B) Develop the idea of how buyers and producers respond to changes in the price of a good.

E\. 8. a) Read the text, b) What do you think profit depends on? c) State the factors affecting the price.

Factors That Affect Price

Managers of coiporations have a duty to earn a profit. They are hired for That purpose by the firm's shareholders.

In addition, managers of all firms must earn profits if they want to stay in business.

Profits, among other things, depend on prices. The first factor affecting price is demand. The demand for a product means Ihe amount customers are willing and able to buy at a given price. The lower the price, the more units of a product will be bought. Demand is not the only thing that counts in setting a price. Cost must also be kept in mind.

General economic rules say lhaT a firm will usually be forced to raise its prices when its costs rise, even though doing so will reduce sales volume. Any reduction in costs, on the other hand, gives the firm a chance to lower prices, increase sales, and improve profits.

Competition is a third factor that affects pricing. The more competitors a firm has, the greater the chance That customers will turn elsewhere if the firm raises iTs prices.

Words and word combinations you may need

hire v— нанимать

count v—иметь значение, идти и расчет set a price — устанавливать иену keep in mind — иметь в виду

Ex. 9. Sum up Text A (orally/in writing).

Situation: Imagine you have bought a consumer product and it has not satis­fied you. What, in your opinion, was the origin of the problem? Do you think the product was not described accurately when it was sold to you? Do you know the firm whose product you bought? Who are the firm's competitors in the market? Discuss the situation with your friend.

TextB The Role of Government in the Economy

In every economy the work of different firms has to be coordinated. In a market economy this coordination is achieved by means ofmar-

7. Любннцеш

Unit 3

I. Business and Government

kets. Nevertheless the debate over the role for Government in a market economy is continuing and the issue is being widely discussed at the present time. An economy based on free enterprise is generally charac­terised by private ownership and initiative, with a relative absence of government involvement. However, government intervention has been found necessary from time to time to ensure that economic opportuni­ties are fair, to dampen inflation and to stimulate growth.

Government plays a big role in the American free enterprise sys­tem. Federal, state and local governments tax, regulate, and support business.

In the United States there are agencies to regulate safety, health, environment, transport, communications, trade, labour relations, and finances. Regulation ensures that business serves the best interests of the people as a whole.

Some industries — nuclear power, for instance - have been regulat­ed more closely over the last few years than ever before. In others the trend has been towards deregulation or reduction of administrative bur­den on the economy.

The U.S. economy has a tradition of government intervention for specific economic purposes — including controlling inflation, limiting monopoly, protecting the consumer, providing for the poor. The gov­ernment also affects the economy by controlling the money supply and the use of credit. The aim is a balanced budget.