Vocabulary Notes to Text 5.7.1.1

1. to drive down — снижать

2. marginal cost — предельная стоимость

3. marginal revenue — предельный доход

4. perfect price discrimination — полная ценовая дискриминация

5.7.1.2. Read the text “Price Regulation in the UK” and translate it in written form.

Price R e fla tio n in the UK

In the UK great experience has been accumulated on restricting the upper level of prices, mainly

for natural monopolies.

By price regulation the UK economists mean a form of regulation, common for public utilities,

in which the prices of the supplier are not allowed to rise above a certain level. The regulation is

designed to prevent the abuse of a monopoly position. The UK price regulation has applied to

telephone, gas. electricity and water providers. In each case the design has shared certain common

features: (a) allowed price rises are set out for a few years in advance, typically four or five; (b) there

is a review at the end of each period, at which the regime governing the next period is decided; (c)

allowed price rises are specified relative to the retail price index, and might be RPI minus 4.5 per

cent each year, for example. (This protects the regulated firm against inflation.) Under price regulation,

if firms can keep their costs low they can earn big profits. This gives them an incentive to be

efficient that does not exist under rate-of-retum regulation. But it has been suggested that, in each

periodic review, the regulator looks at the rate of return to decide what new price formula should be

applied, thus reducing the difference between the two types of the scheme.

Vocabulary Notes to Text 5.7.1.2

1. public utilities — коммунальные услуги

2. the abuse — злоупотребление

3. review — ревизия (проверка)

4. retail price index — индекс розничной цены

5. rate of return — норма прибыли

5.7.1.3. Read the text “Life and Activities of Distinguished Economist, John Stuart Mill” ani

say in English what you know about: 1) the elasticity of demand; 2) rent taxation.

! ) Life and Activities o f Distingui( shed Economist, John Stuart Mill

Mill, John Stuart (1806-1873). John Stuart Mill’s childhood was subjected to a regime of severe

educational discipline by his father, James Mill. He was acquainted with the major works о

economics of the day by the age of twelve, and was correcting the proofs of his father’s book,

Elements of Political Economy, when he was thirteen. He learnt Ricardian economics and Benthamite

utilitarianism from his father. In 1823 he joined the East India Company, where he remained for

thirty-five years. For three years, before moving to France to spend his retirement, he was a Member

of Parliament. He was an extraordinarily prolific writer, especially when it is remembered that

he had a full-time job. His reputation was made by his A System of Logic, Ratiocinative and Inductive,

Being a Connected View of the Principles of Evidence and the Methods of Scientific Investigation.

which was published in 1843. His essay On Liberty appeared in 1859, and his Examination of Sir

William Hamilton’s Philosophy in 1865. His two most important works on economics are Essays on

Some Unsettled Questions of Political Economy (which came out in 1844, though he actually wrote