The substitution effect of a price rise will also reduce the demand for the goods that are complementary to the goods whose price has risen.

In practice, there are three types of relationships between goods: the goods may be substitutes, complements, or independent. The definition of the three types of relationships is based on the substitution effect of the price change of a good.

(1) The substitution effect is positive for substitute goods, the price of the good (J) and the quantity of the good (?) move in the same direction. If the price of j increases, consumers tend to substitute? for /'. If the price of j decreases, then consumers tend to substitute the relatively cheaper j for L In both cases, there is a positive relationship between the price of j and the quantity of?', An example is butter and margarine.

(2) The substitution effect is negative for complementary goods such as buns and hot dogs. In this case, the price of hot dogs (j) and the quantity of buns (?) move in opposite directions. An increase in the price of j (hot dogs) means that the quantity demanded ofj decreases and the quantity of the complementary good i (buns) also decreases. The same happens when the price of j decreases. In both cases there is a negative relationship between the price of j and the quantity of I,

Notice that if the goods change places in the equation, it may result in a different coefficient. Let us consider the consumption of sugar and coffee. A change in the price of coffee may have some influence on the use of sugar, but a change in the price of sugar probably will have very little influence on the use of coffee.

(3) The substitution effect is zero for independent goods. Independence means that no substitution or complementary relationship exists between the two goods.

б) Расположите вопросы в таком порядке, чтобы они могли служить планом текста. Ответьте на эти вопросы.

1. Do all complementary goods affect each other's use to the same extent?

2. What examples of complementary goods are given in the text?

3. What goods are called independent?

4. How many types of relationship between goods can you name?

5. How does the substitution effect work with complementary goods?

6. How does the substitution effect work with substitute goods?

в) Перескажите текст.

TEXT 4

а) Прочитайте текст и ответьте на следующие за ним вопросы.

Price Ceilings and Price Supports

During national emergencies (чрезвычайные обстоятельства), the government sometimes imposes limits on prices, not allowing them to reach their equilibrium level. For example, during World War II, the governments did not allow the prices of foodstuffs to rise to their equilibrium levels, as they felt that it would be unfair (несправедливый) and highly unpopular. As a result, the quantity demanded exceeded the quantity supplied. In other words, there was shortage.

As the price system is not allowed to do the rationing (нормирование продуктов), some formal system of rationing or allocating the available supply of the product may be needed. Thus, in World War II, families received ration coupons which determined how much they could buy of every commodity. And in 1979, when the Organization of Petroleum Exporting Countries cut back oil production and reduced exports of oil to the United States, there was serious talk there that gasoline and oil might be rationed. Such rationing schemes may work well in emergencies (over short periods of time), but they can result eventually in serious problems, as prices are not allowed to regulate production and consumption.