labor and other production costs low.
Self-interest would lead business firms to produce only those products that
___consumers________________________ wanted, and to produce them at the lowest possible cost.
There is a lot of organic fruit and vegetables __available___________________________these days.
When you throw a ball, it follows a _____curve________________________ back down to earth.
25 Ways to Make Your Brain More ___efficient__________________________. We show you how to train
your brain to be smarter, faster and better than ever.
Gold is expensive because there is only a very __________limited___________________ supply.
_____Output________________________ in economics is the "quantity of goods or services produced in a
given time period, by a firm, industry, or country," whether consumed or used for further production.
A company stops making a product, when it isn't in ___________demand__________________anymore.
But all this self-interest would ___________limited__________________ society as a whole by providing it
with more and better goods and services, at the lowest prices.
There has been a ________shift_____________________ in public opinion about the environment recently.
I found the work you've managed to do very _____________________________. Well done!
Any authority, board member, or employee shall be prohibited to __gain the
profit___________________________from any funds, except benefits from interest in investments common to
all members of the company.
Every individual is continually ______________exerting himself_______________ to find the most
advantageous employment for whatever capital he can command.

2. Retell the article (will be given at the lesson) bearing in mind that your listeners will have to do the
following task.
Give definitions to the following notions “mercantilists”, “physiocrats”, “favourable balance of trade” “laissez
fair”

3. Retell the text (will be given at the lesson) to the group bearing in mind that your listeners will have to
answer the following questions:
1) With which group are Adam Smith’s ideas most in agreement: the mercantilists or the physiocrats?
2) What is another term for Smith’s invisible hand? How does it operate in a nation’s economy?

4. Read the text and answer the questions

Formulate the law of demand. Give definition to the notion of “price elasticity”. What factors influence demand
besides price? Which graph shows higher demand, explain why.
The law of demand
Economics can often be very confusing. Thankfully though, some economic ideas are completely
obvious. One of these ideas is the law of demand. Economists are always disagreeing with each other, but the
law of demand is the only thing they all agree on. They all agree on it because it makes sense to everybody,
even to non-economists.
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. Economists show this concept with the demand curve which
you can see in figure 1.The reason why the law of demand works is quite obvious: the money we have is
limited. If something becomes more expensive, we will have less money available to spend on our other needs.
If the product or service is not a necessity, we will 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 put 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. Economists measure price elasticity for a certain product in a particular
market. This helps governments and companies set prices at the correct level for a 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 curve. You can see
this in figure 2.
In figure 2, the curve is still the same shape because price still has the same effect on demand. However,
something else has caused a general increase in demand at all prices. A rise or fall in people's incomes, fashion,
climate and many other things can influence demand in this way.

5. Name the points in the graph. Then listen to the record, then describe
the graph.

6. Listen to the record then read the text and say in which points the authors agree with each other, and in
which points they complete each other.
THORSTEIN VEBLEN(1857- 1929) challenged the assumptions built into the laws of supply and demand.
One of these assumptions was that of "consumer sovereignty." Veblen questioned the assertion that the
consumer was a king who demanded and received the best goods and services at the lowest prices. Instead, he
argued, consumers were subject to all kinds of social and psychological pressures that led them to make some
very unwise decisions.
To illustrate, he coined the term conspicuous consumption to describe the tendency to buy goods and
services simply to impress others. When that occurred, it was possible for the law of demand to be reversed.
Quantity demanded increased at a high price rather than at a low one. For example, the demand for a 1-ounce
bottle of an unknown brand of perfume priced at $1was likely to be less than the same perfume selling for $15
an ounce.
He argued that the desire for profits drove business interests into doing unscrupulous things. Some of these
included efforts to eliminate competition, restrict output, build ever larger combinations of existing firms, and
separate those who owned America's corporations from those who managed them. This, he predicted, would
result in wasted resources and the inability of the economy to reach its full potential. From these observations
Veblen concluded that laissez-faire capitalism was probably destined to be replaced in the long run with a
system more attuned to the needs of the people.

7. A market economy is one that relies upon buyers and producers to determine production, consumption,
investment and savings.
* Think of three examples of new products that have come on the market in your country because of consumer
demand. As these products have been on the market, have they become more expensive or less expensive?
* Think of three products or services that have gone off the market or become difficult to obtain in your country
because of declining demand.