Exercise 13. Mark the following statements as T (true) or F (false). Correct the false statements

1. Supply relates to how much of a product or service is desired by buyers at a particular price in a given time period, all other things being equal. 2. The law of supply states that the price of a product supplied varies inversely with the availability of a product, all other factors that may determine supply remaining the same. 3. Consumers will buy more when there is a price decrease in the market. 4. Sellers want to charge as much as they can so as the price goes up they will be willing to make more and sell more maximizing their profits. 5. The supply curve shows the quantities of a product or service which consumers are willing and able to buy at various prices, all non-price factors being equal. 6. Each point along the curve represents a different price-quantity combination, or to put it another way, a direct correlation between the quantities supplied and price. 7. The non-price determinants of supply are things other than price which affect the amounts of goods and services suppliers are able to bring into the market. 8. If transportation costs of a product increase, the supplier will be forced to increase the price of a product. 9. The previous statement illustrates how changes in technology change the price of a product. 10. Improved technology increases production costs and therefore decreases supply. 11. If the price of a resource used to produce the product grows, this will increase the production costs and the producer will want to charge a higher price to cover the higher costs. 12. If producers anticipate a price rise in the future, they may prefer to store their products today and sell them later. 13. If a product has a relatively low price potential producers will switch over production to that product in order to make it more profitable. 14. Comprehension of elasticity is useful to understand the response of supply to changes in consumer demand in order to achieve an expected result or avoid unforeseen consequences. 15. Elasticity of supply is a measure of how much the quantity supplied of a particular product responds to a change in the price of that product. 16. If a small change of price results in a large change in demand, the demand is called elastic, if the demand changes only a little, it is called inelastic. 17. Price elasticity of supply appears naturally: nothing can influence it.

Exercise 14. Answer the following questions.

(A) 1. What does supply mean? 2. Whose behaviour is supply concerned with? 3. What does the law of supply state? 4. Why does the law of supply have a direct relationship? 5. Why is the law of supply the opposite to the law of demand? 6. What is a supply schedule? 7. What is a supply curve? What does each point along the curve represent? 8. What does a price change lead to? 9. What causes a supply curve to shift? 10. What are the key non-price determinants of supply? 11. How does the cost of production affect the behavior of producers? 12. What does the introduction of new technology result in? 13. Why is it important for producers to use cheap inputs in their production processes? 14. How do future expectations affect the quantity supplied? 15. Why are profit opportunities considered as factors that influence the quantity supplied? 16. Why do potential producers start producing a product? 17. What is elasticity as an economic concept? 18. Why is elasticity important in understanding supply and demand theories? 19. What is the price elasticity of supply? 20. What is the difference between elastic and inelastic supply? 21. What are the determinants of price elasticity of supply?

(B) 1. Why do producers supply more goods at a higher price than at a lower price? 2. Why is price an important determinant of the quantity supplied? 3. When and why do suppliers increase their production and rise prices? 4. What role do prices play for producers and consumers? 5. What is included in costs of production? 6. How do firms get maximum profits? 7. When are profits the highest? When should firms close down? 8. Why is it necessary to know the effect of a price change on the whole output rather than the supply of individual firms for making economic forecasts? 9. Can you give an example of technology influencing the quantity supplied?

Exercise 15. You are a student of economics. You have a younger sister. She is 10. Once she heard somebody say the word “supply” but she failed to understand it. She asks you to explain the meaning to her. Don’t forget that children have a representational thought ( образне мислення ) that’s why you should not only explain the meaning but also illustrate it. Make up and act out the dialogue using the following words and word combinations: price charged for available goods, to furnish, a deal, to switch over production, a supplier, to set a price, to offer for sale, to anticipate.