UNIT 5
SUPPLY
Bananas are a typical example of perishable goods. By “perishable" we mean goods which
cannot be stored for any length of time without going bad. Most foodstuffs are in the perishable
category. Such goods are offered for sale as quickly as possible, and so the supply of perishables
and the stock of perishables at any time are usually the same in quantity.
This is not true in the case of non-perishable goods like coal, steel and cars, which do not
deteriorate easily. The supply of cars on the market may not be the same as the actual stock of
cars in the factories. Economists talk about the Law of supply, in which a rise in prices tends to
increase supply, while a fall in prices tends to reduce it. If prices rise for a particular commodity,
the rise will of course encourage producers to make more. On the other hand, if prices fall either
locally or throughout the world, producers will reduce production. This can result in serious
difficulties for many producers, and may cause them to go out of business completely.
Overproduction of any commodity can also create difficulties, because it can lead to a glut on the
market, which may cause prices to fall sharply.
Supplies of many commodities can generally be adjusted to suit market conditions, This means
that changes in prices lead to changes in the quantity of a particular commodity which is made
available to consumers. Household goods and furniture belong to this category. In such instances
supply is said to be “elastic" because it can be increased available or decreased rapidly in
response to market prices.
I. ORAL QUESTIONS
a) What are perishable goods?
b) What two things are usually the same in quantity?
c) What happens when the Law of supply operates?
d) What does a rise in prices encourage?
e) What does a fall in prices cause?
f) What serious effect may a fall in prices have on some producers?
g) What can over-production lead to?
h) What happens when the supply of a commodity is adjusted to suit market conditions?
i) What kinds of goods belong to the category of commodities that can be adjusted easily?
j) What is meant by "elastic" supply?
II. COMPREHENSION
A. State whether these sentences are true (T) or false (F), and if they are false, state why
a) Bananas are a typical example of goods that easily deteriorate.
b) Steel can be stored for a long time without losing its value.
c) The actual stock of cars in a factory is usually the same as the supply of cars available on the
market.
d) According to the Law of supply, a rise in prices tends to reduce supply.
e) If prices fall locally, production will be reduced throughout the world.
f) When there is a glut on the market, demand decreases and prices fall.
g) Changes in prices lead to a change in the quality of a commodity.
h) Supply is "elastic" because market prices rise and fall.
B. Punctuate the following passages. Provide capital letters, commas, full stops, brackets,
colons, etc... where applicable.
Non-perishable goods such as coal steel cars and aeroplanes can be stored for considerable
periods of time without loss of value this is not true however with perishables which must be
placed on the market as quickly as possible if they are not sold quickly they will deteriorate if
they deteriorate while in storage or in the shops both producers and distributors lose a large
amount of money if there is a glut of certain perishables these commodities must be sold quickly
even if the selling price is too low for a satisfactory profit.
IV. WORD STUDY
Below are pairs of sentences. In the first sentence there is an underlined verb. In the second
sentence there is a blank. Make the underlined verb into a noun in order to fill the blank.
Example: manage → manage + ment → management
a) It is sometimes necessary to adjust the quantity of goods to flowing onto the market.
This…………………is made according market conditions.
b) He arranged the committee meeting. His…………………were very efficient.
c) The government encourages private enterprise. Their…………………sometimes takes the
form of financial help.
d) Some economists are interested in measuring changes in the price of essential commodities.
This………………… extends over a period of years
e) The management tried to assess the amount of money needed for the plan.
The…………………was to be made by a special committee.
f) He decides to invest his capital in the new enterprise. His…………………might be very
profitable
