Vocabulary notes. Typically falls –обычно снижается

typically falls – обычно снижается

a dividing line – разделительная черта

unit-elastic (unitary-elastic) demand – спрос с единичной эластично­стью, единичная эластичность спроса

to raise/to lower revenue – повышать/снижать доходы

the key piece of information – ключевая информация

to set the price (syn. to quote) – устанавливать, назначать цену

foreign holidays – отдых за границей

to refer to – относиться к

parts of the curve corresponding to prices – участки кривой спроса, отно­сящиеся к ценам

adjusted for inflation – с учетом инфляции

prices typically charged – цены, обычно назначаемые

be observed historically – встречаться в истории

determinants – основные факторы, определители, показатели

the answer must be sought in – ответ следует искать в

socially essential – существенно, значимо в общественном мнении

a frivolous luxury – бездумная роскошь

why tastes are as they are – почему вкусы именно таковы

nevertheless (syn. however) – тем не менее

to identify some considerations – выявить некоторые соображения, мо­менты, факторы

the ease – легкость, простота

to substitute smth for smth – заменить одно другим

a substitute – заменитель

substitution – замена

to fulfil approximately the same function – выполнять примерно анало­гичную функцию

extreme cases – экстремальные случаи

the latter (ant. the former) – последний (упомянутый)

to quit (syn. to give up) smoking – бросить курить

one particular brand of cigarettes – один конкретный сорт сигарет

to fulfil basically – в основном выполнять

nicotine provision – насыщение никотином

the more narrowly we define – чем более узкое определение мы даем

to illustrate general principles – для иллюстрации общих принципов

to report estimates in a table – приводить оценки в таблице

durables – товары долговременного пользования

dairy produce – молочные продукты

cereals – крупы

entertainment – развлечения, досуг

catering – поставка продуктов и обслуживание церемоний

the table confirms – из таблицы следует

as a category – как категория

haircuts – стрижка, зд. парикмахерские услуги

sauna baths – посещение сауны

to alter the broad pattern – изменить широкий ассортимент

a much wider variation – большая вариативность

whereas (syn. while, whilst) – в то время как

to be relatively insensitive – быть относительно нечувствительным

taken as a whole – в целом

Assignments

I. Suggest the Russian equivalents

goods with high or low demand elasticities; prices adjusted for inflation

II. Replace the parts in italics by synonyms

to set the prices; ease of substitution suggests a high demand elasticity; may cause households to...; to turn from...to; relatively inelastic

III. Fill in the gaps with the words and expressions from the text Demand is __ if the price elasticity is more negative than -1.

2. Demand is __ if the price elasticity lies between -1 and 0.

3. If the demand elasticity is exactly -1, we say that demand is __.

4. Whether or not demand is elastic is __ required in setting the price.

5. Economists will say that the demand for oil is __, but the demand for foreign holidays is __.

6. Such statements refer to parts of the demand curve __ prices (__ inflation) that are typically charged for these goods and services.

7. The answer must __ in consumer tastes.

8. If televisions arc considered __, the demand elasticity will be much higher.

9. As economists, we can __ some considerations likely to affect consumer __ in the price of a good.

10. The most important consideration is the ease with which consumers can __ another good that __ approximately the same function.

11. Consider two __ cases.

12. With so many other brands __ at unchanged prices, consumers will switch away from the more expensive brand to other __ that basically fulfil the same __.

13. __ implies a high demand elasticity for a particular good.

14. The table __ that the demand for general categories of basic commodities is inelastic.

15. Households simply do not have much scope __ the broad pattern of their purchases.

16. There is a much wider __ in the demand elasticities for narrower definitions of __.

17. Small changes in the __ price of restaurant meals and theatre tickets may lead households to switch in large numbers between eating out and going to the theatre, __ the demand for getting out of the house on a Saturday evening may be relatively __ to the price of all Saturday night activities taken as a whole.

IV. Check your prepositions. Insert a suitable preposition in each of the blanks in these sentences

1. He is interested __ economics.

2. He is not concerned __ non-essential commodities.

3. The demand __ bananas will probably increase.

4. The supply __ cigarettes does not usually fluctuate.

5. The consumers' need __ such a commodity is well-known.

6. There was a change __ the quantity of material supplies.

7. He paid quite a lot of money __ that car.

8. He paid the money __ that man.

9. Non-essential commodities like chocolates cannot be compared basic commodities like fuel.

V. Find in the text English equivalents/or the following

повышать/понижать доходы от...; устанавливать цену; основной, опреде­ляющий фактор; в конечном счете, в конечном итоге; выполнять приблизи­тельно ту же функцию; сорт; упасть на...%; основные товары (товары первой необходимости); хозяйственные товары длительного пользования; спрос на некоторые товары; единичная эластичность спроса

VI. Answer the questions

1. Explain when demand is elastic, inelastic or unit-elastic.

2. How do consumer tastes determine the demand elasticity?

3. What considerations are likely to effect consumer responses to changes in the price of a good?

4. Illustrate the consideration of the demand elasticity according to the case of substitution on the part of buyers by the example of cigarettes.

5. State the interdependence between the scale of definition a commodity and the price elasticity of demand.

6. Think why the demand for going out Saturday nights may be relatively inelastic to the price of the activities.

7. Give your own examples of an elastic and inelastic demand.

VII. Translate using all the active possible

1. Снижение цен может повышать доходы от продаж при эластичном спросе или снижать доходы при неэластичном спросе. В конечном итоге вопрос эластичности спроса становится основным определяющим фак­тором при установлении (2 варианта) цены.

2. В случае, если цена на 1-й сорт какого-либо товара повышается на...%, а цены на другие сорта остаются неизменными, покупатели пред­почитают другие, более дешевые, сорта товара, поскольку они в основ­ном выполняют приблизительно ту же функцию. Легкость замены одних товаров другими предполагает высокую эластичность спроса.

3. Спрос на некоторые категории товаров первой необходимости неэла­стичен. К этим товарам относятся топливо, продукты питания, хозяйствен­ные товары длительного пользования. Структура покупательского спроса домашних хозяйств не предполагает широкомасштабных изменений.

A MODEL OF THE ECONOMY (МОДЕЛЬ ЭКОНОМИКИ)

Economists spend a lot of time trying to develop models of the working of the economy. The London Business School, like many universities and also the Treasury, has a model of the economy which it has entered into a computer. The reason for this is that much of its work is concerned with forecasting future economic trends so as to aid decision-making by business and government. The London Business School's model can be fed with economic information, such as changes in tax rates, and it will then predict how the economy will behave. Such predictions are an invaluable aid to business decision-making because, for example, businesses can find out whether people's

incomes are Likely to rise or not.

The complete economy comprises many millions of economic units. There are households, as one kind of unit. There are also firms, and the departments of both central and local government. These units together decide the economy's total spending. They also decide its total income and its total level of production of goods and services. But in order to develop a simple model of the economy we need to ignore the government sector and the possibility of transactions between households and foreigners. Suppose we are dealing with an isolated economy, one which has no government. Let's assume that there are two main sectors in the economy: households and firms. Households supply firms with the factors of production that firms need to carry on their concerns.

Thus, households provide labour services, both skilled and unskilled, in return for the payment of wages. They may also supply land for which they are paid rent. Finally, they might supply the finance, which is essential to the business. If the finance is in the form of a loan they receive interest payments, but if they have purchased shares in the business they may be entitled to a share of the profits. Most households provide some factor services or services of productive/actors, to a public or private business. Anyone at work is providing labour, and if you or someone in your family has bought shares in the privatization programme (in, for example, British Gas, British Telecom or the water authorities) then they have supplied share capital. Households receive payments for these factor services, that is to say, they earn factor incomes, such

as wages, rents and profits.

The other part of our simple model portrays firms supplying households with all the goods and services that they require. In return for these the households pay the firms. These two sets of actions create the model of the circular flow of money, which is shown in Fig. 3.

In fact, there are two flows. One which is monetary and one comprising goods and' services. A flow of factor services from households to firms for which there is an opposite stream of factor payments and a flow of goods and services, which households pay firms. It is this monetary flow in which we are most interested.

What does the figure suggest? It suggests that there are three ways of measuring the amount of economic activity in the economy. First, we can measure the value of goods and services produced, second, we can measure the level of factor earnings. These factor earnings represent the value of factor services supplied. Third, we can measure the value of spending on goods and services. Then, economists refer to the size of the monetary circular flow as the level of national income.

If we assume that all the goods and services, which are produced are in fact sold and that households spend all their income, then we have arrived at what economists call a neutral equilibrium. The level of income, which is spent and received by the two groups will not alter since as one group receives it, they spend it with the other.

Figure 3. The Circular Flow of Income

The fact that the economy is in a neutral equilibrium means simply that the level of national income, and hence the level of economic activity, are stable and unchanging. (An equilibrium is a point of balance in which there is no inherent tendency to change). If the economy was in equilibrium it does not mean that everyone who wants a job has one or that the country is importing exactly the same value of goods and services as it is exporting.