Innovation has become the industrial religion of the late 20th century. Business see it as the key to increasing 1)______ and 2)______. Governments automatically reach for it when trying 3)______. Around the world, the rhetoric of innovation has replaced the post-war language of 4)______. It is the new technology that unites the left and the right politics, says Gregory Daines of Cambridge University.
But what 5)______ constitutes innovation is hard to say, 6)______ measure. It is usually thought of as 7)______ of a better product or process. But it could just as easily be the 8)______ of a cheaper material in an existing 9)______, or a better way of marketing, distributing or supporting a product or 10)______.
11)______ - the most successful, though not the only, practitioners of innovation – rarely stop to examine how they do it. Most of them simply get on with the job of 12)______ by exploiting some form of change – be it in 13)______, materials, prices, 14)______, demographics, or even geopolitics. They thereby 15)______ new demand, or a new way of exploiting an existing 16)______. “The entrepreneur “, said Jean-Baptiste Say, the French economist who coined the word around 1800, “17)______ economic resources out of an area of lower and into an area of higher 18)______ and greater 19)______”. Two centuries later, economists are still struggling to understand this most mysterious part of the 20)______ process.
VI. Give the terms for the following explanations.
1. The percentage change in quantity demanded divided by the corresponding percentage change in income.
2. The quantity demanded is insensitive to price changes: elasticity is between 0 and –1.
3. A good with a positive income elasticity of demand.
4. A measure of the responsiveness of demand for a good to a change in the price of another good.
5. A good with negative income elasticity.
6. A good having an income elasticity of demand less than 1.
7. A good having an income elasticity of demand greater than 1.
8. The quantity demanded is highly responsive to price changes: elasticity is more negative than –1.
9. Expenditure is unchanged when price falls: elasticity is equal to –1.
10. The percentage change in the quantity of a good demanded divided by corresponding change in its price.
VII. Say whether the following sentences are true or false. Extend your ideas.
1. Price elasticities measure the response of quantity demanded to changes in the relative price of goods.
2. The own price elasticity of demand is constant throughout the length of a strait-line demand curve.
3. Price cuts will increase total spending on a good if demand is inelastic.
4. Demand will tend to be more elastic in the long run than in the short run.
5. Total revenue is maximized when the demand elasticity is equal to –1.
6. Broadly defined commodity groups such as food are likely to have more elastic demand than narrowly defined commodities such as rump steak.
7. If two goods are complements, the cross price elasticity of demand is likely to be positive.
8. Income elasticities measure the response of quantity demanded to changes in the real value or purchasing power of income.
9. If two goods are substitutes, the cross price elasticity of demand is likely to be negative.
10. For price changes, we say that demand is more elastic in the long run than in the short run. The same arguments suggest that income elasticities of demand should be higher once consumers have time to adjust to the increase in their incomes. The reason economists emphasize the long-run/short-run distinction for price elasticity, but not for income elasticity of demand, is that changes in income are usually small.
VIII. Tasks for thought.
1. Table 1 presents the quantity of pop corn demanded at various alternative prices:
| Price per packet | Quantity demanded | Total spending (revenue) | Own price elasticity of demand |
| 2.10 1.80 1.50 1.20 0.90 0.60 0.30 | 10 20 30 40 50 60 70 |
a) Draw the demand curve on graph paper, plotting price on vertical axis and quantity on the horizontal axis.
b) Suppose price were 1.20. What would be the change in quantity demanded if price were to be reduced by 30 pence? Would your answer be different if you started at any other price?
c) Calculate total spending on pop corn at each price shown.
d) Calculate the own price elasticity of demand for prices between 60p and 2.10 pounds.
e) Draw a graph shoeing total revenue against sales. Plot revenue on the vertical axis and quantity demanded on the horizontal.
f) At what price is revenue at its greatest?
g) At what price is the demand elasticity equal to –1?
h) Within what ranges of prices is demand
(i) elastic?
(ii) inelastic?
2. Flora Blake likes a nice cup of tea but is equally content to accept a cup of coffee. She takes two teaspoons of sugar in coffee, but none in tea. What signs would you expect to observe for her cross price elasticities between the three commodities?
3. For which of the following commodities would you expect demand to be elastic, and which inelastic?
a) bread;
b) theatre tickets;
c) foreign holidays;
d) fuel and light
e) catering
f) dairy produce
g) clothing
4. Which of the following would an economist describe as inferior or normal goods?
a) A good with income elasticity of –0.1.
b) A good with cross-price elasticity of +0.3.
c) A good with own-price elasticity of –1.1.
d) A good with income elasticity of +0.9.
e) A good with income elasticity of –0.2.
IX. Translate into English.
1. Мы утверждаем, что объем спроса отдельного потребителя не зависит от объема спроса других, т.к. речь может идти только об индивидуальных вкусах и предпочтениях.
2. Однако в экономической теории существуют такие понятия как эффект сноба и эффект подражания большинству (bandwagon effect), когда спрос отдельного потребителя на некоторые товары зависит в существенной мере от потребления этих товаров другими, от влияния моды и рекламы.
3. При анализе спроса на какой-либо товар нас часто интересует не его абсолютный объем, а изменение его в ответ на изменение цены товара.
4. Объем спроса по разным товарам измеряется в различных единицах, поэтому по абсолютным изменениям объема спроса нельзя судить о реакции спроса на изменение цен по различным товарам. Для этого удобнее пользоваться показателями относительного изменения, что приводит нас к понятию эластичности.
5. Эластичность спроса по цене в значительной степени зависит от наличия товаров-заменителей; чем больше товаров-заменителей у конкретного товара, тем более чувствительным к изменения цен будет спрос, т.е. мы можем в данном случае говорить об эластичности спроса.
6. Понятие «эластичность» обеспечивает необходимую информацию о том, как расходы потребителя будут меняться вслед за изменением цены. Эта информация чрезвычайно важна для поставщиков, доход которых зависит от трат потребителей.
7. Перекрестная эластичность спроса по цене характеризует относительное изменение объема спроса на один товар при изменении цены другого.
8. Основными факторами, определяющими перекрестную эластичность спроса по цене, являются естественные свойства товаров, их способность замещать или дополнять друг друга.
9. Эластичность спроса по доходу характеризуется относительным изменением спроса на какой-либо товар в результате изменения дохода потребителя.
10. В этой связи экономическая теория анализирует такие понятия как низкокачественные товары, товары первой необходимости, предметы роскоши. Нужно отметить, что для лиц с разным уровнем дохода одни и те же товары могут оказаться либо предметами роскоши, либо товарами первой необходимости.
UNIT 13 MONEY AND BANKING
I. Find the following word-combinations in the texts and translate them into Russian.
a) the crucial feature of money; unit of account; to hand over; a store of value; to swap for other goods; a barter economy is wasteful; money pays no interest; monetary value; prices are quoted in pounds; interest-bearing bank accounts; a standard of deferred payment; tiny manufacturing costs; legal tender; IOU money
b) a financial intermediary; to credit the public with a deposit; liabilities are used as a means of payment; trustee savings banks; to credit; to debit; a transfer of funds; the asset side of the balance sheet; interest-earning assets; sight deposit; time deposit; to have notification of a withdrawal
П. Find in the texts English equivalents for the following.
a) отсроченные платежи; двойное совпадение желаний; совершать взаимовыгодный обмен; средство сохранения стоимости; расточительный; средство сбережения; приносящий проценты счет в банке; покупательная способность; фактически уменьшать доходы; денежные знаки; законное платежное средство; выписывать чек третьему лицу
b) финансовый посредник, кредитно-финансовое учреждение; денежная масса; государственная лицензия; система взаимозачетов; иметь смысл; сокращать издержки; кассовый резерв; активы, приносящие проценты; ссуда, кредит; фондовая биржа; цены колеблются; ценные бумаги; срочный вклад; точно установленный период времени
Ш. Say what is meant by:
a barter economy is wasteful; purchasing power of money is eroded by inflation; a token money; IOU money; the deposit; to handle payments by check; a clearing system; liquidity; a sticky period for a firm; sight deposit; time deposit; to have notification of any withdrawal; certificates of deposit
IV. Listening.
1. Listen to the lecture to answer the questions in the textbook.
2. Listen to the lecture again taking notes to give a summary of it.
V. Match the words (1 – 5) with their corresponding definitions (a – e):
| 1. clearing bank 2. commercial bank 3. sight deposit 4. time deposit 5. reserve ratio | a) a type of bank account from which you can take out money immediately without paying a charge and without informing the bank in advance b) a bank involved in international trading and providing services for business and organizations rather than for individuals c) one of the banks that issues and accepts cheques and passes them through the banking system d) the amount of money a financial institution possesses in relation to the amount of money it has lent e) a bank account in which you must leave your money for a minimum period of time and from which you can only take out money after informing the bank in advance |
VI. Match the words in the left-hand column with their synonyms:
1. sight deposit a) to contain
2. time deposit b) invariable
3. crucial c) term deposit
4. fixed d) call deposit
5. to lend e) decisive
6. to comprise f) to loan
7. liability g) payment
8. notification h) obligation
9. account i) later
10. subsequently j) information
VII. Fill in the gaps in the following text:
backed; considerable; define; acceptable; money; status; currency; commodity; reveals; legal tender; medium of exchange; broad; accepted; supply
Money
Most of us use 1)_____every day. We see it, touch it, and spend it. But how many of us can 2)______it adequately? Usually money is defined too narrowly. Some define it as the 3) ______ of a nation: others think of it in terms of 4) ______ ; still others refer to it as the 5)______. Such definitions, however, automatically exclude large portions of our money. To include all segments of our money 6)______, we must use a 7)______definition. Thus, we can say that money is commonly 8)______in exchange for other goods and services.
9)______ money refers to the use of some commodity as money. Many
commodities - such as stones, shells, various crops, metal, and paper - have served as money in various countries of the world. American history 10)______that tobacco, corn, beads, warehouse receipts, and bank notes, in addition to metal coin and paper currency, have served as money. In fact, many of these monies were given the 11)______of legal tender, which means that they were 12)______for the payment of debts, both public and private.
There are two basic types of modern money, each of 13)______importance: token money and paper money. Token or metallic money consists of coins - a special type of commodity money in which a metal such as gold, silver or copper is used. Paper money takes the form of bills and notes. It may or may not be 14)______by gold or silver.
VIII. Give the terms for the following explanations.
1. Any generally accepted means of payment for the delivery of goods or the settlement of the debt.
2. The function of money whereby it enables the exchange of goods and services.
3. The function of money by which it provides a unit in which prices are quoted and accounts are kept.
4. The function of money by which it can be used to make purchases in the future.
5. An economy with no medium of exchange, in which goods are swapped for other goods.
6. A medium of exchange based on the debt of a private firm or individual.
7. Financial intermediaries with a government licence to make loans and issue deposits.
8. A means of payment whose value or purchasing power as money greatly exceeds its cost of production or value in uses other than money.
9. A set of arrangements in which debts between banks are settled, by adding up all the transactions in a given period and paying only the net amounts needed to balance interbank accounts.
10. The speed and certainty with which an asset can be converted into money.
11. In the time of the goldsmiths, the amount entrusted to the goldsmith for safekeeping.
IX. Say whether the following statements are true or false. Extend your ideas.
1. Cigarettes were used as money in the war.
2. Trading is expensive in a barter economy.
3. Money in current accounts in banks is legal tender.
4. If the goldsmiths insisted that all transactions were backed by equal amounts of gold in the vaults, then their actions could not cause growth in the money supply.