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Ex. 8. Review the following statements and mark them true (T) or false (F). Correct the statements which are false.

1. Demand is the amount of the good that buyers are willing and able to purchase. 2. The quantity demanded rises as the price falls and falls as the price rises. 3. If the demand for a good falls when income falls, the good is called an inferior good. 4. When a fall in one price of one good raises the demand for another good, the two goods are called substitutes. 5. The relationship between price and quantity supplied is called the law of demand. 6. The supply of a good is negatively related to the price of the inputs used to make the good.

Ex. 9. Answer the questions.

1. What does microeconomics study? 2. What kind of mechanism is a market? 3. What factors determine the demand for any good? 4. What determines the quantity supplied? 5. How do subsidies and taxes influence supply of goods and services? 6. What is the mechanism of interaction between the demand and supply in setting a price?

Ex. 10. Give a brief summary of the text.

TEXT B. Market Structures

Task: scan the text and do the tasks that follow.

Market structure is determined primarily by (1) the number of firms selling in the market; (2) the extent to which the products of different firms in the market are the same or different; (3) the ease with which firms can enter into or exit from the market. Based on these three criteria, economists usually group market structures into four basic categories: (1) pure competition; (2) monopoly; (3) oligopoly; and (4) monopolistic competition. Let us examine each of these market structures.

Pure Competition. The main characteristics of the pure competition are:

1.Many sellers: There are many sellers, and each firm is so small relative to the entire market that its actions will have no effect on the price of its product. Instead, it must accept the going market price, established by the forces of supply and demand.

2.Standardized product: The products of the various firms in the market are so nearly identical that buyers do not prefer the product of any one firm over that of any other firm.

3.Easy entry and exit: There are no significant financial, legal, technological, or other barriers to prevent new firms from entering the market or to prevent existing firms from leaving the market. Firms are free to enter and leave the market at will.

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4. No artificial restrictions: There are no wage and price controls, minimum wage laws, labour unions, or other artificial restrictions on the free movement of prices and wages up and down.

Pure competition has its limitations. Although it works well in an industry such as agriculture, it is not practical for all markets and all industries. Nevertheless, since competition is the controlling mechanism of a market economy, a high degree of competition is usually desirable in most markets.

Monopoly. Monopoly is the extreme opposite of pure competition and has the following characteristics: (1) the market consists of a single seller; (2) the seller sells a product for which there are no close substitutes; (3) there are barriers to entry that prevent competitors from entering the market; and (4) the seller can control the price of his or her product.

Monopoly disadvantages include the following: (1) a monopolist charges a higher price and produces less output than a perfectly competitive firm, (2) resource allocation is inefficient because the monopolist produces less than if competition existed, (3) monopoly produces higher long-run profits than if competition existed, and (4) monopoly transfers income from consumers to producers to a greater degree than under competition.

Oligopoly. Although few industries are controlled by a single firm, main industries in the United States are dominated by a few giant firms. Such a market structure is known as oligopoly, and it is the market structure under which most large corporations operate. Oligopoly has the following characteristics: (1) a few sellers; (2) substantial barriers to entry; (3) standardized or differentiated products; and (4) substantial non-price competition.

Non-price competition includes advertising, packaging, product development, better quality, and better service. Under imperfect competition, firms may compete, using non-price competition, rather than price competition.

Monopolistic Competition. Monopolistic competition is a market structure that is characterized by (1) many sellers; (2) differentiated products; (3) nonprice competition; (4) relatively easy entry and exit. It has similarities to both pure competition and oligopoly.

Monopolistic competition is similar to pure competition in the sense that there are many sellers and no strong barriers to entry. Firms can enter and leave markets on a regular basis and, indeed, do so. The amount of money required to go into business is relatively small, and there are few government regulations restricting those wishing to enter a market. In addition, each seller controls such a small share of the market that each believes that his or her actions will bring no reactions from competitors.

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Ex. 1. Match the words with their definitions.

Ex. 2. Complete the sentences.

1. Market structure is determined primarily by… . 2. Economists usually group market structures into four basic categories:… . 3. The main characteristics of the pure competition are… . 4. Monopoly is the extreme opposite of pure competition and has the following characteristics:… . 5. Oligopoly has the following characteristics:… . 6. Monopolistic competition is a market structure that is characterized by… .

Ex. 3. Answer the questions.

1. What is market structure determined by? 2. What are the four characteristics of pure competition? 3. What problems exist in a purely competitive economy? 3. What are the basic characteristics of monopoly? What are the examples of natural monopoly? 4. What market structure is known as oligopoly? What are its main characteristics? 5. What is monopolistic competition characterized by? 6. In what way is monopolistic competition similar to oligopoly, to pure competition?

TEXT C. Market Leaders, Challengers and Followers

Task: read the text and say what you have learned about types of companies in the market.

In most markets there is a definite market leader: the firm with the largest market share. This is often the first company to have entered the field, or at least the first to have succeeded in it. The market leader is frequently able to lead other firms in the introduction of new products, in price changes, in the level or intensity of promotions, and so on.

Market leaders usually want to increase their market share even further, or at least to protect their current market share. One way to do this is to try to find

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ways to increase the size of the entire market. Contrary to a common belief, wholly dominating a market, or having a monopoly, is seldom an advantage: competitors expand markets and find new uses and users for products, which enriches everyone in the field, but the market leader more than its competitors. A market can also be expanded by stimulating more usage: for example, many households no longer have only one radio or cassette player, but perhaps one in each room, one in the car, plus a Walkman or two.

In many markets, there is often also a distinct market challenger, with the second-largest market share. In the car hire business, the challenger actually advertises this fact: for many years Avis used the slogan “We’re number two. We try harder.” Market challengers can either attempt to attack the leader, or to increase their market share by attacking various market followers.

The majority of companies in any industry are merely market followers which present no threat to the leader. Many market followers concentrate on market segmentation: finding a profitable niche in the market that is not satisfied by other goods or services, and that offers growth potential or gives the company a differential advantage because of its specific competencies.

A market follower which does not establish its own niche is in a vulnerable position: if its product does not have a “unique selling proposition” there is no reason for anyone to buy it. In fact, in most established industries, there is only room for two or three major companies: think of soft drinks, soap and washing powders, jeans, sports shoes, and so on. Although small companies are generally flexible, and can quickly respond to market conditions, their narrow range of customers causes problematic fluctuations in turnover and profit. Furthermore, they are vulnerable in a recession when, largely for psychological reasons, distributors, retailers and customers all prefer to buy from big, wellknown suppliers.

Ex. 1. Find words in the text, which mean the following.

1)a company’s sales expressed as a percentage of the total market;

2)short-term tactics designed to stimulate stronger sales of a product;

3)the situation in which there is only one seller of a product;

4)companies offering similar goods or services to the same set of customers;

5)a short and easily memorized phrase used in advertising;

6)the division of a market into submarkets according to the needs or buying habits of different groups of potential customers;

7)a small and specific market segment;

8)a factor which makes you superior to competitors in a certain respect;

9)a business’s total sales revenue;

10)a period during which an economy is working below its potential.

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Ex. 2. Complete the sentences.

1. The market leader is frequently able to lead other firms in ____. 2. Market leaders usually want to increase _____. 3. A market can be expanded by _____. 4. Market challengers can either attempt to attack the leader, or ______. . 5. Many market followers concentrate on _____. 6. In most established industries, there is only room for ______. 7. Small companies are vulnerable in a recession when _______.

Ex. 3. Write a heading for each paragraph.

TEXT D. Three Pricing Strategies

Task: skim the text and find definitions of the following terms: cost-plus pricing, competitive pricing, value pricing. Give their Russian/Belarusian equivalents.

There are three basic pricing strategies: cost-plus pricing, competitive pricing, and value pricing.

In cost-plus pricing, you look at the cost of what you sell – that is, the total marginal cost – then add on the profit you need to make. That’s your price. Cost-plus means “cost plus profit”.

This method of pricing is straightforward and ensures that you will make money on what yousell. Unfortunately, it does not ensure that you will sell it. The success of this pricing strategy depends on targeting a “reasonable” profit and controlling your costs. It also depends on not being under-priced by a competitor.

A competitive pricing strategy aims to price the product at the lowest price among all recognized competitors. Low prices are one way to compete effectively, and sometimes competitive pricing is essential. For instance, in an industry selling a commodity, the outfit with the lowest price will usually succeed. That’s because when the products themselves are not differentiated, price becomes the differentiating factor.

Competitive pricing is not just for commodities. In retail, for example, portable CD players are not a commodity, but once a customer has decided she wants to buy one, price will play a big role in which type she buys. So competitive pricing is common in retailing. In fact, some retailers offer to beat any other advertised price.

In general, the success of a competitive pricing strategy depends on achieving high volume and low cost – preferably the lowest in the industry – so you can maintain the lowest price and still make a profit. Success also depends on avoiding a destructive price war.

A value pricing strategy is the alternative to basing your prices on your costs or your competitors’ prices. Instead, you base your prices on the value

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you deliver to customers. In this strategy, you deliver as much value as possible to your customers – and charge them for it. With this strategy, you charge a high price and justify it by delivering high value.

Value pricing is common in high technology and luxury items, such as clothing, restaurants, and automobiles.

In practice, a business considers all three pricing strategies. You have to consider your costs, or your profits will suffer. You have to consider your competitor’s prices, even if you’re not competing on price. You must consider the value you deliver because no matter what you sell, customers want value for their money.

Ex. 1. Choose the correct answer.

1.A cost plus profit pricing is

a)a straightforward method;

b)a method that ensures that you will make money on what you sell;

c)a method that includes total marginal cost and profit you need to make;

d)all of the above.

2.A competitive pricing strategy aims

a)to beat any other advertised price;

b)to price the product at the lowest price among all recognized competitors;

c)to compete effectively;

d)all of the above.

3.A value pricing strategy suggests that you should base your prices on

a)your costs and expenses;

b)your competitor’s prices;

c)the value you deliver to customers.

Project

Get ready to speak on the following points:

1.Basic market structures in Belarus.

2.Advantages and disadvantages of cost-plus, competitive and value pricing strategies.

3.The type of pricing strategy you would consider if you had your own busi-

ness.

Use any sources available

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Section III. LEXICAL-GRAMMAR TESTS

Grammar material to be revised:

1.Verb. Tenses in the Active and Passive Voice.

2.Sequence of Tenses.

3.Modal Verbs and their Equivalents

TEST I

I. Read the text and answer the questions that follow.

Henry Ford as a marketing executive

Henry Ford was an American industrialist, the founder of the Ford Motor Company and a great manager. Although Ford did not invent the automobile, he developed and manufactured the first simple and reliable car that many middle class Americans could afford.

He stated: "Our policy is to reduce the price, extend the operations and improve the product. You will notice that the reduction of price comes first. We have never considered any costs as fixed. Therefore we first reduce the price to the point where we believe more sales will result. Then we go ahead and try to make the prices. We do not bother about the costs. The new price forces the costs down. The more usual way is to take costs and then determine the price and although that method may be scientific in the narrow sense, it is not scientific in the broad sense. I can explain why. The cost is worth knowing if it tells you that you cannot manufacture at a price at which the product cannot be sold. One may calculate what a cost is and of course, all our costs are carefully calculated, but no one knows what a cost ought to be".

The statement by Henry Ford illustrates the importance of satisfying customers’ needs.

Although Henry Ford was known as a great production genius, he was also a very good marketing executive. Ford realized that what the US wanted in the early 1900s was inexpensive automobile transportation. His procedure was first to determine the price the market was willing to pay for a car and then to design a car that could be manufactured at that price. The car was produced in the United States. During this period the price of his car fell from $ 850 to $ 263.

If Ford had used old methods for price calculation he wouldn't have gained such a success.

1. What is Henry Ford known for? 2. What approaches did he follow in his business activity? 3. What was his policy aimed at? 4. What was his method of determining the price of a car? 5. Why is Henry Ford considered to be a great production genius and a very good marketing executive?

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II. Translate the text into Russian/Belarusian.

III.State the tense of the verbs in the following sentences.

1.The demand for our products is increasing. 2. The equilibrium price is sometimes called the market-clearing price because, at this price, everyone in the market has been satisfied. 3. Income will have a market effect on leisure spending. 4. If you expect the price of goods to rise in the future, you will put some of your current production into storage. 5. These figures have been fairly constant for many years. 6. If Ford had used old methods for price calculation he wouldn't have gained such a success. 7. We have never considered any costs as fixed. 8. Market leaders usually want to increase their market share even further.

IV. Rewrite the sentences in the Active.

1.Monopolistic competition is characterized by product differentiation and non-price competition. 2. Main industries in the United States are dominated by a few giant firms. 3. Market structure is determined primarily by the number of firms selling in the market. 4. Rise of prices was caused by the cost rise. 5. Inflation was caused by the excess of demand. 6. The rate of exchange of silver to gold is fixed by the government at sixteen to one.

V.Open the brackets, use the verbs in the Passive.

1.Market price is the price at which a good or service (to buy) and (to sell) most efficiently. 2. Elasticity (to consider) to be a planning tool for managers. 3. A market can (to define) as a place where any type of trade takes place. 4. Free markets may (to distort) if a seller gains monopoly power by managing the majority of supply. 5. Complements are often pairs of goods that (to use) together. 6. The accounts (to prepare) already. 7. The price (to discuss) next meeting. 8. Henry Ford (to known) as a great production genius. 9. A bank statement (to sent) to us by the bank every month. 10. The new price (to offer) last week. 11. At the final stage the finished products (to pack) into boxes.

VI. Put the verbs in brackets into the correct form.

1. If you (to want) to know how any event or policy (to affect) the economy, you must think first about how it (to affect) supply and demand. 2. If you (to expect) the price of goods to rise in the future, you (to put) some of your current production into storage. 3. Manufacturing output (to increase) by 8% in two years. 4. Once the market (to reach) its equilibrium all buyers and sellers (to be satisfied) and there (to be) no upward or downward pressure on the price. 5. What (to happen) to our sales if we (to increase) our advertising costs by 5%?

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VII. Use the correct form of the verbs in brackets. Mind sequence of tenses.

1. A representative said the news (to be) a disaster. 2. We left after the deal (to reject). 3. Chief Executive Officer stated that the company (to sign) the contract already. 4. The manager said a statement (to make) in next week's newspaper. 5. The Finance Director warned that any delay (can) mean that our competitors (may) overtake our company.

VIII. Underline modal verbs and their equivalents in the following sentences. Translate the sentences into Russian/Belarusian.

1.Price is an amount of money for which something may be bought or sold.

2.All countries can make profits through international trade.3. In order to increase productivity the producers should reorganize the work process. 4. Some industries have to pay higher wages to attract the extra labour. 5. Any economic system must use one or more decision-making rules or methods.

TEST II

I. Translate the text into Russian/Belarusian.

Market

A market is an arrangement through which buyers and sellers meet or communicate for the purpose of trading goods or services. Markets are a way in which buyers and sellers can conduct transactions resulting in mutual net gains that otherwise wouldn’t be possible. Many market transactions are conducted without buyers and sellers actually meeting at a particular location. For example, you can browse through catalogues or magazine advertisements to see what various sellers are offering. If you find something you like, you can order it by mail or telephone, without face-to-face contact with the seller. You can also hire an intermediary to carry out a transaction for you.

The purpose of a market is to make the information on the goods and services sellers are willing to sell and buyers want to purchase available. This exchange of information is the basis for determining prices which in turn influence the actual amount of goods and services exchanged. Prices are a major determinant of the choices we make as both buyers and sellers. Market prices play a vital role in coping with the problem of scarcity because they ration available amounts of goods and services.

To analyze the way markets operate, we first must understand the concept of supply and demand. Supply and demand analysis explains how prices are established in markets through competition among buyers and sellers and how those prices affect quantities traded.

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II.Put questions to the following sentences:

1.A market is an arrangement through which buyers and sellers meet for the purpose of trading goods or services. 2. The purpose of a market is to make information on the goods and services available. 3. The exchange of information is the basis for determining prices. 4. Market prices play a vital role in coping with the problem of scarcity. 5. To analyze the way markets operate, we must understand the concept of supply and demand. 6. Supply and demand analysis explains how prices are established in markets.

III.State the tense of the verbs in the following sentences.

1.Many market transactions are conducted without buyers and sellers. 2. A competitive pricing strategy aims to price the product at the lowest price among all recognized competitors. 3. Microeconomics has been called “the bottom-up view of the economy”. 4. Virtual marketplaces supported by IT networks such as the internet have become the largest and most liquid. 5. A market follower which does not establish its own niche is in a vulnerable position. 6. They have been discussing the possibility of joint ventures for some months. 7. Property values show a slight fall.

IV. Rewrite the sentences in the Passive.

1.Firms can enter and leave markets on a regular basis. 2. Economists use the term ‘elasticity of demand’ to describe the responsiveness of demand to price. 3. The government increased prices on several basic goods. 4. Prices determine the supply and demand for goods and services. 5. The company has increased supply in imports.

V.Put the verbs in brackets in the Passive.

1.If the demand for a good rises when income falls, the good (to call) an inferior good. 2. 50 per cent of our production is going (to make) at our plant. 3. When costs increase too much, capital investment (to reduce). 4. The benefits of faster productionshould (to see) next year. 5. Acompletelynew process is going(to introduce) in five years. 6. The profit (to calculate) regularly. 7. The loss (to reduce) next term. 8. We (to increase) the profit recently. 9. The agreement (to reach) last week. 10. The cheap goods (to deliver) already.

VI. Put the verbs in brackets in the correct form (Active or Passive).

1. These goods (produce) in Minsk and (export) to different countries. 2. Corporate income (tax) twice. 3. The size of the company (measure) often in terms of its assets. 4. Partnerships (find) most often in professions, such as law,

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