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Text 3. The law of Demand and Supply

Task 1. Read the text and then answer the questions:

The United States has a free enterprise economy. This type of economic system depends on cooperation between producers and consumers. To make a profit, producers provide products at the highest possible price. Consumers serve their own interests by purchasing the best products at the lowest possible price.

The forces of supply and demand establish the price that best serves both producers and consumers.

Demand is the desire to have some good or service and the ability to pay for it. You may want to take a round-the-world cruise or to rent a huge apartment that overlooks the ocean. Or you may want to buy a brand-new sports car or a state-of-the-art home entertainment center. However, you may not be able to afford any of these things.

Therefore, economists would say that you have no actual demand for them. Even though you want them, you don’t have the money needed to buy them. Conversely, you may want the latest CDs by several of your favorite bands. And, at a price of between $12 and $15 each, you can afford them. Since you have both the desire for them and the ability to pay for them, you do have demand for CDs.

Price is one of the major factors that influence demand. The law of demandstates that when the price of a good or service falls, consumers buy more of it. As the price of a good or service increases, consumers usually buy less of it.

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