И.П. Агабекян, П.И. Коваленко 12 страница

Supply is a fundamental concept in both macro- and microeconomic analysis. In macroeconomic theory, aggregate supply is mainly a function of expected sales to consumers, businesses, and governments. In microanalysis supply is mainly a function of prices and costs of production. A more complex view of the supply curve for a commodity is its relation between quantities forthcoming and the possible current prices of that commodity, its expected future prices, the prices of alternative goods and services, the costs of the producer, and time.

Opportunity Costs

Incorporated in the supply curve of goods and services are opportunity costs. Economists differ from accountants and from the Internal Revenue Service by including both explicit and implicit costs, or opportunity costs. Implicit costs are mainly business costs for wages, rents, and interest, whereas opportunity costs are the alternative costs of doing something else. A sole proprietor or the owners of businesses should calculate what they forgo in wages, rents, and interest by not working for someone else, or by renting the property they use to others, or by the possibility of converting plant and equipment to alternative investment projects.

The Shape and Position of Supply Curves

(see pp. 324-328)

In competitive markets the shape, or elasticity of supply, reflects time in the production process, such as the immediate or market period, the short run, and the long run. Elasticity of supply is the relative change in price that induces a relative change in quantity supplied. The supply curve is a line on a diagram where the vertical axis measures price and the horizontal axis is quantity. Usually the coefficient of elasticity is positive, meaning that a rise in price induces an increase in the quantity supplied. In the immediate or market period, a given moment, time is defined as too short to allow for a change in output. The supply curve is vertical, and the coefficient of elasticity is zero.

The short run is defined as a' period sufficiently long to permit the producer to increase variable inputs, usually labor and materials, but not long enough -to permit changes in plant and equipment. The supply curve in the short run is less inelastic or more elastic than in the immediate period. The long run permits sufficient time for the-producer to increase plant and equipment. The longer the time, the greater the elasticity of supply.

Changes in supply are shifts in the position of supply curves. An increase in supply is a rightward movement of a supply curve, with more of the commodity being offered for sale at each possible price. Conversely, a decrease in supply shifts the supply to the left. An increase in supply can occur because sellers expect lower prices in the future, or, as in the agricultural sector, because of bountiful crops. The reverse is true of a decrease in supply. Over periods of time long enough for production processes to change, improvements in technology and changes in input prices and productivities are the main causes of changes in supply.

Vocabulary

aggregate supply - совокупное предложение complex — сложный, комплексный forthcoming — предстоящий, ожидаемый opportunity costs - альтернативные издержки accountant - бухгалтер explicit — явный, откровенный

implicit - подразумевающийся

to calculate — подсчитывать, вычислять, рассчитывать for(e)go - предшествовать (по времени или в пространстве)

to convert — обращать, преобразовывать shape — форма given moment — данный момент

sufficiently - достаточно, в достаточной мере to permit - позволять, разрешать variable — переменный, изменчивый; a variable - переменная rightward movement — движение вправо conversely — наоборот bountiful crops — обильный урожай

General understanding:

1. What is the difference of the concept of supply in macro— and microeconomics?

2. What are opportunity costs?

3. What are implicit costs?

4. What, according to the text, a sole proprietor or the owners should do?

5. What does the elasticity of supply show?

6. What is the difference between the short-time and long-time supply?

7. Why do changes in the supply affect the position of the supply curve?

1. Which of the following is not true:

A. Supply is a concept of macroeconomics.

B. Economists differ from bookkeepers and tax-gatherers because they include also opportunity costs.

C. The shape of the supply curve provides specialist with the information on elasticity of supply and the reflection of the shareholder.

D. The supply curve is a line on a diagram where the vertical axis measures price and the horizontal axis is quantity.

E. Bountiful crops is a cause of increase in supply.

F. Improvements in technology and changes in input prices and productivities are the main causes of the changes in elastic demand.

2. Find equivalents in Russian:

a) fundamental concept

b) current prices

c) business costs for wages,

d) sole proprietor

e) alternative investment projects.

f) coefficient of elasticity

g) a decrease in supply

h) improvements in technology

3. Find antonyms for the following words. Write one sentence with each:

a) expected —

b) complex —

c) possible —

d) future —

e) competitive —

4. Find the synonyms of the following:

a) accountant —

b) calculate —

c) permit —

d) expect —

e) complex —

f) opportunity —

g) businessman —

5. Define the following terms in English:

a) aggregate supply

b) opportunity costs

c) sole proprietor

d) elasticity of supply

e) coefficient of elasticity

Questions for discussion:

1. How do you understand: «Economists differ from accountants and from the Internal Revenue Service»?

2. In what sphere can a person with the economic education work?

3. What is a better-paid job for economist: applied economics or theoretical research? Give examples to support your opinion.

UNIT 6

Competitive and monopolistic markets

<^Text 1

COMPETITIVE MARKET

Competition refers to the nature of the conditions under which individuals may trade property rights. It assumes a definition of property rights that individuals may trade among themselves as well as a description of the trading process. A competitive equilibrium is the outcome of competition. The very existence of such an equilibrium depends on the nature of the property rights. These aspects of competition are especially important in connection with the development of new technology and new products and with the use of low-cost, large-scale methods of production and distribution.

The simplest situation in an analysis of competition is a market where individuals have initial endowments of commodities that they own and that they may trade among themselves. All trades occur at the same time and place. The essential characteristics remain valid when trades do not all occur at the same time and place. However, individuals would have incomplete knowledge relevant for their decisions. This complication changes the nature of the outcome of competition. Incomplete knowledge is inevitable partly because the future is unknown. Even so, it is often less costly to take current actions that will have future consequences without knowing that these will be than to respond only to momentary events of the present. The advantages of planning and the resulting exposure to hazards that may occur alter the effects of competition.

These basic considerations help explain the nature of production and why the quantities of goods offered will change over time in response to the expectations and information firms have. They also explain why some common notions about competition are inadequate. Among the inadequate notions about competition is the belief that a necessary condition for competition is a lack of power by any firm to affect the prices of its products. Sometimes this is put in another form, that competition can exist in an industry only if the demand curves-facing the individual firms in that industry are infinitely elastic so that changes in the quantities sold by a single firm cannot affect the product price. This condition is not necessary for competition. Nor is it necessary for competition that the number of firms be so large that each one is of negligibly small size relative to the total market for the commodities made by firms in the industry. Finally, it may be consistent with competition that some or all firms in an industry have obtained very high profit rates.

Pure Exchange

Assume there is a market where there are individuals, each of whom starts with given amounts of various commodities. Each one would like to make trades that will result in the acquisition of goods preferred to those goods to be exchanged. The theory assumes that for each trader the purpose of trade is to improve the trader’s position. Hence, the trader would not willingly leave the market with a bundle of goods worth less than his or her initial holdings. The theory also assumes that each trader owns the commodities to be traded, that they can be traded on terms that are mutually acceptable to the parties directly involved in an exchange, and that each trader may accept or reject the terms offered. Underlying the possibility of exchange is the existence of property rights in the goods. Competition requires voluntary exchange so that no trader is compelled to accept or reject offers without freely given consent. The very notion of exchange implies, therefore, a voluntary agreement among those who are directly involved in the transaction on the terms that each one willingly accepts.

In pure exchange, although the total quantities of the commodities exchanged among the parties is constant, each one must regard the obtained goods as worth more than the exchanged goods. If the parties can reach agreement on mutually beneficial terms of exchange, the result is an allocation of the commodities among the individuals that must make at least one of them better off than before and cannot make anyone worse off than before.

The theory assumes that no individual accepts terms that would leave that individual in a worse position than if no trades at all were made. The existence of a state of competition in pure exchange allows the participants to seek the best terms that they can obtain from the others. Competition does not requires the presence of a very large number of traders nor does it require that each of the .individual traders in the market must be of such a small relative size that none can affect the terms of trade. Traders can make tentative agreements with each other subject to the condition that these agreements become binding only if none can obtain better terms from others. The final outcome is a set of exchanges among the traders such that no individual or group of individuals can obtain better terms. The set of outcomes with these attributes need not be unique. All possible outcomes with these attributes represent the state of competition. The set of all possible trades that can satisfy these conditions is known as the core of a market. Therefore, the set of trades induced by competition in a market is in the core of a market.

Vocabulary

to trade property rights —

обменивать права на собственность competitive equilibrium — равновесие конкуренции outcome - исход, результат initial — начальный endowment — вклад commodities — 1) предмет потребления 2) часто мн.; экон. товар, продукт для продажи relevant - соответствующий, релевантный inevitable — неизбежный respond - ответ hazard — опасность exist — существовать quantities of goods offered -

объемы (количество) предлагаемых товаров infinitely elastic — бесконечно эластичный acquisition - приобретение to improve — улучшать hence — следовательно voluntary exchange - добровольный обмен to compel — вынуждать constant — постоянный to regard as — рассматривать, как (в качестве) tentative — предварительный unique — уникальный, исключительный core of a market — основа экономики

General understanding:

1. What is competition?

2. What is a competitive equilibrium?

3. What is the simplest situation in the analysis of competition?

4. What, according to the text, are the basic considerations of the competition and what do they explain?

5. What are the «inadequate» notions about competition?

6. What does the competition require?

7. What are the features of pure exchange?

1. Which of the following is true:

A. Competition refers to both the trade of property rights and the description of the trading process.

B. A competitive equilibrium is the result of competition.

C. Goods are infinitely elastic when the demand for them is elastic.

D. Some or all firms may have high profits under competition.

E. Competition is only possible when people are willing to exchange commodities.

F. In pure exchange each participant exchanges bad goods for better ones.

G. Core market is the set of all possible trades that can satisfy these conditions.

2. Define the following terms in English:

h) competition

i) property rights

j) competitive equilibrium k) infinitely elastic demand curves

1) pure exchange m) individual trader n) description

3. Translate into Russian:

A. Competition refers to the nature of the conditions under which individuals may trade property rights.

B. The very existence of such an equilibrium depends on the nature of the property rights.

C. The essential characteristics remain valid when trades do not all occur at the same time and place.

D. The theory assumes that for each trader the purpose of trade is to improve the trader’s position.

E. Underlying the possibility of exchange is the existence of property rights in the goods.

F. Traders can make tentative agreements with each other.

5. Questions for discussion:

1) Under what circumstances competition is impossible?

2) Under what circumstances is pure exchange possible?

3) Do you think that competition stimulates the production of better goods? What role does advertising play in competition?

MONOPOLY

Monopoly is a market structure with only a single seller of a commodity or service dealing with a large number of buyers. When a single seller faces a single buyer, that situation is known as bilateral monopoly.

The most important features of market structure are those, which-influence the nature of competition and price determination. The key element in this segment of market organization is the degree of seller concentration, or the number and size distributions of the sellers. There is monopoly when there is only one seller in an industry, and there is competition when there are many sellers in an industry. In cases of an intermediate number of sellers, that is, something between monopoly and competition, there can be two sellers (duopoly), a few sellers (oligopoly), or many sellers (atomistic competition).

Today the term monopoly is usually extended to include any group of firms, which act together to fix prices or levels of production. Complete control of all output is not necessary to exercise monopoly power. Any combination of firms, which controls at least 80 percent of an industry’s production, can dictate the prices of the remaining 20 percent.

Aside from private monopolies, there are public monopolies. One example of a public monopoly in the

United States is the nonprofit postal service. There is also the «natural» monopoly, which exists when it is more efficient, technically, to have a single seller.

Although the precise definition of monopoly — a market structure with only a single seller of a commodity or service — cannot he applied directly to a labor union because a union is not a seller of services, labor unions have monopolistic characteristics. For example, when a union concludes a wage settlement, which sets wage rates at a level higher than that acceptable to unorganized workers, the union clearly contributes to monopolistic wage results. In effect, the price of labor (wages) is set without regard to the available supply of labor.

Monopolies versus Competition

Pure monopoly is a theoretical market structure where there is only one seller of a commodity or service, where entry into the industry is closed to potential competitors, and where the seller has complete control over the quantity of goods offered for sale and the price at which goods are sold. Pure monopoly is one of two limiting cases used in the analysis of market structure. The other is pure competition, a situation in which there are many sellers who can influence neither the total quantity of a commodity or service offered for sale nor its selling price. Hence, monopoly is the exact antithesis of competition. It is generally agreed that neither of these two limiting cases is to be found among existing market structures.

The monopolist establishes market position by ability to control absolutely the supply of a product or service offered for sale and the related ability to set price. Theoretically, profit maximization is the primary objective, and it is often possible to achieve this by restricting output and the quantity of goods offered for sale. Levels of output are held below the quantity that would be produced in a competitive situation. Hence, monopoly is of interest to economic policymakers because it may impede the most efficient possible allocation of a nation’s economic resources.

Monopolies held by individuals or organizations may begin by the granting of a patent or a copyright, by the possession of a superior skill or talent, or by the ownership of strategic capital. The huge capital investment necessary to organize a firm in some industries raises an almost insurmountable barrier to entry in these monopolistic fields and, thus, provides established corporations in these industries with potential monopoly power.

The use of such monopoly power may lead to the development of substitute products, to an attempt at entry into monopolistic fields by new firms (if profits are high enough), or to public prosecution or regulation. The antitrust policy of the federal government has prevented the domination of an industry by one firm or even a few firms. Moreover, with the growth of international trade and investment, it is no longer possible to determine whether an effective monopoly exists by studying market shares. The recent competitive pressures from Japanese sellers of autos and electronic products have resulted in more competition and less monopoly power on the part of U.S. manufacturers. Thus, the trend during the last 40 years or so in the United States has been away from monopolies in many industries and toward oligopolies.

Vocabulary

bilateral monopoly — двусто- «natural» monopoly — есте-

ронняя монополия ственная монополия

degree - степень precise - точный

aside from — помимо to conclude — заключать

nonprofit - некоммерческий entry - вход, вступление efficient - эффективный to impede - затруднять

limiting cases — ограничивающие случаи antithesis — антитезис, противоположность to establish — учреждать, устанавливать economic policymakers — стратеги экономики to grant — выдавать superior — превосходящий insurmountable — непреодолимый

domination — преобладание, доминирование competitive pressures - конкурентное давление

General understanding:

1. What is a monopoly, duopoly, oligopoly, atomistic competition?

2. What is a bilateral monopoly?

3. Is full control necessary for the monopoly?

4. What is an example of a public monopoly?

5. What is a «natural» monopoly?

6. What are the two «limiting cases» used in the analysis of market structures?

7. How do the monopolies begin?

1. Which of the following is wrong:

A. When two buyers meet two sellers it is called bilateral monopoly.

B. The degree of sellers concentration is the number and size distributions of monopolists.

C. Any group of firms which act together to fix prices or levels of production is a monopoly.

D. Monopoly is a 100% different thing than competition.

E. Economic policymakers are interested in monopolies on markets.

2. Find the equivalents in Russian:

a) market structure

b) segment of market

c) public monopolies

d) labor unions

e) entry into the industry

f) profit maximization

g) substitute products

h) antitrust policy

3. Translate into Russian:

A. Monopoly is a market structure with only a single seller of a commodity or service dealing with a large number of buyers.

B. The key element in this segment of market organization is the degree of seller concentration.

C. Complete control of all output is not necessary to exercise monopoly power

D. Pure monopoly is a theoretical market structure where there is only one seller of a commodity or service.

E. Monopoly is the exact antithesis of competition.

F. The use of monopoly power may lead to the development of substitute products.

G. The trend during the last 40 years or so in the United States has been away from monopolies in many industries and toward oligopolies.

4. Give definitions in English to the following:

a) monopoly

b) bilateral monopoly

c) duopoly

d) atomistic competition

e) «natural» monopoly

f) public monopoly

3. Questions for discussion:

1) Are there any examples of bilateral monopolies on the:

a) world market b) domestic market c) local market

2) Think of an example of a public monopoly. Is postal

service in Russia also a public monopoly as it is in

USA?

3) What are the criteria for defining a monopoly

«natural»? Give an example.

^Text 3 WHAT IS OLIGOPOLY

4. An oligopoly exists when a few sellers of a commodity or service deal with a large number of buyers. When a few sellers face a few buyers, that situation is known as bilateral oligopoly. In the case of oligopoly a small number of companies supply the major portion of an industry’s output. In effect the industry is composed of a few large firms which account for a significant share of the total production. Thus, the actions of the individual firms have an appreciable effect on their competitors.

5. However, it does not follow as a consequence of the presence of relatively few firms in an industry that competition is absent. Although there are few firms in an industry, they may still act independently, and the outcome of their actions is consistent with competition. With few firms in an industry, each takes into account the likely repercussions of its actions. For example, each seller knows that if he or she lowers prices, the few competitors will immediately follow suit and lower their prices, leaving the seller with roughly the same share of the total market but lower profits. However, the seller may be reluctant to raise prices because competitors might not follow this lead.

6. One feature of markets with few sellers is that prices are often stable, except during periods of very rapid inflation. Also, prices of oligopolistic industries generally fluctuate less widely than in more competitive industries.

Vocabulary

to exist — существовать to deal with - иметь дело t чем-либо(кем-либо) bilateral - двусторонний portion — часть, доля, порция

to be composed of — состоять из

appreciable — значительный consistent — последовательный

repercussions - последствия roughly the same — практически такой же reluctant — неохотный stable — стабильный

General understanding:

1) When does oligopoly exist?

2) What is bilateral oligopoly?

3) Is absent of competition a common phenomenon?

4) What is known to happen if one competitor lowers the price?

5) What is the feature of the market with few sellers?

1. Translate into Russian:

a) When a few sellers face a few buyers, this situation is known as bilateral oligopoly.

b) The actions of the individual firms have an appreciable effect on their competitors.

c) Although there are few firms in an industry, they may still act independently

d) One feature of markets with few sellers is that prices are often stable.

e) Prices of oligopolistic industries generally fluctuate less widely.

2. Compose sentences using the following expressions:

a) to deal with smth.

b) to face smth.

c) to be composed of smth.

d) to be reluctant to smth.

e) in case of smth.

3. Write an occupation of a person. Compose one sentence with each word:

a) produce —

b) consume —

c) trade —

d) purchase —

e) sell —

f) observe —

4. Find equivalents in Russian:

a) act independently

b) take into account

f) not follow this lead

d) fluctuate less widely

Questions for discussion:

1) How can policymakers influence the economics via oligopolies?

2) Is price stability a good trend in economy? What about the 60s-70s in the history of USSR?

3) Why in your opinion there are no such institutions as natural and public oligopolies?

UNIT 7 Philosophy of market

^5 Text 1 DEFINING MARKETING

A prominent economist Philip Kotler defines marketing as «a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and values with others.» Marketing research is used to assess the market’s response to the firm’s marketing inputs which include promotional activities such as price discounting, placement of in-store displays, multimedia advertising, and couponing; expanding distribution; and product development and enhancement. The goal of marketing research is to assist the firm in determining the most effective, i.e. most profitable, mix of marketing inputs given knowledge of the marketplace.

As a formal scientific discipline marketing research began in the early twentieth century with most analyses being based on survey data. In the 1930s, the A. C. Nielsen Company began collecting in-store data using manual audits. Today, with the advent of scanning technology, the amount of timely data available from stores and household panels has grown exponentially. Coincident with this data explosion, the data delivery systems and the techniques used to analyze the data have become increasingly sophisticated. Marketing research is an integral part of organizations in both the consumer durable and nondurable goods sectors, and.in recent years •the use of marketing principles has become increasing prevalent among nonprofit and government sectors.

Marketing research is interdisciplinary requiring the knowledge of economists, operations researchers, psychologists, and statisticians. For the economist, the economic theory of consumer behavior and the theory of the firm provide basic building blocks. Marketing research can be viewed as an operational or tactical activity and as a strategic activity. Although both activities require knowledge of the workings of the marketplace at both the macroeconomic and microeconomic levels, tactical -analyses focus on monitoring a product’s performance and testing the effectiveness of marketing programs relative to competitors. Strategic research involves selecting and optimizing marketing opportunities.

In order to understand the marketplace, the researcher must define the market in terms of both the geographic unit and the product class and collect data. Data on consumer purchases permit an analyst to determine what was sold and how particular brands performed relative to each other. In addition to sales and price information, causal data assist the analyst in understanding the reason that sales took place. Examples of causal data лг*- newspaper advertising, which indicates the extent м retailer advertising support, display activity, and coupon ads. Another important source of information for understanding the source of sales is television advertising. Measuring the effects of television advertising is relatively difficult owing to the dynamic effects such advertising has on consumer behavior, however.

Once the data are collected, the analyst may choose to evaluate the information by simply looking at the raw series together over time or compute straightforward measures such as market share in order to arrive at a qualitative assessment of market activity. Statistical models might be estimated in order to address issues such as temporary price reduction, effectiveness, the extent of cannibalization due to promotional activity,

⇐ Предыдущая 7 8 9 10 111213 14 15 16 Следующая ⇒