Text for additional reading and discussion

(A) Read the text and entitle it. Ask questions so as to cover the content of the text. Translate the text into Ukrainian. Consult the dictionary if necessary.

(B) Answer the following questions:

How are the elasticities of supply and demand similar?

How do they differ?

The elasticity of a producer’s supply curve depends on the nature of its production. If a firm can adjust to new prices quickly, then supply is likely to be elastic. If the nature of production is such that adjustments take longer, then supply is likely to be inelastic. The supply curve for nuclear power, for example, is likely to be inelastic in the short run. No matter what price is being offered, electric utilities will find it difficult to increase output because of the huge amount of capital and technology needed - not to mention the issue of extensive government regulation — before nuclear production can be increased. However, the supply curve is likely to be elastic for many toys, candy, and other products that can be made quickly without huge amounts of capital and skilled labour. If consumers are willing to pay twice the price for any of these products, most producers will be able to gear up quickly to significantly increase production. Unlike demand elasticity, the number of substitutes has no bearing on supply elasticity. In addition, neither the ability to delay the purchase nor the portion of income consumed are important. Instead, only produc-tion considerations determine supply elasticity. If a firm can react quickly to a changing price, then supply is likely to be elastic. If the firm takes longer to react to a change in prices, then supply is likely to be inelastic.

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