Self-study 1 Task

Task 2. 3. Writing: Write the summary to the given text

How the market works

A market is any place where individuals buy and sell goods and services. There are all kinds of markets in our economic world. All markets, though, have some common economic principles. The price is what you have to pay for something in order to get it.

Consumers are the ones who provide the demand for an item. Demand is the amount or quantity of goods and services consumers are willing and able to buy at various prices. Generally, the higher the price, the less consumers will buy of an item.

The opposite of this principle also applies: The lower price, the more consumers will buy. At the higher price some consumers will simply decide not to buy. Others will buy less of the item still others may try substitutes. The law of demand states that consumers will generally buy less of an item at a higher price than at a lower price.

Producers are influenced to supply goods or services by the prices in the market. The supply is the amount or quantity of goods and services that producers will provide at various prices. Producers must receive a price for their goods and services that will cover their costs and provide a profit in order to stay in business. They look at price as a barometer that tells them how much of a good or service to produce. Producers will generally produce less of an item at a lower price than they will at a higher price. The law of supply states that the higher the price, the more producers will supply; the lower the price, the less they will supply.

It should be clear by now that in the marketplace, both consumers and producers follow their own self-interests. Consumers want to get as much as possible at the lowest possible price. And producers want to make as much profit as possible. The price for all goods and services sold are determined through the actions of buyers and sellers.

There is a surplus, or oversupply. Evidently the consumer demand is less the amount supplied. The price – at a point where the amount supplied equals the amount demanded – is called the equilibrium price. Equilibrium, then, is the point at which supply and demand meet, or come together. The equilibrium price is the price at which supply and demand meet. Consumers` and producers` activities not only affect price, but those activities are also affected by the price. Changes in the market come about automatically as a result of producers and consumers following their own self-interests.