English for the students of economic faculties

Normative economics is very different. Normative economics offers prescriptions or recommendations based on personal value judgements.

In positive economics, we hope to act as detached scientists. Whatever our political persuasion, whatever our view about what we would like to happen or what we would regard as "a good thing", in the first instance we have to be concerned with how the world actually works. At this stage, there is no scope for personal value judgements. We are concerned with propositions of the form: if this is changed then that will happen. In this regard, positive economics is similar to the natural sciences such as physics, geology or astronomy.

Here are some examples of positive economics in action. Economists of widely differing political persuasions would agree that, when the government imposes a tax on a good, the price of that good will rise. The normative question of whether this price rise is desirable is entirely distinct. Similarly, there would be substantial agreement that the following proposition of positive economics is correct: favourable weather conditions will increase wheat output, reduce the price of wheat, and increase the consumption of wheat. Many propositions in positive economics would command widespread agreement among professional economists.

Of course, as in any other science, there are unresolved questions where disagreement remains. These disagreements are at the frontiers of economics. Research in progress will resolve some of the issues but new issues will arise and provide scope for further research.

Although competent and comprehensive research can in principle resolve many of the outstanding issues in positive economics, no corresponding claim can be made about the resolution of disagreement in normative economics.

Normative economics is based on subjective value judgements, not on the search for any objective truth. The following statement combines positive and normative economics: "The elderly have very high medical expenses compared with the rest of the population, and the government should subsidize health bills of the aged." The first part of the proposition - the claim that the aged have relatively high medical bills - is a statement in positive economics, it is a statement about how the world works, and we can imagine a research programme that could determine whether or not it is correct. Broadly speaking, this assertion happens to be correct.

The second part of the proposition - the recommendation about what the government should do - could never be "proved" to be correct or false by any scientific research investigation. It is simply a subjective value judgement based on the feelings of the person making the statement. Many people might happen to share this subjective judgement, for example those people who believe that all citizens alive today should be able to purchase roughly equal amounts of luxury and recreational goods after paying for the necessities of life. But other people might reasonably disagree. You might believe that it is more important to devote society's scarce resources to improving the environment.

There is no way that economics can be used to show that one of these normative judgements is correct and the other is wrong. It all depends on the preferences or priorities of the individual or the society that has to make this choice. But that does not mean that economics can throw no light on normative issues. We can use positive economics to spell out the detailed implications of making the choice one way or the other. For example, we might be able to show that failure to subsidize the medical bills of the elderly leads middle-aged people to seek a lot of unnecessary medical check-ups in an attempt to detect diseases before their treatment becomes expensive. Society might have to devote a great deal of resources to providing check-up facilities, leaving less resources available than had been supposed to devote to improving the environment. Positive economics can be used to clarify the menu of options from which society must eventually make its normative choice.

VOCABULARY NOTES

to distinguish two branches of the subject - разграничивать два аспекта предмета

positive economics deals with objective explanations - позитивная экономическая теория предлагает объективные объяснения

the working of the economy - действие экономики

exchange of goods - обмен товаров

the purpose of the investigation is twofold - цель исследования двояка

to satisfy curiosity - удовлетворять любопытство

circumstances - обстоятельства

prescriptions or recommendations - предписания или рекомендации

based on - основанный на

personal value judgements - субъективные оценки ценностей

detached scientists - беспристрастные, независимые ученые

whatever our political persuasion - независимо от политических убеждений

whoever - кто бы ни

whenever - когда бы ни

wherever - где бы ни

in the first instance - прежде всего

actually - в действительности

at this stage - на этом этапе

there is no scope for - нет места

on a large scope - широкомасштабно

to be concerned with - интересоваться чем-либо, заботиться о чем-либо

propositions of the form - формальные утверждения, суждения

in this regard - в этом отношении

to be similar to - быть похожим на

natural sciences - естественные науки

liberal arts, humanities - гуманитарные науки

in action - в действии

to be desirable - быть желательным

to be entirely distinct - быть совершенно несхожим

substantial agreement - принципиальное единомыслие

favourable weather conditions - благоприятные погодные условия

wheat output - производство пшеницы

to command widespread agreement - привести к общей согласованности во взглядах

unresolved questions - неразрешенные вопросы

where disagreement remains - где разногласия продолжают существовать

research in progress - исследования, проводимые в настоящее время

new issues will arise (arose, arisen) - возникнут новые проблемы

to provide scope for further research - создать фундамент, базу, основу для дальнейших исследований

competent and comprehensive research - квалифицированная и всеобъемлющая исследовательская работа

outstanding issues - спорные, остающиеся неразрешенными вопросы

corresponding claim - аналогичное заявление

to claim - притязать на что-либо

search for objective truth - поиск объективной истины

in search of smth - в поисках чего-либо

the elderly (syn. aged) - пожилые люди

medical expenses - расходы на здравоохранение

to subsidize health bills - субсидировать расходы на здравоохранение

statement (syn. assertion) - заявление

to determine whether or not it's correct- определить, правильно ли это

broadly speaking - в широком значении, в общем понимании

assertion (syn. statement) - утверждение, заявление

to assert - утверждать, заявлять

to share one's judgement (view) - разделять чьи-либо суждения, взгляды

roughly equal amounts - приблизительно равные количества

luxury and recreational goods - предметы роскоши и товары для отдыха

to disagree reasonably - приводить разумные возражения

to improve the environment - охранять окружающую среду

the preferences or priorities of the individual or the society - предпочтения или приоритеты отдельных лиц или общества в целом

to make a choice - делать выбор

to throw light on - пролить свет на

to spell out - точно, обстоятельно объяснить

the detailed implications - скрытый смысл, значение

failure - провал, неудача

to fail smth - терпеть неудачу в чем-либо

to fail an exam - провалиться на экзамене

to seek (sought, sought) - искать что-либо

medical check-ups - медицинские осмотры

an attempt - попытка

to attempt (syn. to try) - пытаться

to detect smth - выявить, обнаружить

check-up facilities - оборудование для медосмотров

to suppose to do smth - предполагать сделать что-либо

to clarify smth (syn. to clear up) - пояснить что-либо

the menu of options - набор вариантов

Assignments

I. Suggest the Russian equivalents

twofold; to respond to changes in circumstances; to command widespread agreement among smb; a corresponding claim; disagreement in positive economics; to be proved correct or false; to devote a great deal of resources to providing smth; to clarify the menu of options

II. Replace the parts in italics by synonyms

the price of the goods will rise; favourable conditions will increase output; the new issues will arise; medical check-ups; to devote resources to smth; when the government places the tax on the goods; there would be considerable agreement

III. Find in the text the opposites to the following

subjective; lack of interest; treat as the same; involved; not to notice or see;

success; confuse; general; things with no claim to consideration

IV. Fill in the gaps with the words and expressions from the text

1. In studying economics it is important to __ two branches of the subject.

2. Positive economics deals with __ or scientific explanations of __ the economy. ,

3. Normative economics offers prescriptions based on personal __.

4. Whatever our __ in the first instance we have to be concerned with how the world __ works.

5. __, positive economics is similar to the natural sciences.

6. There would be __ that the following __ of positive economics is correct: favourable weather conditions will increase __, reduce the price of wheat, and increase the consumption of wheat.

7. There are __ questions where disagreement remains.

8. New __ will arise and provide __ for further research.

9. __ and __ research can in principle resolve many of the outstanding issues in positive economics.

10. The government should __ health bills of the aged.

11. Many people might happen __ this subjective judgement.

12. Some people believe that all citizens alive today should be able to purchase roughly equal amounts of luxury goods after paying for __ of life, but other people might __.

13. It all depends on __ of the individual or the society that has to make this choice.

14. We can use positive economics __ the detailed implications of making the choice one way or the other.

15. Society might have to devote a great deal of resources to providing _.

16. Positive economics can be used __ the menu of options from which society must eventually make its normative choice.

V. Find in the text English equivalents for the following

каковы бы ни были политические убеждения; в этом отношении; облагать товары налогом; согласованность во взглядах, единогласие в принципах;

неразрешимые вопросы; исследования, проводимые в настоящее время;

квалифицированная и всеобъемлющая исследовательская работа; разделять взгляды; в широком значении, в общем понимании; приблизительно равные количества; привести разумные возражения; то, чему отдается предпочтение в обществе; пролить свет на...

VI. Explain in English

predicting; personal value judgement; proposition

VII. Answer the questions

1. What are two branches of economics?

2. What does the positive economics deal with?

3. What is the aim of normative economics?

4. What is the difference between positive and normative economics in regard to the role of research?

5. What are the global consequences of the government's failure to subsidize the medical bills of the elderly?

VIII. Translate using all the active possible

1. При изучении экономики необходимо различать (2 варианта) позитивную и нормативную экономические теории. Если в позитивной теории мы можем оставаться беспристрастными, независимо от наших политических убеждений, то нормативная теория основывается на личной системе ценностей. В этом отношении различие между двумя теориями очень наглядно.

2. Квалифицированная и всесторонняя исследовательская работа может в некоторой степени исправить положение (3 варианта) в области нерешенных вопросов, порождающих (2 варианта) разногласия среди экономистов. В широком понимании никакая рекомендация правительству не может оказаться правильной или ложной, поскольку она основана на субъективных оценках.

3. Позитивная теория может предложить ряд возможных альтернатив, из которых индивид или общество в целом выбирают наиболее приоритетные.

MICROECONOMICS AND MACROECONOMICS (ТЕОРИЯ МИКРОЭКОНОМИКИ И МАКРОЭКОНОМИКИ)

Many economists specialize in a particular branch of the subject. For example, there are labour economists, energy economists, monetary economists, and international economists. What distinguishes these economists is the segment of economic life in which they are interested. Labour economics deals with problems of the labour market as viewed by firms, workers, and society as a whole. Urban economics deals with city problems: land use, transport, congestion, and housing. However, we need not classify branches of economics according to the area of economic life in which we ask the standard questions what, how and for whom. We can also classify branches of economics according to the approach or methodology that is used. The very broad division of approaches into microeconomic and macroeconomic cuts across the large number of subject groupings cited above.

Microeconomic analysis offers a detailed treatment of individual decisions about particular commodities.

For example, we might study why individual households prefer cars to bicycles and how producers decide whether to produce cars or bicycles. We can then aggregate the behaviour of all households and all firms to discuss total car purchases and total car production. Within a market economy we can discuss the market for cars. Comparing this with the market for bicycles, we may be able to explain the relative output of these two goods. The sophisticated branch of microeconomics known as general equilibrium theory extends this approach to its logical conclusion. It studies simultaneously every market for every commodity. From this it is hoped that we can understand the complete pattern of consumption, production, and exchange in the whole economy at a point in time.

If you think this sounds very complicated you are correct. It is. For many purposes, the analysis becomes so complicated that we tend to lose track of the phenomena in which we were interested. The interesting task for economics, a task that retains an element of art in economic science, is to devise judicious simplifications, which keep the analysis manageable without distorting reality too much. It is here that microeconomists and macroeconomists proceed down different avenues.

Microeconomists tend to offer a detailed treatment of one aspect of economic behaviour, but ignore interactions with the rest of the economy in order to preserve the simplicity of the analysis. A microeconomic analysis of miners' wages would emphasize the characteristics of miners and the ability of mine owners to pay. It would largely neglect the chain of indirect effects to which a rise in miners' wages might give rise. For example, car workers might use the precedent of the miners' pay increase to secure higher wages in the car industry, thus being able to afford larger houses, which burned more coal in heating systems. When microeconomic analysis ignores such indirectly induced effects it is said to be partial analysis.

In some instances, indirect effects may not be too important and it will make sense for economists to devote their effort to very detailed analyses of particular industries or activities. In other circumstances, the indirect effects are too important to be swept under the carpet and an alternative simplification must be found.

Macroeconomics emphasizes the interactions in the economy as a whole. It deliberately simplifies the individual building blocks of the analysis in order to retain a manageable analysis of the complete interaction of the economy.

For example, macroeconomists typically do not worry about the breakdown of consumer goods into cars, bicycles, televisions, and calculators. They prefer to treat them all as a single bundle called "consumer goods" because they arc more interested in studying the interaction between households' purchases of consumer goods and firms' decisions about purchases of machinery and buildings.

VOCABULARY NOTES

a labour economist - специалист по экономике труда

an energy economist - специалист по экономике (электро) энергии

a monetary economist - специалист по монетарной экономике

an international economist - специалист по мировой экономике

congestion - перенаселенность

to cut across - не соответствовать

a detailed treatment - детальный, подробный анализ

an individual household - отдельное домашнее хозяйство

to aggregate, v - собирать в одно целое

aggregate, n - совокупность

in the aggregate - в совокупности

aggregate, adj - совокупный

the relative output - относительный объем производства

general equilibrium theory - теория общего равновесия

to study simultaneously - одновременно изучать

the complete pattern - полная структура, система, схема

to lose track of the phenomena - потерять след явлений

to devise judicious simplifications - выработать разумные упрощения

to keep the analysis manageable - позволять проводить анализ

to distort reality - искажать реальность

to preserve the simplicity of the analysis - сохранить простоту анализа

to neglect the chain of indirect effects - пренебрегать косвенным воздействием, совокупностью (цепочкой) косвенных результатов, эффектов

to secure higher wages - получить более высокую заработную плату

indirectly induced effects - воздействие, вызванное косвенными причинами

partial analysis - частичный (неполный) анализ

to sweep under the carpet - прятать, маскировать {доел. замести под ковер)

to simplify deliberately - намеренно упрощать

to retain a manageable analysis - сохранить возможность анализа (выполнимый, поддающийся выполнению анализ)

the breakdown of consumer goods - классификация (подразделение) товаров потребления

a single bundle - отдельная единица, величина (доел. набор)

Assignments

I. Suggest the Russian equivalents

cuts across the large number of subject groupings cited above; the sophisticated branch of microeconomics; the complete pattern of consumption, production, and exchange; to devise judicious simplifications; keep the analysis manageable; to retain a manageable analysis; indirectly induced effects

II. Replace the parts in italics by synonyms

pulling out of shape, pay not enough attention; pay no attention; think out, plan;

keep safe, brought about, showing good sense; keep; make less complicated; as a rule, characteristically, be sensible

III. Fill in the gaps with the words and expressions from the text

1. What distinguishes different economists is __ in which they are interested.

2. Urban economics deals with city problems: .land use, transport, __, and housing.

3. We can also classify branches of economics according to__ that is used.

4. The very broad division of approaches into microeconomic and macroeconomic __ the large number of subject groupings.

5. To discuss total car purchases and total car production we can __ the behaviour of all households and all firms.

6. The sophisticated branch of microeconomics known as __ studies __ every market for every commodity.

7. The task for economics is to devise __ simplifications, which keep the analysis __ without __.

8. Microeconomists tend to offer __ of one aspect of economic behaviour but __ with the rest of the economy in order to __ of the analysis, largely __ the chain of __.

9. When microeconomic analysis ignores such indirectly induced effects it is said to be __.

10. Macroeconomics __ the individual building blocks of the analysis in order to ____ a manageable analysis of __ of the economy.

11. Macroeconomists prefer to treat cars, bicycles, televisions, and calculators as a single __ called "consumer goods".

IV. Check your grammar

Define each of the words given below, using the pronouns who and which:

an energy economist is...who...

microeconomics is...which...

international economics is...

a monetary economist is...

consumer goods arc...

macroeconomics is...

a worker is...

a miner is...

coal is...

Complete the following sentences using adjectives or/and adverbs:

e.g.: a relatively difficult branch (adverb and adjective) an expensive cassette player (adjective) to buy something cheaply (adverb)

1. This is a __ book to read. (comparative, easy)

2. __ car production is not always __to estimate __. (total, easy, general)

3. Even some __ tools of __ analysis are not __ known, (common, economic, general)

4. Some microeconomic analyses offer __detailed treatments of __ decisions, (extreme, individual)

5. If we compare the market for cars and bicycles __, we may be able to offer a __ explanation for their __ prices, (careful, good, relative)

6. __ she managed to pass her __ exams __. (fortunate, final, easy)

7. My tutor emphasized the __ importance of putting ideas in a __ order. (great, logical)

8. __analysis ignores __induced effects, (partial, indirect)

9. The __economist keeps his analysis __ without __ distorting reality. (sensible, manageable, undue)

10. She's an __ novelist -- something __ and __ happens_in her stories. (excellent, unusual, exciting, constant)

V. Find in me text English equivalents for the following

перенаселенность; собирать в одно целое; теория общего равновесия;

искажать реальность; подробный анализ (рассмотрение); сохранить простоту анализа; косвенное (непрямое) воздействие (эффект); взаимодействие внутри экономики

VI. Explain in English

consumption; exchange; partial analysis; simplification; indirect effect

VII. Answer the questions

1. What distinguishes an energy economist from an urban economist?

2. Are the same questions asked in each area of economic life?

3. What is needed before total car purchases and production can be discussed?

4. What does the general equilibrium theory examine?

5. What can be understood from such a study?

6. What happens when an analysis becomes too complicated?

7. What can keep an analysis manageable?

8. What do most microeconomists leave out of their analysis?

9. What does partial analysis ignore?

10. Why wouldn't most macroeconomists make a breakdown of consumer

goods?

VIII. Translate using all the active possible

1. Макроэкономика - это один из основных разделов экономической теории, который изучает поведение экономики как единого целого. Она анализирует взаимодействие факторов, влияющих на рост национального производства, а также такие процессы, как безработица, инфляция, и т п. Объектом макроэкономики является именно взаимодействие этих величин внутри экономики, при этом сами эти величины рассматриваются упрощенно, абстрактно.

2. Микроэкономика - это один из основных разделов экономической теории, изучающий поведение отдельных экономических единиц, их взаимодействие на рынках, в результате которого формируются цены на производимые товары и услуга и т. д. Микроэкономика стремится к детальному рассмотрению поведения какой-либо экономической единицы, при этом не уделяя достаточного внимания косвенному воздействию этого поведения на другие экономические единицы и на экономику в целом.

РRIСЕ AND DEMAND (ЦЕНА И СПРОС)

The following text will introduce you to the topic of the effect of price and Income on demand quantities.

The Price Responsiveness of Demand

Tabl. 3 presents some hypothetical numbers for the relation between ticket price and quantity demanded, other things equal.

Tabl. 3. The Demand for Football Tickets

PRICE (?/ ticket)	Quantity of tickets demanded (thousands/game)
12,50 10,00 7,50 5,00 2,50 0	0 20 40 60 80 100

Fig. 2 plots the demand curve, which happens to be a straight line in this example.

Ticket price (?)

Quantity of tickets

Figure 2. The Demand for Football Tickets

For given prices of related goods and consumer incomes, higher ticket prices reduce the quantity of tickets demanded.

How should we measure the responsiveness of the quantity of tickets demanded to the price of tickets? One obvious measure is the slope of the demand curve. The downward slope of the demand curve shows that quantity demanded increases as the price of a good falls. Each price cut of ? 1 leads to 8000 extra ticket sales per game.

Suppose, however, that we wish to compare the price responsive ness of football ticket sales with the price responsiveness of the quantity of care demanded: clearly, ? 1 is a trivial cut in the price of a car and will have a negligible effect on the quantity of cars demanded.

When commodities arc measured in different units it is often best to examine the percentage change, which is unit-free. This suggests that we think about the effect of a 1 per cent price cut on the quantity of care and football tickets demanded. Similarly, it is not the absolute number of cars or tickets we should examine but the percentage change in quantity demanded. Not only does this solve the problem of comparing things measured in different quantity units, it also takes account of the size of the market. Presumably an extra sale of 8000 tickets is more important when ticket sales arc 4000 than when they number 40000.

Thus we reach the definition of the price elasticity of demand, which economists use to measure responsiveness to price changes.

The price elasticity of demand is the percentage change in the quantity of a good demanded divided by the corresponding percentage change in its price.

Although we shall shortly introduce other demand elasticities - the cross price elasticity and the income elasticity -- the (own) price elasticity is perhaps the most frequently used of the three. Whenever economists speak of the demand elasticity they mean the price elasticity of demand as it has been defined above.

If a 1 per cent price increase reduces the quantity demanded by 2 per cent, the demand elasticity is - 2. Because the quantity falls 2 per cent, we express this as a change of -- 2 per cent, then divide by the price change of 1 per cent (a price rise) to obtain --2. If a price fall of 4 per cent increases the quantity demanded by 2 per cent, then the demand elasticity is -- 1/2, since the quantity change of 2 per cent is divided by the price change of - 4 per cent. Since demand curve slopes down, we arc either dividing a positive percentage change in quantity (a quantity rise) by a negative percentage change in price (a price fall) or dividing a negative percentage change in quantity (a quantity fall) by a positive percentage change in price (a price rise). The price elasticity of demand tells us about movements along a demand curve and the demand elasticity must be a negative number.

For further brevity, economists sometimes omit the minus sign. It is easier to say the demand elasticity is 2 than to say it is -2. Whenever the price elasticity of demand is expressed as a positive number, it should be understood (unless there is an explicit warning to the contrary) that a minus sign should be added. Otherwise, we should be implying that demand curves slope upwards, a rare but not unknown phenomenon.

VOCABULARY NOTES

to introduce smb to the topic of - познакомить кого-либо с темой the effects of smth on smth - воздействие чего-либо на что-либо

hypothetical numbers - вымышленные, гипотетические числа

the relation between - соотношение между

quantity demanded - требуемое количество

to plot the demand curve - вычерчивать кривую спроса

for given price - для данной (приведенной) цены

to measure the responsiveness of smth to smth - измерять способность, реагировать (реакция) на

obvious measure - очевидная, наглядная мера

the slope of the curve - покатость кривой

the downward slope - движение кривой вниз

ticket sales per game - продажа билетов на игру

trivial (syn. minor, slight) - незначительный

a negligible effect - мелкий, незначительный эффект

to examine smth - рассмотреть, проанализировать

the percentage change - процентное изменение

unit-free - независящий от характера единиц (<? которых измеряются товары)

this suggests (syn. to imply) - это предполагает

similarly - подобным образом

to take account of (syn. to take into account, consideration) - учитывать, принимать во внимание

presumably (syn. probably) - возможно, вероятно

extra sale - дополнительные продажи

to number - насчитывать

to reach the definition - подвести к определению

the price elasticity of demand - ценовая эластичность спроса

to divide by - разделить на

shortly - зд. вскоре

cross price elasticity - перекрестная эластичность цен

income elasticity - эластичность но доходу

the (own) price elasticity - собственно ценовая эластичность

the most frequently used - наиболее часто используемый

as it has been defined above - согласно определению, приведенному выше

to express smth - выражать что-либо

to obtain (syn. to get) - получить, e.g. to obtain a diploma

a positive percentage change - положительное (плюсовое) процентное изменение

a negative percentage change - отрицательное (минусовое) процентное изменение

movements along a demand curve - движения вдоль кривой спроса

for further brevity - для краткости

to omit the minus sign - опускать знак минуса

it's easier to say - легче сказать

unless there is an explicit warning to the contrary - если только не имеется точного указания на обратное

to add - добавить, сложить

adding, addition - сложение, дополнение

addendum - дополнение, приложение

to imply (syn. to suggest) - предполагать, подразумевать

a rare but not unknown phenomenon - редкое, но встречающееся явление

Assignments

I. Suggest the Russian equivalents

the effect of price and income on demand quantities; the downward slope of the demand curve; movements along a demand curve

II. Replace the parts in italics by synonyms

a minor cut; a slight effect; to consider the size of the market; probably; a clear warning

III. Fill in the gaps with the words and expressions from the text

1. How should we measure __ of the quantity of tickets demanded to the price of tickets?

2. Clearly, ? 1 is a __ cut in the price of a car and will have a negligible effect on the quantity of cars demanded.

3. It is not the absolute number of cars or tickets we should examine but __ in quantity demanded.

4. ___ of demand is the percentage change in the quantity of a good demanded divided by the corresponding percentage change in its price.

5. The price elasticity of demand tells us about movements along __ and the demand elasticity must be a negative number.

6. For further brevity, economists sometimes __ the minus sign.

IV. Check your grammar

Shorten the following sentences without changing their meaning, like this:

Nobody likes prices, which are constantly rising. Nobody likes constantly rising prices.

A demand curve, which slopes.

John is a person who works very hard.

We must develop a policy, which fixes prices better.

Interest rates, which rise will damp down demand.

An economy, which is rapidly expanding can get out of control.

Let's look at the information, which corresponds to this in tabular form. Shorten the following sentences without changing their meaning, like this:

The quantity, which we require is 5000 units. The required quantity is 5000 units.

A demand curve, which has been drawn inaccurately.

A price, which has been fixed.

We can see changes in the price of goods, which are related to each other.

The prices, which we have been given should be seen as hypothetical.

If we don't use a model, which has been simplified we shall get bogged down.

Ours is a company, which is managed well.

An economy, which is poorly run leads to problems in society.

That is a theory, which is now out of date.

On the evidence available, that is a conclusion, which is not justified.

V. Find in the text English equivalents for the following

кривая спроса; реакция на...; при прочих равных условиях; товар, предмет потребления; снижение цены на 1 процент; процентное изменение в количественном показателе спроса; эластичность спроса в зависимости от изменения цены; измерить гибкость реакции на...; положительное (плюсовое) процентное изменение; негативное (минусовое) процентное изменение

V. Explain in English

different units; percentage change; unit-free; absolute number

VII. Answer the questions

1. What does the downward slope of the demand curve show?

2. Give the definition of the price elasticity of demand. Explain it in your own words.

3. Name the three types of the demand elasticity as mentioned above.

4. Explain in your own words how to calculate demand elasticity.

5. Explain why economists sometimes omit the minus sign and how negative and positive numbers should be distinguished.

VIII. Translate using all the active possible

1. Построенная (начерченная) кривая спроса отображает воздействие цен и доходов на количественные показатели (величину) спроса. Нисходящая кривая показывает рост спроса по мере снижения цен.

2. Незначительное снижение цены какого-либо товара мало влияет на величину спроса на этот товар.

3. Понятия перекрестной ценовой эластичности, эластичности доходов и собственно эластичности спроса в зависимости от изменения цен помогают экономистам измерять гибкость реакции на изменения цен.

4. В случае нисходящей кривой спроса мы имеем дело либо с повышением количественного показателя спроса (положительное процентное изменение) при снижении цен (отрицательное процентное изменение), либо с обратной ситуацией (падение величины спроса при росте цен).

PRICE, INCOME AND DEMAND (ЦЕНА, ДОХОД И СПРОС)

In this chapter we're going to investigate the price elasticity of demand for football tickets. Let's start by looking at Table 4. It reproduces the demand data from Tabl. 3, that is to say, it reproduces it in columns one and two.

Tabl. 4. The Price Elasticity of Demand for Football Tickets

PRICE (?/ticket)	Quantity of tickets demanded (thousands/game)	Price elasticity of demand
12,50 10,00 7,50 5,00 2,50 0	0 20 40 60 80 100	-4 -1,5 -0,67 -0,25 0

We have to look at column one. As you can see, this shows price cuts of two pounds fifty. By considering the effects of price cuts of two pounds fifty we can calculate the price elasticity of demand at each price. This price is shown in column three. But how have we calculated this? Let's, as an example, take the price of ten pounds, which you can see in the table. There is a corresponding quantity of twenty thousand tickets demanded. If we consider a price cut to seven pounds fifty, there is a price change here of- 25%, from ten pounds to seven pounds fifty. Now look at the corresponding change in the quantity of tickets demanded, in the next column, column two. The change in the quantity of tickets demanded is a 100%, from 20,000 tickets to 40,000 tickets.

There is a 100% change in demand, and a 25% change in price. So we divide a 100 by - 25, which gives the answer - 4. So we say the demand elasticity at ten pounds is - 4. You calculate other elasticities in the same way, that is by dividing the percentage change in quantity by the corresponding percentage change in price.

Notice one thing here in the table. That is when we begin from the price of twelve pounds fifty the demand elasticity is minus -infinity. It's simply because the percentage change looks like this. Any positive number divided by zero yields plus infinity. When we then divide by the minus twenty per cent change in price, that's from twelve pounds fifty to ten pounds, we obtain or get, minus infinity as the demand elasticity at this price.

There's one more thing to be said at this stage. We say demand elasticity is high, when it is a large negative number. And we say demand elasticity is tow, when it is a small negative number, and when the quantity demanded is relatively insensitive to price. It follows from this that the words high and low refer to the magnitude of the elasticity ignoring the minus sign. The demand elasticity falls when it becomes a smaller negative number and quantity demanded becomes less sensitive to price.

VOCABULARY NOTES

to investigate - исследовать, рассматривать

to reproduce the data - представлять данные price cuts - сокращения цены

a corresponding quantity - соответствующее количество

a corresponding change in the quantity - соответствующее изменение количества

infinity - бесконечность

to yield - приносить, давать

magnitude - величина, размер

Assignments

I. Suggest the Russian equivalents

a price change of minus 25 per cent; high/low demand elasticity; to be insensitive to price; magnitude

II. Fill in the gaps with the words and expressions from the text

1. By considering the effects of price cuts of two pounds fifty we can calculate__ of demand at each price.

2. You calculate other elasticities by dividing __ in quantity by the corresponding percentage change in price.

3. When we divide by the minus twenty per cent change in price we obtain minus __ as the demand elasticity at this price.

4. Demand elasticity is __, when it is a large negative number.

5. Demand elasticity is __, when it is a small negative number.

6. __ falls when it becomes a smaller negative number and quantity demanded becomes less sensitive to price.

III. Find in the text English equivalents for the following

снижение цены на ... фунтов; соответствующее количество; разделить сотню на 25; встретить понятие; процентное изменение в количестве; процентное изменение в цене; минус бесконечность/плюс бесконечность

IV. Answer the questions

1. How is the demand elasticity calculated?

2. Why is the demand elasticity minus infinity in the example?

3. In what case can we speak of high/ low demand elasticity?

4. What does the insensitivity of the quantity demanded to the price mean?

5. When does the demand elasticity fall?

V. Translate into English using all the active possible

1. Безграничная эластичность - это такая эластичность спроса, при которой изменение в количестве спрашиваемых или предлагаемых товаров и услуг будет приводить к увеличению дохода. Такая эластичность характерна для условий совершенной конкуренции, когда отдельная фирма не имеет возможности оказывать влияние на рыночную цену и имеет кривую спроса на свой товар или услуги в виде горизонтальной прямой.

ELASTIC AND INELASTIC DEMAND (ЭЛАСТИЧНЫЙ И НЕЭЛАСТИЧНЫЙ СПРОС)

Although elasticity typically falls as we move down the demand curve, an important dividing line occurs at the demand elasticity of - 1.

Demand is elastic if the price elasticity is more negative than -1. Demand is inelastic if the price elasticity lies between -1 and 0.

In Tabl. 4 demand is elastic at all prices of ?7,50 and above and inelastic at all prices of ?5-00 and below. If the demand elasticity is exactly -1, we say that demand is unit-elastic.

Later in this section we'll see that a cut in prices raises revenue from football ticket sales if demand for football tickets is elastic but lowers revenue if demand is inelastic. Whether or not demand is elastic is the key piece of information required in setting the price of football tickets in this example.

Although the price elasticity of demand typically changes as we move along demand curves, economists frequently talk of goods with high or low demand elasticities. For example, they will say that the demand for oil is price-inelastic (price changes have only a small effect on quantity demanded) but the demand for foreign holidays is price-elastic (price changes have a large effect on quantity demanded). Such statements refer to parts of the demand curve corresponding to prices (adjusted for inflation) that are typically charged for these goods and services. They do not necessarily describe the demand elasticity at points on the demand curve corresponding to real prices, which have never been observed historically.

The Determinants of Price Elasticity. Основные факторы ценовой эластичности спроса

What determines whether the price elasticity of demand for a good is high (say, -5) or low (say, -0,5)? Ultimately, the answer must be sought in consumer tastes. If it is considered socially essential to own a television, higher television prices may have little effect on quantity demanded. If televisions are considered a frivolous luxury, the demand elasticity will be much higher. Psychologists and sociologists may be able to explain more fully than economists why tastes are as they are. Nevertheless, as economists, we can identify some considerations likely to affect consumer responses to changes in the price of a good. The most important consideration is the ease with which consumers can substitute another good that fulfils approximately the same function.

Consider two extreme cases. Suppose first that the price of all cigarettes is raised 1 per cent, perhaps because the cigarette tax has been raised. Do you expect the quantity of cigarettes demanded to fall by 5 per cent or by 0,5 per cent? Probably the latter. People who can easily quit smoking have already done so. A few smokers may try to cut down but this effect is unlikely to be large. In contrast, suppose the price of one particular brand of cigarettes is increased by 1 per cent, all other brand prices remaining unchanged. We should now expect a much larger quantity response from buyers. With so many other brands available at unchanged prices, consumers will switch away from the more expensive brand to other brands that basically fulfil the same function of nicotine provision. For a particular cigarette brand the demand elasticity could be quite high.

Ease of substitution implies a high demand elasticity for a particular good. In fact this example suggests a general rule. The more narrowly we define a commodity (a particular brand of cigarette rather than cigarettes in general or oil rather than energy as a whole), the larger will be the price elasticity of demand.

Measuring Price Elasticities. Измерение ценовой эластичности

To illustrate these general principles we report estimates of price elasticities of demand in Tabl. 5.

Таbl 5. Estimates of Price Elasticities of Demand in the UK

Good (general category)	Demand elasticity	Good (narrower category)	Demand elasticity
Fuel & light Food Alcohol Durables Services	-0,47 -0,52 -0,83 -0,89 -1,02	Dairy produce Bread & cereals Entertainment Expenditure abroad Catering	-0,05 -0,22 -1,40 -1,63 -2,61

The table confirms that the demand for general categories of basic commodities, such as fuel, food or even household durable goods, is inelastic. As a category, only services such as haircuts, the theatre, and sauna baths, have an elastic demand. Households simply do not have much scope to alter the broad pattern of their purchases.

In contrast, there is a much wider variation in the demand elasticities for narrower definitions of commodities. Even then, the demand for some commodities, such as dairy produce, is very inelastic. However, particular kinds of services such as entertainment and catering have a much more elastic demand. Small changes in the relative price of restaurant meals and theatre tickets may lead households to switch in large numbers between eating out and going to the theatre, whereas the demand for getting out of the house on a Saturday evening may be relatively insensitive to the price of all Saturday night activities taken as a whole.

VOCABULARY NOTES

typically falls - обычно снижается

a dividing line - разделительная черта

unit-elastic (unitary-elastic) demand - спрос с единичной эластичностью, единичная эластичность спроса

to raise/to lower revenue - повышать/снижать доходы

the key piece of information - ключевая информация

to set the price (syn. to quote) - устанавливать, назначать цену

foreign holidays - отдых за границей

to refer to - относиться к

parts of the curve corresponding to prices - участки кривой спроса, относящиеся к ценам

adjusted for inflation - с учетом инфляции

prices typically charged - цены, обычно назначаемые

be observed historically - встречаться в истории

determinants - основные факторы, определители, показатели

the answer must be sought in - ответ следует искать в

socially essential - существенно, значимо в общественном мнении

a frivolous luxury - бездумная роскошь

why tastes are as they are - почему вкусы именно таковы

nevertheless (syn. however) - тем не менее

to identify some considerations - выявить некоторые соображения, моменты, факторы

the ease - легкость, простота

to substitute smth for smth - заменить одно другим

a substitute - заменитель

substitution - замена

to fulfil approximately the same function - выполнять примерно аналогичную функцию

extreme cases - экстремальные случаи

the latter (ant. the former) - последний (упомянутый)

to quit (syn. to give up) smoking - бросить курить

one particular brand of cigarettes - один конкретный сорт сигарет

to fulfil basically - в основном выполнять

nicotine provision - насыщение никотином

the more narrowly we define - чем более узкое определение мы даем

to illustrate general principles - для иллюстрации общих принципов

to report estimates in a table - приводить оценки в таблице

durables - товары долговременного пользования

dairy produce - молочные продукты

cereals - крупы

entertainment - развлечения, досуг

catering - поставка продуктов и обслуживание церемоний

the table confirms - из таблицы следует

as a category - как категория

haircuts - стрижка, зд. парикмахерские услуги

sauna baths - посещение сауны

to alter the broad pattern - изменить широкий ассортимент

a much wider variation - большая вариативность

whereas (syn. while, whilst) - в то время как

to be relatively insensitive - быть относительно нечувствительным

taken as a whole - в целом

Assignments

I. Suggest the Russian equivalents

goods with high or low demand elasticities; prices adjusted for inflation

II. Replace the parts in italics by synonyms

to set the prices; ease of substitution suggests a high demand elasticity; may cause households to...; to turn from...to; relatively inelastic

III. Fill in the gaps with the words and expressions from the text Demand is __ if the price elasticity is more negative than -1.

2. Demand is __ if the price elasticity lies between -1 and 0.

3. If the demand elasticity is exactly -1, we say that demand is __.

4. Whether or not demand is elastic is __ required in setting the price.

5. Economists will say that the demand for oil is __, but the demand for foreign holidays is __.

6. Such statements refer to parts of the demand curve __ prices (__ inflation) that are typically charged for these goods and services.

7. The answer must __ in consumer tastes.

8. If televisions arc considered __, the demand elasticity will be much higher.

9. As economists, we can __ some considerations likely to affect consumer __ in the price of a good.

10. The most important consideration is the ease with which consumers can __ another good that __ approximately the same function.

11. Consider two __ cases.

12. With so many other brands __ at unchanged prices, consumers will switch away from the more expensive brand to other __ that basically fulfil the same __.

13. __ implies a high demand elasticity for a particular good.

14. The table __ that the demand for general categories of basic commodities is inelastic.

15. Households simply do not have much scope __ the broad pattern of their purchases.

16. There is a much wider __ in the demand elasticities for narrower definitions of __.

17. Small changes in the __ price of restaurant meals and theatre tickets may lead households to switch in large numbers between eating out and going to the theatre, __ the demand for getting out of the house on a Saturday evening may be relatively __ to the price of all Saturday night activities taken as a whole.

IV. Check your prepositions. Insert a suitable preposition in each of the blanks in these sentences

1. He is interested __ economics.

2. He is not concerned __ non-essential commodities.

3. The demand __ bananas will probably increase.

4. The supply __ cigarettes does not usually fluctuate.

5. The consumers' need __ such a commodity is well-known.

6. There was a change __ the quantity of material supplies.

7. He paid quite a lot of money __ that car.

8. He paid the money __ that man.

9. Non-essential commodities like chocolates cannot be compared basic commodities like fuel.

V. Find in the text English equivalents/or the following

повышать/понижать доходы от...; устанавливать цену; основной, определяющий фактор; в конечном счете, в конечном итоге; выполнять приблизительно ту же функцию; сорт; упасть на...%; основные товары (товары первой необходимости); хозяйственные товары длительного пользования; спрос на некоторые товары; единичная эластичность спроса

VI. Answer the questions

1. Explain when demand is elastic, inelastic or unit-elastic.

2. How do consumer tastes determine the demand elasticity?

3. What considerations are likely to effect consumer responses to changes in the price of a good?

4. Illustrate the consideration of the demand elasticity according to the case of substitution on the part of buyers by the example of cigarettes.

5. State the interdependence between the scale of definition a commodity and the price elasticity of demand.

6. Think why the demand for going out Saturday nights may be relatively inelastic to the price of the activities.

7. Give your own examples of an elastic and inelastic demand.

VII. Translate using all the active possible

1. Снижение цен может повышать доходы от продаж при эластичном спросе или снижать доходы при неэластичном спросе. В конечном итоге вопрос эластичности спроса становится основным определяющим фактором при установлении (2 варианта) цены.

2. В случае, если цена на 1-й сорт какого-либо товара повышается на...%, а цены на другие сорта остаются неизменными, покупатели предпочитают другие, более дешевые, сорта товара, поскольку они в основном выполняют приблизительно ту же функцию. Легкость замены одних товаров другими предполагает высокую эластичность спроса.

3. Спрос на некоторые категории товаров первой необходимости неэластичен. К этим товарам относятся топливо, продукты питания, хозяйственные товары длительного пользования. Структура покупательского спроса домашних хозяйств не предполагает широкомасштабных изменений.

A MODEL OF THE ECONOMY (МОДЕЛЬ ЭКОНОМИКИ)

Economists spend a lot of time trying to develop models of the working of the economy. The London Business School, like many universities and also the Treasury, has a model of the economy which it has entered into a computer. The reason for this is that much of its work is concerned with forecasting future economic trends so as to aid decision-making by business and government. The London Business School's model can be fed with economic information, such as changes in tax rates, and it will then predict how the economy will behave. Such predictions are an invaluable aid to business decision-making because, for example, businesses can find out whether people's incomes are Likely to rise or not.