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UNIT SEVEN

An Initial Look at Supply What do We Mean by Supply? The Law of Supply Supply Curve Elasticity of Supply

ESSENTIAL VOCABULARY

1. Anticipate v –to imagine or expect that something will happen – передбачати, очікувати, сподіватися. Syn. to expect, to hope, to predict, to foresee.

2. Charge v –to impose or ask somebody for an amount of money as a price or fee – призначати, вимагати плату, правити. To charge a price – призначати ціну. Syn. to establish, to fix, to set.

3. Set v –to decide and state when something will happen, how much something should cost, what should be done etc – встановлювати, засновувати, визначати, формувати. To set a price – визначати ціну, Syn. to determine, to establish.

4. Shift n – the act of moving from one position, place, direction, or condition to another – зміна, переміщення, зсув. Shift in demand/supply – зміна у характері попиту/пропозиції. Syn. a change.

5. Supplier n –a company or a person that provides things that people want or need, especially over a long period of time – постачальник. Syn. a provider, a producer, a seller.

6. Supply v –to make available something that is wanted or needed by somebody or something often in large quantities and over a long period of time – постачати, доставляти, надавати, задовольняти. To supply the demand – задовольняти попит, to supply a need – задовольняти потребу, to supply a service – надавати послугу, to supply goods to – постачати товари, to supply with something – постачати щось. Syn. to furnish, to provide, to sell.

7. Switch (from something to something) v - to change suddenly or completely, especially from one thing to another, or to exchange by replacing one thing with another – переміщати, міняти, змінювати. To switch over production –переключитися на виробництво/змінювати напрям виробництва. Syn. to shift, to transfer.

8. Trade v - to engage in buying and selling for profit – торгувати.Syn. to deal, to sell.

Text

Transactions require both buyers and sellers. Unlike demand that describes the behaviour of consumers supply refers to the behaviour of sellers. Thus, demand is only one aspect of decisions about prices and the amounts of goods traded, the other is supply. So, supply is one of the two key determinants of price. The theory of supply explains the mechanisms by which prices and levels of production are set.

In economics, supply relates to the quantity of goods or services that a producer or a supplier is willing to bring into the market at a particular price in a given time period, all other things being equal.

The law of supply states that the quantity of a commodity supplied varies directly with its price, all other factors that may determine supply remaining the same. The law of supply expresses the relationship between prices and the quantity of goods and services that sellers would offer for sale at each and every price. In other words, the higher the price of a product, the higher the quantity supplied. As the price of a commodity increases relative to price of all other goods, business enterprises switch resources and production from other goods to production of this commodity, increasing the quantity supplied.

Clearly the law of supply is the opposite to the law of demand. Consumers want to pay as little as they can. They will buy more when there is a price decrease in the market. Sellers, on the other hand, want to charge as much as they can. They will be willing to make more and sell more as the price goes up. In this way they can maximize profits.

The relationship between price of a product and its quantity supplied is represented in a table called a supply schedule. The supply curve is a graphic representation of the market supply schedule and the law of supply. The supply curve shows a direct relationship between the quantities of products that firms are willing to produce and sell at various prices, all non-price factors being constant. Sloping upwardfrom left to right the supply curve reflects that producers supply more at a higher price and less at a lower price.

Supply schedule for cut jeans

Price	The quantity supplied
$400
$350
$300
$225
$175
$100
$50

The supply curve enables producers to anticipate what the supply would be for those prices falling in between the prices that are in the supply schedule. 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. Like a shift in the demand curve, a shift in the supply curve to the right or to the left means that the quantity supplied is affected by a factor other than a product’s price.

People often confuse supply with the quantity supplied. The difference between supply and quantity supplied is that

ü Supply represents the amounts of items that suppliers are willing and able to offer for sale at different prices at a particular time and place, all non-price determinants being equal.

ü The quantity supplied refers to the amount of a certain product producers are willing to supply at a certain price. A change in the price of the product will cause a change in the quantity supplied.

Price is an important determinant of the quantities supplied. The law of supply states that the amount offered for sale rises, as the price is higher. The quantity of pairs of cut jeans producers are willing to offer for sale rises, since their price is higher primarily because they need to cover the increased costs of production.

However, there are things other than price which affect the amounts of goods and services suppliers are able to bring into the market. These things are called the non-price determinants of supply.

As it has been mentioned a change in the quantity supplied caused only by a change in the price of the product. A change in supply is caused by a change in the non-price determinants of supply. They are:

® Changes in the cost of production. Production costs relate to the labour costs and other costs of doing business used in production process. The cost of production is probably one of the most important effects on production process. An increase in the costs of any input brings about the lower output. Regardless of the price that a firm can charge for its product, price must exceed costs to make a profit. Thus, the supply decision is a decision in response to changes in the cost of production.

® Changes in technology. Changes in technology usually result in improved productivity. Improved technology decreases production costs and therefore increases supply.

® Changes in the price of resources needed to produce goods and services. If the price of a resource used to produce the product increases, this will increase the production costs and the producer will no longer be willing to offer the same quantity at the same price. He will want to charge a higher price to cover the higher costs.

® Changes in the expectations of future prices. Changes in producers' expectations about the future price can cause a change in the current supply of products. If producers anticipate a price rise in the future, they may prefer to store their products today and sell them later. As a result, the current supply of a particular product will decrease.

® Changes in the profit opportunities. If a business firm produces more than one product, a change in the price of one product can change the supply of another product. For example, automobile manufacturers can produce both small and large cars. If the price of small cars rises, the producers will produce more small cars to earn higher profits. They will shift the resources of the plant from the production of large cars to the production of small ones. Therefore, the supply of small cars will increase and a supply curve will shift outward. So, profit opportunities encourage producers to produce those goods that have high prices.

® Changes in the number of suppliers in the market. Potential producers are producers who can produce a product but don’t do it because of relatively low price. If price of a product rises potential suppliers will switch over productionto that product to make more profit. If more producers enter a market, the supply will increase, shifting the supply curve to the right.

Making a summary it is necessary to emphasize that the understanding of concepts of supply and demand provides an explanation of how prices are determined in competitive markets.

An important concept in understanding supply and demand theories is elasticity. 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. For example, an entrepreneur expecting a price increase might find that * it lowers the profits if demand is highly elastic, as sales would fall sharply. Similarly, a business relying on a price cut might find that* it does not increase sales, if demand for the product is inelastic.

In economics, the price elasticity of supply is the degree of proportionality with which the amount of a commodity offered for sale changes in response to a given change in the going price. In other words 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.

Elasticity of supply works similar to elasticity of demand. Supply is elastic if a change in price results in a large change in the quantity supplied. On the other hand, if a great change in price brings about a small change in the quantity supplied, supply is called inelastic. There are some factors that determine price elasticity of supply. The most important of them are the ability of producers to change the amount of goods they produce, time period needed to alter the output and others.

COMMENTS

an entrepreneur expecting a price increase might find that – підприємець, який сподівається на підвищення ціни, міг би з’ясувати, що;

a business relying on a price cut might find that –підприємець, який розраховує на зниження ціни, міг би з’ясувати, що.

Exercise 1. Read, translate into Ukrainian in written form and memorize the definitions of the following economic terms and concepts.

1. Elastic supply:Supply for which a percentage change in a product's price causes a larger percentage change in the quantity supplied.	____________________________________________________________________________________________________________________________________________________________________________________________
2. Elasticity of supply:The degree to which supply of a commodity responds to a change in that commodity’s price.	_____________________________________________________________________________________________________________________________________________
3. Inelastic supply:Supply for which a percentage change in a product's price causes a smaller percentage change in the quantity supplied.	____________________________________________________________________________________________________________________________________________________________________________________________
4. Law of supply:the economic law that states as the price of a commodity that producers are willing and able to offer for sale during a particular period of time rises (falls), the quantity of the commodity supplied goes up (decreases), all non-price determinates being equal.	________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
5. Quantity supplied:the amount of a product that producers are willing and able to sell at a certain price during a time period, all other factors that may determine supply remaining the same.	___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
6. Supply:the total amount of a commodity available for purchase by consumers.	_____________________________________________________________________________________________________________________________________________
7. Supply curve: the graphical representation of how supply varies as prices change.	_____________________________________________________________________________________________________________________________________________
8. Supply schedule: a table showing the quantities of a product that would be offered for sale at various prices at a given time.	____________________________________________________________________________________________________________________________________________________________________________________________

Exercise 2. Find the English equivalents for the following.

1. пустити в продаж ________________________________________________________________

2. товар, який постачається __________________________________________________________

3. пропонувати на продаж ___________________________________________________________

4. значно збільшувати прибутки ______________________________________________________

5. прямо пропорційна залежність _____________________________________________________

6. давати можливість виробникам передбачити _________________________________________

7. зміна величини пропозиції ________________________________________________________

8. за певною ціною _________________________________________________________________

9. покривати збільшені виробничі витрати _____________________________________________

10. витрати експлуатації підприємства _________________________________________________

11. перевищувати витрати ____________________________________________________________

12. рішення щодо пропозиції _________________________________________________________

13. існуюча пропозиція ______________________________________________________________

14. конкурентний ринок _____________________________________________________________

15. розуміння еластичності ___________________________________________________________

16. уникати непередбачених наслідків _________________________________________________

Exercise 3. Give the Ukrainian equivalents for the following.

1. the two key determinants ___________________________________________________________

2. the quantity supplied ______________________________________________________________

3. sloping upwardfrom left to right _____________________________________________________

4. to fall in between the prices _________________________________________________________

5. a price-quantity combination ________________________________________________________

6. a direct correlation ________________________________________________________________

7. a shift in the supply curve __________________________________________________________

8. all non-price determinants being equal ________________________________________________

9. at a particular time and place ________________________________________________________

10. the labour costs ___________________________________________________________________

11. to bring about the lower output ______________________________________________________

12. in response to changes _____________________________________________________________

13. to result in improved productivity ____________________________________________________

14. to prefer to store their products today _________________________________________________

15. to enter a market __________________________________________________________________

16. the understanding of concepts _______________________________________________________

17. to alter the output _________________________________________________________________

Exercise 4. Match these nouns/noun phrases, prepositions (if necessary) and nouns/noun phrases as they occur together in the text. Translate the expressions they make into Ukrainian.

1. a shift	to between in along of about	the future price
2. an increase	items
3. decisions	opportunities
4. each point	period
5. expectations	the law of demand
6. the amounts	prices and the quantity of goods
7. the opposite	the curve
8. the profit	the supply curve
9. the relationship	prices
10. time	the quantity supplied

Exercise 5. Match these adjectives and nouns/noun phrases as they occur together in the text. Translate the expressions they make into Ukrainian.

1.available	determinants of price
2.certain	relationship
3.competitive	price
4.current	technologies
5.direct	price
6.going	producers
7.key	correlation
8.particular	supply
9.potential	time and place
10. direct	markets

Exercise 6. Match the verbs/verbal phrases, prepositions (if necessary) and nouns/noun phrases as they occur together in the text. Translate the expressions they make into Ukrainian.

1. to be caused	on with into in for by	improved productivity
2. to bring	a price cut
3. to charge	sale
4. to offer	a higher price
5. to reckon	its price
6. to result	a change in the non-price determinants
7. to vary directly	the market

Exercise 7. Copy out from the texts the sentences containing the following words and word- combinations and translate these sentences into Ukrainian.

the amounts of goods traded: ___________________________________________________________

______________________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________________

is willing to bring into the market: _______________________________________________________

___________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________

business enterprises: __________________________________________________________________

___________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________

a direct relationship: __________________________________________________________________

___________________________________________________________________________________

is affected by a factor: ________________________________________________________________

___________________________________________________________________________________

must exceed costs: ___________________________________________________________________

___________________________________________________________________________________

to store their products: ________________________________________________________________

___________________________________________________________________________________

a business firm: _____________________________________________________________________

___________________________________________________________________________________

to achieve an expected result ___________________________________________________________

responds to a change _________________________________________________________________

by allocating alternative resources _______________________________________________________

Exercise 8. Choose from the box the words and word-combinations having the same or similar meaning to the words listed below. More than one is possible.

1. збільшення ціни (2)

2. зміна (2)

3. постачальник (3)

4. за умови, що усі нецінові фактори залишаються незмінними (3)

5. очікування(2)

6. очікуваний результат (2)

7. непередбачений/результат (3)

8. іншими словами (2)

9. поточна пропозиція (3)

10. передбачати (3)

11. пустити в продаж (3)

12. призначати ціну (3)

13. стосуватися (2)

14. відображати (2)

15. постачати (3)

16. задовольнити попит (3)

17. переміщати (3)

18. торгувати (2)

all non-price factors being constant	to supply the demand	an unforeseen consequence
an anticipation	a price increase	an unpredicted effect	a change	a producer
to offer for sale	to provide	the present supply	to deal	to furnish
the current supply	to fix a price	to put it another way	to expect	a supplier
an expected result	to foresee	to put on the market	a shift	an anticipated effect
a provider	to relate to	an unanticipated influence	to show	to predict
to charge a price	to shift	to respond to the demand	to supply	to set a price
to refer to	to represent	all other things being equal	to switch	to transfer
in other words	an expectation	to meet the demand	to trade	a rise in price
to bring into the market	the going supply	all non-price determinants being equal

Exercise 9. Replace the words or word combinations in bold type with their synonyms.

1. A supply curve slopes upward from left to right, reflecting the fact that more of a product will be brought into the market at a higher price and less at a lower price.

2. According to the law of supplyan increase in supply leads to a reduced price, while a decrease in supply causes a rise in price, demand remaining constant.

3. As a result of a shift in supply, there will be a new relationship between the price and quantity of a commodity supplied.

4. Since it costs more to produce additional items, producers will supply more only if they can charge a higher price.

5. Potential producers switch resources to production of a particular product, if its price increases, and enter the market for that product to maximise their revenues.

6. Changes in suppliers’ expectations cause supply curves to shift.

7. Companies that operate in highly competitive industries provide goods or services that are very elastic because current market condition does not enable them to charge a price they would like to.

8. Supply along with demand is one of the two key determinants of price but relates to the total amount of the goods available for purchase.

Exercise 10. Translate the words in brackets into English.

Supply (відноситься до) seller's willingness and ability (пустити в продаж) available quantity of product.

In accordance with (закону пропозиції) the price and (величина пропозиції) are directly proportional, (за умови, що усі нецінові фактори залишаються незмінними). In most markets (збільшення ціни товару) will increase the quantity of a product that (продавці готові поставити). This (співвідношення між ціною і величиною пропозиції) can be represented as (шкала пропозиції) or a graph relating the price and quantity supplied. In a graph the supply curve (полого підіймається зліва направо).

The higher price (надає виробникам стимул) to supply more, but rising opportunity costs (встановлює межу кількості) they will supply (за будь-якою даною ціною). A change in a price refers to (зміни поведінки постачальників) caused by a product’s price, (інакше кажучи), (зміна в ціні відображається) by changes in the quantity supplied. In this case, the relationship between price and quantity (залишається незмінним), but there will be a new (поєднання ціни та кількості).

A change in supply relates to a change in behaviour of sellers (що є наслідком) a change in factors (інших ніж ціна товару). When one of (нецінових визначників пропозиції) changes, the supply curve (переміщується або направо або наліво). These non-price determinants of supply are costs of (витрати експлуатації підприємства), technology and productivity, (очікування виробників) about future prices, (можливості отримання прибутку) and prices of (споріднених товарів та послуг).

(Давайте подивимося на) the relationship of prices and quantity supplied of related goods or services. Changes in the prices of complements and substitutes (мають протилежний вплив на пропозицію) of a product. When (ціна товару супутника) goes up, supply of (іншого товару-супутника зростає). When (ціна товару замінника) rises, supply of (іншого товару-замінника зменшується ).

Notice that (відповідь кривої пропозиції на) a change in the price of a complement or substitute in supply (протилежна відповіді кривої попиту на) a change in the price of a complement or substitute in demand. As the price of (товару-супутника у пропозиції) goes up, supply increases. As the price of a complement rises, (попит зменшуються). When the price of a substitute goes down, (пропозиція іншого товару замінника) increases but (попит на нього) decreases.

Exercise 11. Pair the halves of the sentences and write the completed sentences. Translate them into Ukrainian.

1. Supply represents	a. more at a higher price.
2. According to the law of supply the higher the price is,	b. that results from a one percent change in the price of the good.
3. The supply curve shows how sellers alter their plans	c. the supply also increases shifting a supply curve to the right.
4. Buyers will be supplied with less amounts of goods at a lower price and	d. the more goods will be put on the market.
5. Quantity supplied refers to the quantity	e. in response to a change in the price, other things being equal.
6. A change in supply is a change in the quantity of a product that suppliers plan to sell	f. at each quantity there will be a new price.
7. Supply decreases or increases depend on	g. how much the market can offer for sale.
8. A change in supply is represented by a shift of the supply curve	h. that producers are willing and able to sell at a particular price.
9. A change in the quantity supplied is represented by a movement along a supply curve	i. in response to a change in one of the non-price determinants, the good's price being constant.
10. At each price there will be a new quantity and	j. the cost of production.
11. As the number of sellers in a particular market increases,	k. in response to a change in the price of that good, holding non-price determinants unchanged.
12. The price elasticity of supply is the percentage change in the quantity supplied of a good	l. that results from a change in a condition other than a product’s price.

Completed sentences

Translation

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_______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Exercise 12. Match each term in column A with its definition in column B.

A	B
1. Elastic supply	a. A measure of the responsiveness of a commodity’s quantity supplied to changes in that commodity’s price
2. Elasticity	b. A table recording the number of units of a commodity supplied at various possible prices.
3. Inelastic supply	c. The number of items that sellers will put on the market at each and every price at a particular time and place.
4. Law of demand	d. A graphic representation of the supply schedule and the law of supply showing the relationship between each possible price of the good and the quantity that would be supplied for sale at that price.
5. Law of supply	e. A term used when the percentage change in a product's price causes a smaller percentage change in quantity supplied.
6. Price elasticity of supply	f. It refers to how supply and demand change in response to various influences.
7. Quantity supplied	g. A term used when the percentage change in a product's price causes a larger percentage change in quantity supplied.
8. Supply	h. The economic law under which demand represents a direct relationship to price. If all other factors remain unchanged, an increase in demand leads to an increased price, while a decrease in demand leads to a decreased price.
9. Supply curve	i. The economic law under which supply reflects an inverse relationship to price. If all other factors are equal, an increase in supply causes a decreased price, while a decrease in supply causes an increased price.
10. Supply schedule	j. The amount suppliers are willing and able to offer for sale at a certain price during a given period of time, all non-price factors being constant.

Exercise 13. Translate into English using the active vocabulary.

1. Пропозиція – це кількість продукції, яка є в наявності для задоволення попиту.	__________________________________________________________________________________________________________________________________________
2. Закон пропозиції стверджує, що чим нижча ціна, тим менша величина пропозиції і, чим вища ціна, тим більша величина пропозиції.	________________________________________________________________________________________________________________________________________________________________________________________
3. В економіці взаємовідношення між пропозицією та ціною виражається законом пропозиції.	__________________________________________________________________________________________________________________________________________
4. Крива пропозиції показує прямо пропорційну залежність між ціною та величиною пропозиції, за умови, що усі нецінові фактори є сталими.	________________________________________________________________________________________________________________________________________________________________________________________
5. Величина пропозиції – це кількість одиниць товару, що продавці готові запропонувати на продаж за певною ціною та у визначений час.	________________________________________________________________________________________________________________________________________________________________________________________
6. Крива пропозиції показує, що підприємці вироблятимуть більше товарів та послуг за відносно високими цінами, а за нижчими цінами буде менше вироблено і поставлено.	______________________________________________________________________________________________________________________________________________________________________________________________________________________________________
7. Крива пропозиції переміщується наліво або направо, коли змінюється величина пропозиції.	__________________________________________________________________________________________________________________________________________
8. Зниження витрат на виробництво збільшує пропозицію.	____________________________________________________________________________________________
9. Оскільки ціна виробу зростає, постачальники будуть схильні значно збільшити свої надходження, постачаючи товару більше ніж до того.	________________________________________________________________________________________________________________________________________________________________________________________
10. Можливості отримання прибутку впливають на рішення виробників щодо пропозиції.	__________________________________________________________________________________________________________________________________________
11. Зміни в прибутках споживачів, смаках, технологіях виробництва, виробничих витратах та зміни в кількості продавців на ринку та можливостях отримання прибутку спричиняють переміщення як кривої попиту, так і кривої пропозиції.	__________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
12. Запровадження удосконалених технологій виробництва та знижені витрати виробництва дають виробникам можливість виробляти більше продукції.	________________________________________________________________________________________________________________________________________________________________________________________
13. Цінова еластичність пропозиції відноситься до того, як величина пропозиції певного товару реагує на зміну ціни цього товару.	________________________________________________________________________________________________________________________________________________________________________________________
14. Еластичність товару може змі-нюватися відповідно до кількості товарів замінників та споріднених товарів.	__________________________________________________________________________________________________________________________________________