3. Demand curve — кривая спроса

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15.7.1.5. Read the text “Factors Affecting the Market Situation Adversely” and enumerate these

factors in Russian.

( ! ) Factors Affecting the Market Situation Adversely

Within the context of analyzing the market situation we shall pay special attention to market failures.

Market failure is an outcome deriving from the self-interested behaviour of individuals in the

context of free trade, in which economic efficiency does not result. Market failures provide a ubiquitous

argument for intervention of some form or other. But they have two main sources. First, they

derive from the fact that many transactions which would need to occur for the sake of economic

efficiency simply do not occur. This may be on account of transaction costs. Or, there may be a

deficiency of information to the parties involved, or there may be asymmetric information (with its

corresponding problems of adverse selection, moral hazard and agency costs). Or, the necessary

transaction may be deterred by the fact that the efficient price is not set — on account of menu

costs. Or, there may be strategic behaviour by the individuals involved, who fail to engage in a trade,

In the hope that they might extract a better deal from their adversary if they “play it tough.” a large

number of “missing trades” are those involving the many resources over which no properly defined

property rights exist (such as clean air) and thus over which no trade can occur. The second main

category of market failures derive from the fact that there are sometimes collective interests that are

unable to be served by self-interested, individual behaviour. There are goods or services that have to

be consumed collectively (public goods like defence); there can be free-rider problems in which,

for example, citizens hope to avoid paying for a service on the grounds that someone else will pay

(why should I invest in innovation, if someone else will do it for me?); there can be prisoner’s

dilemma-type situations, in which selfish behaviour leads to sub-optimal outcomes (particularly

apt in areas where utility is a function of relative position, rather than absolute position). There can

be industries subject to increasing returns to scale, in which monopoly is inevitable, which carries

large efficiency costs unless there is a collective effort to regulate. This provides an almost comprehensive

list of the sources of market failure. Some of the conventionally discussed forms of failure

are derivable from this list. For example, externalities are a combination of lack of allocation of

property rights, and a lack of trade in the externality itself. The deviation from marginal cost pricing

tends to occur as a result of increasing returns to scale.

Commentary and Notes to Text 15.7.1.5

1. Outcome — последствие (результат)

2. ubiquitous — вездесущий, повсеместный

3. transactions which would need to occur — сделки (операции), которым бы следовало

произойти

4. for the sake of economic efficiency — ради экономической эффективности

5. a deficiency of information — недостаток информации

6. the transaction may be deterred — сделка может быть отложена

7. adversary — соперник

8. property rights — права собственности

9. apt in areas where utility... — склонный заниматься вопросами, в которых общественная

полезность...

10. externality — внешний аспект (воздействие)

15.7.2. Match the following terms with the correct definition

Work with a partner.

a) The organizational and othersm e itrsace5ghknx fo trsae4kom ac3um tfrekutr ram .ter1akM 2characteristics of a market and

in particular those which affect the nature of competition and

pricing. Traditionally, the most important features of market

structure are the number and size distribution of buyers and

sellers, which reflect the extent of monopoly or monopsony;

this, in turn, will be affected by the existence or absence of

barriers to entry.

219

b) The terms under which the trading takes place. Usually the

terms of exchange are given by the price at which a good is

traded.

c) An abstract concept concerning all of the arrangements that

individuals have for exchanging with one another. Thus we

can speak of the labour market, the automobile market, and

the credit market.

d) The application of self-interested, individual behaviour in a

free market economy which, through supply and demand in

different markets, determines price and the allocation of resources.

e) Broadly, the functions of sales, distribution, advertising and

sales promotion, product planning and market research. Thai

is, those functions in a business that directly involve contact

with the consumer and assessment of his needs, and the translation

of this information into outputs for sale consistent with

the firm’s objectives.

15.7.3. Read the text, complete it using the words from the box, and translate it into Russian

mobile, sales, in terms, competitive substitutes, market, particular commodity

By market share we mean either (a) the sales of the product or products of a firm as a proportion

of the sales of the product or products of the ... (1) as a whole, e.g. ... (2) of Ford motor cars

compared with total UK motor-car sales; or (b) the sales of a ...... (3) compared with the total sales

for the class of commodity of which the particular commodity is a member, e.g., sales o f ... (4)

telephones compared with sales of all telephones. The presumption is that the firm’s product and

the particular commodity are faced with.......(5) in their respective markets.

Market shares may also be calculated.......(6) of the proportion of the product in the total

existing stock of that class of products, as opposed to its share of the flow of new sales.