²ʲв
:
³
ʳ
'
˳
˳
ϳ
'
㳿
Գ
Գ
Գ
Գ


PUBLIC GOODS, INFORMATION AND UNCERTAINTY

...

I. Read and memorize the following words, word-combinations and word-groups:

public goods

e.g. Goods are called public goods, not because they are provided by the government, but because they differ from the usual goods and services that we privately enjoy.

nonexclusive consumption

e.g. Consumption of a public good is nonexclusive.

(positive) externalities () , a뿿

e.g. The production of public goods is accompanied by positive externalities.

noncompetitive consumption

e.g. Consumption of a public good by one individual is noncompetitive with consumption by another individual.

free riding ,

e.g. Free riding occurs when a person consumes a valuable good or service without having to pay.

searching for information

e.g. Searching for information is a very important way for individuals to gain the information necessary for individual economic choice.

reputation

e.g. Company has a good reputation at the international market.

brand name

e.g. Reputation becomes associated with a label or brand name.

patent

e.g. For technological innovations we have patents.

copyright

e.g. For other kinds of ideas in printed or recorded form we have copyrights.

registered trademark

e.g. We protect the information about quality of goods associated with brand names by allowing for legally registered trademarks.

 

II. Give English equivalents of the following:

 

III. Fill in the blanks with appropriate words:

1. ... is any good or service whose searching for infor-
consumption by one person is not mation
affected by the consumption of the patents

same good or service by someone free riding
else. a public good

... occurs when a person consumes reputation a valuable good or service without uncertainty having to pay. trademarks

... is a very, important way for indivi- copyrights duals to gain the information necessary for individual economic choice.

... is important because it lowers search costs by allowing information gathered in the past to be used in the future.

For technological innovations we have ... and for other kinds of ideas in printed or recorded form we have ....

... is not merely a matter of costly search however.

We even protect the information about quality of goods associated with brand names by allowing for legally registered ....

 

IV. Read and translate the text:

Goods are called public goods, not because they are provided by the government, but because they differ from the usual goods and services that we privately enjoy. Public goods pose a serious problem for a market economy: markets are organized on the basis of individual decision-making, but in a sense, public goods require collective decisions.

A public good is any good or service whose consumption by one person is not affected by the consumption of the same good or service by someone else.

Public goods have three characteristics that create problems for markets. First, consumption of a public good by one individual is not competitive with consumption by another individual. Second, consumption is nonexclusive. Third, the production of public goods is accompanied by positive externalities.

Consumption of a public good by a single individual does not affect the ability of others to consume the same public good. Hence a public good can be jointly consumed by two, three, or many thousands of people, consumption of a public good is noncompetitive and there is no rationing problem.

It is generally not possible to keep those who do not pay for a public good from consuming it. Consumption of a public good is nonexclusive.

Finally, if it is not possible to exclude others from consuming a public good, the purchase or provision of a public good by one person creates a positive externality since others benefit from the purchase or provision without having to pay.

These three aspects of public goods create a special problem that makes it difficult for markets to produce them.

The problem is free riding. Free riding occurs when a person consumes a valuable good or service without having to pay. Because the consumption of public goods is nonex-haustive and noncompetitive, each of us has an incentive to free ride, that is, consume goods and services that others have purchased.

Information is enormously important in making decisions in a market economy.

Since this information is valuable, we might expect that there would be a market for it, a place where we could purchase information about automobiles, stereos, canned and frozen goods, and other commodities of, where a firm could purchase information about the quality of potential employees. However, these markets are very difficult to create because of the public-good nature of the information.

Searching for information is a very important way for individuals to gain the information necessary for individual economic choice; searching produces information, that cannot in general be purchased in some market.

Reputation is important because it lowers search costs by allowing information gathered in the past to be used in the future. Frequently, reputation becomes associated with a label or brand name.

Use of an economically valuable idea by one person does not lessen the value when the idea is used by another person.

One response to these problems is to create property rights in ideas, particularly when the ideas are embodied in piece of equipment or are written down. For technological innovations we have patents and for other kinds of ideas in printed or recorded form we have copyrights. We even protect the information about quality of goods associated with brand names by allowing for legally registered trademarks (pp. 389412).

 

V. Answer the following questions:

What is the difference between public goods and private goods?

What three characteristics do public goods have?

How do we call a phenomenon, when a person consumes a valuable good or service without having to pay?

Why is information a public good?

Why is reputation important?

How does the state attempt to stimulate technological or recorded innovations?

 

VI. Define the terms:

registered trademark public goods

free riding patent

positive externalities information

reputation copyright

 

VII. Translate into English:

1. . 2. , . 3. . 4. . 5. . 6. , . 7. . 8. , , , .

 

VIII. Read and dramatize the following dialogue:

M.: Why if it isn't Bob! Never expected to meet you at this shop. This is a small world!

B,: Hi, Mike! I've got to do some shopping.

M.: So you are to buy some goods for yourself. And do you know that there are things in this world that you can't consume alone.

B.: Really. I've never heard about this.

M.: Yes, you have, but never realized it. I'll try to explain this to you in some words.

B.: That's rather interesting.

M.: So, some goods can be consumed by one person and still be available for consumption by others. For example, you can enjoy the light, colour, noise and excitement associated with fireworks without affecting the ability of your neighbour to also enjoy the fireworks. Or, you can capture the signal from a television station and use it without affecting anyone else's ability to capture and use the same signal.

B.: And can we take as an example of such a case a ship at sea. It can use the services of a lighthouse that warns of danger without affecting the use of the lighthouse service by other ships in the area.

M.: And police services make a city safer for all of its citizens I consume safety, but this does not affect your ability to consume safety. National defense provides security for one citizen at the same time as it provides the same service for another citizen.

.: see. Each of these goods or services is different from an apple, a loaf of bread, a seat at a rock concert, or the medical services provided by a doctor.

M.: Yes, you are quite right. If you consume an apple, no one else can consume the same apple. It's gone. Similarly with a loaf of bread your consumption precludes someone else's consumption. When you occupy a seat at a rock concert, no one else can occupy the same seat. If you spend one hour with your doctor, the doctor cannot provide the same hour's service to another patient.

B.: Oh! I've never thought about this. And what do economists

call such goods.

M.: They call them public goods, as they differ from the usual

goods and services that we privately enjoy.

B.: Thank you for the information. That was really new to me.

M.: If you want to know more about public goods you may

read a book on economics.

B.: Thank you. Bye.

M.: Bye.

 

IX. Make up your own dialogue using the following expressions:

consumption of public goods to obtain benefits

and services registered trademark

use of an economically valuable idea technological innovations

to create property rights in ideas to gain the information

to protect the information brand name

to have a good reputation individual economic choice searching for information

 

X. Answer the following questions as in the models:

M d e I s : a) Suppose you want to lower search costs. What would you do? I should allow information gathered in the past to be used in the future. b) Suppose you wanted to lower search costs. What would you have done? I should have allowed information gathered in the past be used in the future.

1. Suppose you want to stimulate innovation. Suppose you wanted to stimulate innovation. 2. Suppose you want to create property rights in ideas. Suppose you wanted to create property rights in ideas. 3. Suppose you want to gain the information necessary for individual economic choice. Suppose you wanted to gain the information necessary for individual economic choice. 4. Suppose you want to get reputation. Suppose you wanted to get reputation. 5. Suppose you want to have copyrights. Suppose you wanted to have copyrights.

 

XI. Change the following sentences using the Present Subjunctive II and the Conditional Mood:

Model: If he wants to protect the information about quality of goods, he will apply for a patent. If he wanted to protect the information about quality of goods, he would apply for a patent. 1. If he has the necessary information he will minimize search time. 2. If the company uses an economically valuable idea it will not lessen its value for another company. 3. If a firm creates property rights in ideas it will get a patent. 4. If a company has a reputation it will lower search costs. 5. If the state attempts to stimulate innovation it will use its police powers to stop use of the idea by those who do not compensate the inventor or innovator.

 

XII. Translate into English using the Conditional Mood:

1. , . 2. Գ , . 3. , . 4. , . 5. , .

 

XIII. Communicative situations:

1. A movie theatre shows a film to a large number of people at the same time.

Is this a public good?

2. Mail-order catalogues often offer clothing and other goods at lower prices than local stores.

Why doesn't everyone purchase these goods by mail?

 

Lesson 22

MARKETS

I. Read and memorize the following words, word-combinations and word-qroups:

market

e.g. We went to the market to buy food for the family.

tangible ;

e.g. A good is something tangible that is produced and consumed.

to satisfy desires

e.g. Markets exist to satisfy individual desires.

intangible ; ,

e.g. Some things are intangible but are also important in satisfying individual interests.

goods

e.g. Product markets are divided into two classes: goods and services.

service

e.g. A service is something intangible that is produced and consumed, also frequently having

been purchased in a market.

to adjust

e.g. When you have someone adjust a carburettor you are purchasing a service.

demander

e.g. Some people come to a market because they want to buy. They are called demanders.

supplier

e.g. Some people come to a market because they want to sell. They are called suppliers.

market allocation

e.g. The interaction of demanders and suppliers determines a market price and a market allocation of a particular commodity.

to affect the market

e.g. This interaction creates a set of incentives for subsequent decisions by both suppliers and demanders that may affect many markets.

excess supply

e.g. Excess supply occurs when, at a particular market price, the quantity that suppliers want to provide to the market exceeds the quantity that demanders want to purchase.

to decline ,

e.g. Excess supply will be eliminated if the relative price is free to decline.

equilibrium

e.g. The importance of equilibrium is that the equilibrium relative price is the only price at which the interests of de-manders coincide with the interests of suppliers.

to eliminate ,

e.g. Excess demand will be eliminated if the relative price is free to increase.

 

II. Give English equivalents of the following:

-

() /

 

III. Fill in the blanks with appropriate words:

Frequently product markets ... two a set of incentives classes; goods and services. excess demand

When you have someone adjust a are divided into carburettor, however, you are .... purchasing a service

... determines a market price and a increases

market allocation of a particular the importance of equicommodity. librium

4. This interaction also creates ... for the interaction of desubsequent decisions by both supp- manders and suppliers liers and demanders that may affect excess supply

many markets. decreases

... occurs when, at a particular market price, the quantity that suppliers want to provide to the market exceeds the quantity that demanders want to purchase.

... occurs when, at a particular market price, the quantity that suppliers want to provide to the market is less than the quantity that demanders want to purchase.

When there is excess demand, the relative price ... and when there is excess supply the relative price ....

... is that the equilibrium relative price is the only price at which the interests of demanders happen to coincide precisely with the interests of the suppliers.

 

IV. Read and translate the text:

A market is a set of transactions in which a particular kind of commodity is exchanged, and in which the transactions for this commodity among different individuals and firms are

related.

There are markets for hundreds of thousands of things. Some of these things are tangible and satisfy individual desires, while others are intangible but also important in satisfying individual interests. These things are frequently referred to as products. Frequently, product markets are divided into two classes: goods and services. For example, a hamburger is a good, while a doctor's examination is a service. When you buy an automobile, you are purchasing a good. When you have someone adjust a carburettor, however, you are purchasing a service.

A good is something tangible that is produced, and consumed, often having been purchased in a market. A service is something intangible that is produced and consumed, also frequently having been purchased in a market.

Resources are things used to produce goods, services and capital. Some people come to a market because they want to buy (demanders), others come because they want to sell (suppliers). The interaction of demanders and suppliers determines a market price and a market allocation of a particular commodity. This interaction also creates a set of incentives for subsequent decisions by both suppliers and demanders that may affect many markets. To understand these incentives, as well as how market prices and allocations are determined, we need to understand how suppliers and demanders respond to different relative price and the quantity of a particular commodity that individuals or firms (suppliers) would be willing to provide to the market.

Demand is all combinations of relative price and the quantity of a particular commodity that individuals or firms (demanders) would be willing to purchase in a market.

A market is created when those who willingly supply a good, service, or resource exchange with those who desire to use, control, or consume a good, service, or resource.

Markets reallocate commodities from suppliers to demanders. What if suppliers want to provide more than demanders want to purchase? Or, what if demanders want more than suppliers are willing to provide?

Excess supply occurs when, at a particular market price, the quantity that suppliers want to provide to the market exceeds the quantity that demanders want to purchase.

Excess demand occurs when, at a particular market price, the quantity that suppliers want to provide to the market is less than the quantity that demanders want to purchase.

In an open or free market, the relative price for a commodity will generally decrease when there is excess supply; the relative price will generally increase when there is excess demand.

Excess demand will be eliminated if the relative price is free to increase.

Markets adjust in predictable ways if, when there is excess demand, the relative price increases and if, when there is excess supply, the relative price decreases. These changes in relative prices tend to eliminate the excess supply or excess demand.

A market is equilibrium when the quantity that suppliers are willing to provide to the market at a specific market price is exactly equal to the quantity that demanders desire to purchase in the market at the same market price.

The importance of equilibrium is that the equilibrium relative price is the only price at which the interests of demanders happen to coincide precisely with the interests of the suppliers. At any other relative price, the interests of suppliers and demanders do not coincide (pp. 106125)*.

 

V. Answer the following questions:

What is a market?

What is a good?

What is a service?

Whom do we call demanders and suppliers?

What is supply?

What is demand?

What is excess supply?

What is excess demand?

When will excess demand and excess supply be eliminated?

What is an equilibrium of a market?

Why is market equilibrium important?

 

VI. Define the terms:

a good a service

a market a demander

a supplier market

allocation excess supply

excess demand equilibrium

a transaction resources

 

VII. Translate into English:

1. . 2. , , , . 3. , , . 4. , . 5. . 6. ; . 7.  , . 8. , , , , . 9. .

 

VIII. Read and dramatize the following dialogue:

A.: I say, Fred, you promised to tell me everything about

markets.

S.; Yes, I do remember I promised to tell you. A.: I am all ears.

B.: To begin with markets are as old as recorded civilization. A.: If I've got you right, they existed in earlier times. 8.: That's right. In earlier times, they were primarily a physical

location where people would gather periodically to

exchange goods and services. A.: So, going to market was an important economic and social

activity. B.: Indeed, it was so important that permanent market locations

frequently developed into the towns and cities that now

dot much of the landscape.

A.: Sure. And today we think less about markets as specific physical locations where exchanges occur than we do as institutional arrangements that tie exchanges together in some way.

.: think that any particular transaction occurs in a specific place, of course, but tens of thousands of such transactions scattered across a community or even a nation may constitute a market for a particular thing.

A.: Yes. And if there is a market, a person can expect that the nature of the transaction will be similar in different locations.

B.: What do you mean by this?

.:For example, we speak of the housing market in a city or the rental market in a city, even though there is no central location where houses are bought and sold or where apartments are offered for rent and rented. While there may be local peculiarities, buying a home in one part of a city is quite similar to buying a home in another part of a city.

6.; In this sense there is a market for housing in a city, or even across an economy. And, similarly, we may speak of the market for cereal, or soft drinks or shirts or jeans or computer software, even though cereal is sold in thousands of different locations throughout an economy.

A.: Thus, a market need not have a single physical location as long as transactions for a specific good or service or resource in one place are related in some way to the transactions for the good or service or resource in some other place.

B.: That's great. And in an important sense, however, a market is an idea. That is, a market is a way of thinking about the consequences of the many transactions that occur for specific goods, services, or resources.

 

IX. Make up your own dialogue using the following expressions:

exchange of goods and services transactions for commodity

to satisfy individual interests to purchase in a market

to determine a market price a market allocation

to provide to the market to consume a good service or resource

 

X. Paraphrase the sentences as in the model:

Model: I am afraid that this firm will provide less quantity of the commodity to the market. I am afraid lest this firm provide less quantity of the commodity to the market.

1. I worry, because the relative price for a commodity will decrease. 2. The retailer is afraid that his goods will satisfy individual desires of only one group of consumers. 3. The producers are afraid that the retailers will provide inconvenient market location. 4. The producers are afraid that their market research is of no value to predict what the people will want. 5. The producers are afraid that marketing operations will be very expensive.

 

XI. Paraphrase the sentences as in the model:

Model: The manager demanded: The wholesalers must simplify the process of distribution. The manager demanded that the wholesalers simplify the process of distribution.

1. The wholesaler demanded: We must determine a market price of a particular commodity. 2. The manager ordered: The interaction of demanders and suppliers must determine a market allocation of a particular commodity. 3. The manager demanded: The wholesalers must provide new channels of distribution which help to bring goods to the market. 4. The middleman suggested: Suppliers and demanders must respond to different relative prices to determine market allocations and prices. 5. The producer suggested: Markets must adjust in predictable ways. 6. The producer suggests: Changes in relative price must tend to eliminate the excess supply or excess demand.

 

XII. Translate into English using Subjunctive I:

1. , . 2. , 䳺 ' . 3. , . 4. , . 5. , , . 6. , .

 

III. Communicative situations:

1. Why does a market adjust toward an equilibrium?

If markets did not adjust toward an equilibrium, what behavior would you observe?

Do you suppose that a market ever reaches equilibrium?
If not, is the concept of equilibrium useful?

If a firm found that its market demand was inelastic and cut
its production, would its revenues from supplying goods
to the market increase or decrease?

 

Lesson 23

...

© 2013 wikipage.com.ua - wikipage.com.ua |