Prices and markets. Types of market, страница 4

2. When the price of a commodity falls, therefore, its price will become relatively more attractive compared with the prices of its substitutes. More of the commodity will be demanded as consumers switch some of their purchases away from the substitutes, which are now relatively dearer. For example, if the price of butter falls, many people will buy more butter and less margarine. If the price of apples falls, many people will buy more apples and less of other fruits such as pears.

A rise in the price of commodity will have opposite effects to those described above.

1.4 Supply

Supply does not means the existing stock of a good; it refers to the amounts which traders are prepared to offer for sale.

Supply is defined as the quantity of a commodity which is supplied at any given price over some given period of time. For example, we could say that at a price of 5$ per unit, 1000 units of Commodity X will be supplied each week.

The amounts which firms are prepared to supply will depend upon the prices which people are prepared to pay. When farmers consider market prices to be too low, they will sometimes plough vegetables back into the ground or dump fruit crops, rather than take these products to the market. In such cases, the vegetables and fruit were produced, but they were not part of the supply of these things because they were not offered for sale.

Another of the ‘laws’ of economics states, ‘More mill be supplied at higher prices than at lower prices’. This is illustrated in Figure 1.2. The table on the right of the Figure 1.2 is describes as a supply schedule; it shows the quantities which will be supplied at different prices. The graph on the left of Figure 1.2 is a supply curve, which is obtained by plotting the figures in the supply schedule.

1.4.1 The shape of the supply curve

The shape of the supply curve is based on the idea that firms will always try to earn the maximum profit. This assumption helps us to understand why supply curves slope upwards from the left to right, that is, why firms are prepared to supply-more at higher prices.

If the demand for a commodity increases, it will become more scarce and its price will rice. This will make it more profitable to produce. The amount supplied will increase, because the increased profitability will encourage firms to increase production. The higher prices and greater profits will also tempt more firms to enter the industry.

A fall in the demand for a product will tend to lower its price. The fall in demand will mean that, at the existing price, there will be excess supplies in the market. Firms will be obliged to lower the price in order to dispose of their goods. At the lower price, production will be less profitable and firms will reduce their outputs; there will be a reduction in supply. The fall in price may also force some less efficient firms to leave the industry.

Answer these questions based on the text above:

1.  How is demand defined?

2.  How do changes in price affect demand?

3.  What does “supply” mean?

1.3 Спрос

В ранних главах этой книги, довольно много было сказано о человеческих потребностях. Мы теперь поворачиваем довольно различную идею, а именно, спрос людей на товары и услуги.

В экономике слово 'спрос' обращается к желанию пользы, которая поддержана готовностью и способностью заплатить цену той товара или услуги. Важный пункт - то, что фирмы только продолжат поставлять товары и услуги, если они могут продать им по ценам, которые покрывают их расходы. Другими словами, будет поставка пользы или обслуживания, только если есть требование на это – фирмы не будут поставлять товары и услуги просто, потому что люди хотят их.

Требование определено как количество, потребованное по любой данной цене свыше некоторого установленного срока времени. Например, мы могли сказать, что спрос на Товар X по цене 5$ является 1000 единиц в неделю.

1.3.1 Как изменения цен затрагивают спрос