[ SRTB ] 010. Basic Economics.

In free-market economies, companies decide what and how much of a product they will produce. However, they are interested in making profits. So they do not want to produce too much or too little of a product. They want to produce exactly the right amount necessary. So they often pay attention to the law of supply and demand. 

This law states that when the supply of a product is low yet demand is high, then the price will be high. However, if the supply of a product is high yet demand is low, then the price will be low. Companies want to find a median. They want just the right amount of supply and just the right amount of demand. 

But, there are often other factors that companies must consider. Once they make something, they must deliver it to the market. This way, people can purchase the product. This is called distribution. Distribution is often done by trucks, trains, ships, and airplanes. Without an effective distribution system, even in-demand products will not sell well. 

Once products are at the market, they must be consumed. This means that people purchase them. The amount of consumption depends on many things. It depends on the supply and demand, of course. And the price is also another important factor.

 

1. What is the passage mainly about?

- Some important economic factors

 

2. What is true?

a. Companies are interested in earning profits. ( T )

b. The law of supply and demand is important in economics. ( T )

c. A low demand and a high supply usually result in a high price. ( F ) 

 

3. a. demand : the amount of desire for a product or service

    b. make a profit : to earn money

    c. pay attention to : to watch out for; to keep something in mind.