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Now let’s speak about desire.

The consumer’s desire for a commodity tends to diminish (ди/миниш) as he buys more units of it. Economists call this tendency the Low of Diminishing Marginal Utility.

The interaction of buyers and sellers determines the prices for goods and services. If the price is too low, a shortage will develop and if the price is too high, a surplus will develop.

In a market economy, prices are the result of the needs of both buyers and sellers. The sellers will supply more goods at higher prices. The buyer will buy more goods at lower prices. Some prices is satisfactory to both buyers and sellers. This price is called an equilibrium price.

№4 Supply and demand.

In a market economy, the actions of buyers and sellers set the prices of goods and services. The price, in turn, determine what is produced, how it is produced and who will bay it. Supply, the quantity of a product that suppliers will provide, is the seller’s side of a market transaction. Suppliers usually want the price that allows them to make the most money. Demand, the quantity of a product consumer want, is a buyer’s side of a market transaction. Buyers want the price that gives them the most value for the least cost.

The items are sold one at a time, buyers mast quickly decided what price they are willing to pay. Imagine now that you want to buy electric popcorn maker on the auction. In order to get it you will have to outbid all the others who want it. New popcorn maker costs about $14 and you decided you are willing to go as high as $10 but not hire. At first you look into your wallet. Only $5 is there. But you know that you have $15 on the desk at home, and you know that your friend can lend you some money. And what factors so far have influence you? You decision is the result of your tastes, your available cash income, your wealth, your credit. You have also had to think of the price of substitutes and the price of related items.

And on the auction you buy. The cost of popcorn maker is $9.

The popcorn demand schedule illustrates the low of demand, which indicates that as the price of an item increases, a smaller quantity will be bought.

The degree to which changes in price cause changes in quantity demanded is called elasticity of demand. There are two main kinds of the elasticity of demand, it is highly elastic and inelastic. Highly elastic means that demand changes when the price changes and inelastic means when people buy nearly the same amount even though the price of smth. changes.

There are two main reasons for elasticity of demand. The first concerns the relationship between income and the cost of the product. The second reason why demand is elastic concerns whether or not substitute product is available.

№5. Markets and monopolies.

Whenever people who are willing to sell a commodity contact people willing to buy it, a market for that commodity is created. Buyers and sellers meet in person, or they may communicate by letter, by phone or through their agents. In a perfect market there can be only one price for a given commodity: the lowest price which sellers will accept and the highest which consumers will pay. Competition influences the prices prevailing in the market. Although in a perfect market competition is unrestricted and sellers are numerous, free competition and large numbers of sellers are not always available in the real world. In some markets there may only be one seller or a very limited number of sellers. Such a situation is called a "monopoly". It is possible to distinguish in practice four kinds of monopoly.

State planning and central control of the economy often mean that a state government has the monopoly of important goods and services. A different kind of monopoly arises when a country has control over major natural resources or important services. Such monopolies can be called natural monopolies. Legal monopolies occur when the law of a country permits certain producers, authors and in­ventors a full monopoly over the sale of their own products. These types of monopoly are distinct from the sole trading opportunities. This action is often called "cornering the market" and is illegal in many countries.

In the market systems, competition answers the basic questions of what, how, for whom, and how much. Competition among producers is for the highest profits. Compe­tition among consumers is for the best goods and services at the lowest prices.

In a market economy three basic resources - land, labour and capital - are bought and sold for the best price. Market for labour is constantly changing.

№6. Economic Growth.

If you spent all the money you have now, you might be able to buy many of the things you want. But you realise that by saving some now, you will save more for the future. Societies also must save some of what they produce today in order to have more for tomorrow. Every society must produce capital goods as well as consumer goods to meet future economic needs. Long-range economic growth depends on the continued production of capital goods (goods used to produce other items).

Everyone who works contributes to the growth of capital resources. Suppose you earn $72 a week. Your labour must be valuable enough to earn more than just the money to cover your wages. Your labour may earn your company $100 a week. Since you are paid $72, you are hel­ping the company to collect $28 a week. Some, or all, of this money can be used for ca­pital resources. Company can use this money to replace old tools and equipment for example. The manager may decide to replace the old tools,

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