Part One: Informational Reading
Read the following passage below about an economic marketplace.
A market place is a physical or virtual place where goods and services are sold. The people who make the goods and services are known as producers. To remember this, just remind yourself that producers “produce”, and that “to produce” means “to make.” Therefore, producers are the people who make the products that will be sold in the market.
The people who buy the products are called consumers. To remember this, just remind yourself that consumers “consume” and to “to consume” means to “to use up”. Therefore, consumers are the people who use up the products or services that are bought. Remember, consumers are buying.
In a market place, buyers and sellers are able to negotiate their prices. It’s important that sellers are earning money on the goods that have been produced. But, buyers also want to spend as little as they possibly can. As a result, the price of goods and services are related to supply and demand. When there is a lot of one item (the supply is high) buyers have more options. Therefore, buyers are able to look for the cheapest price they can find. However, if there are few items (the supply is low), then buyers are forced to adhere to whatever price the seller has set. The goal of sellers is to keep their inventory moving. Inventory is how much of one thing the sellers have to offer their buyers.
Part Two: Practice Questions
Answer the questions below.
1. Florida suffered an unusual winter, with temperature dropping to frigid temperatures for five days in a row. As a result, the production of oranges suffered, leaving farmers with the smallest crop they have had in ten years.
Which of the following would be true about the economic repercussions of this frigid weather?
A. Buyers will pay lower prices for the oranges because the supply is low.
B. The supply of the oranges will not satisfy the demand, and buyers will pay more.
C. The demand of the oranges will be lower than normal, and buyers will pay less.
Answer: B. The supply of the oranges will not satisfy the demand, and buyers will pay more.
2. Jean is a farmer in Idaho. He has a small vegetable stand at the end of his driveway that attracts several customers a day. During the summer, he employs five people to help him keep up with his vegetable production.
Which of the following would be a consumer good at his farm?
A. a tractor
B. his vegetable production
C. a passerby customer
Answer:A. a tractor
3. Which of the following is a main purpose of the marketplace?
A. To create an open exchange between producers and consumers.
B. To give consumers a better opportunity for selling their products.
C. To encourage locals to volunteer in their own communities.
Answer:A. To create an open exchange between producers and consumers.