A market economic system is a model of the economy that is based on market self-regulation and operates on the basis of commodity-money relations and private property.
In this case, only the buyers themselves and direct suppliers of goods and services form the distribution structure.
A market economic system functions only if certain principles are observed in the relationships between economic entities.
1. Economic freedom
This principle means that each economic entity is guided by its own interests and is responsible for its actions. The condition for the implementation of this principle is private property, which extends to property, income and
For an entrepreneur, economic freedom means the opportunity to start an activity in any field and achieve the goal of maximizing your income from a project by all legal means.
For the consumer, economic freedom provides for a wide choice of goods and services, achieving optimal use of their income in order to obtain the highest benefit for themselves.
2. Competition
This principle means competition for the best realization of one's economic interests. Competition cannot exist without economic freedom, and without it a market economic system is impossible.
There are also imperfect ones. The first implies several conditions:
A large number of buyers and producers so that no one can dictate and determine the price on the market;
Every buyer and seller has the opportunity to freely enter the market (participate in production, purchase or sale) and freely exit it (terminate their participation), since there are no legal and organizational obstacles to this;
Products of a certain market are approximately the same in quality or homogeneous, that is, they do not offer buyers advantages over each other (all buyers are the same for sellers);
Buyers and sellers are equally fully informed about market prices and know the market situation;
Buyers and sellers cannot collude to obtain benefits.
It begins when one or more of the above conditions are violated.
A market system most often exists in conditions of imperfect competition, since it is almost impossible to comply with all the requirements of perfect competition.
3. Self-regulation
This principle means that, despite the large number of producers and consumers, significant differences in interests, their activities are coordinated automatically, thanks to competition and free formation of prices. A market economic system implies that prices are determined by mutual agreement of consumers and producers.
This principle of market self-regulation was first formulated by the outstanding economist Adam Smith, who lived in England in the 18th century. In his book “The Wealth of Nations,” he expressed the idea that it is economic egoism, that is, the desire to fulfill one’s interests, that forces the manufacturer to create exactly what customers require, while maintaining the minimum price of the product. directs the manufacturer towards goals that are not at all related to his original intentions.
This is exactly what we are seeing now: it perfectly contributes to the development of charity, the social sphere, the development of technology and the improvement of the general standard of living.
Thus, a market economic system assumes that each individual, influenced by his own self-interest, will inevitably choose to perform actions that will best serve the interests of society.
A market economic system is based on free enterprise.
The structure of production, distribution and consumption is determined only by mutual agreements of producers, suppliers and buyers.
Under such an economic system, the state takes only a limited part in the economy.
Many economists consider the market economy to be the best and most optimal of all existing ones. Some, however, are critical of such statements, since the market economy is not without its shortcomings.
Characteristics of a market economy
- The advantage of private property and entrepreneurship;
- Possibility of existence of diverse forms of ownership;
- Market mechanisms of price formation;
- Presence of competition;
- Independence and autonomy of the manufacturer;
- Free choice of sources of raw materials and buyers;
- Market orientation towards the buyer. The entire economy of a country with a market system is organized on these principles.
Advantages and disadvantages
Proponents of a market economy point out that its main advantage is equality of opportunity. Economic participants are free to choose their type of activity, profession and position, place of work and goods based on their abilities and needs. The market is also able to allocate resources most efficiently.
He can quickly adapt to changing conditions and develop new industries; he demands the same from all participants in the economy. Of course, such a system is not suitable for all participants, since it requires them to be quick-witted, constantly improve and learn, as well as the ability to limit themselves.
A person who is accustomed to mechanically following directives (government, religious, tribal) is most often unable to “fit” into market standards. A market economy in its pure form, however, also has its weaknesses.
- The market cannot cope with the side effects it generates. For example, an increase in the number of cars leads to environmental pollution. Modern highly paid office work creates health problems caused by low mobility and poor nutrition.
- The market itself is not capable of providing social guarantees and smoothing out property inequality. It cannot eliminate unemployment, poverty, and social tension. What stands apart is the “vicious circle of poverty,” which traps people who do not have any economically significant resources. The “vicious circle” is often inherited - for example, children of alcoholics are more likely to become alcoholics themselves.
- The market creates opportunities for unearned income; Often profits from non-labor sources are many times higher than the income of honest workers.
- One of the basic principles of the market - competition also gives rise to such a problem as hiding real information. As a result, the buyer purchases a product that is not of the same quality as stated. Information itself becomes a commodity and costs money. Therefore, only the most successful market participants get access to more accurate and “high-quality” information.
- The unstable nature of the market causes instability of state and public institutions.
Such an abundance of problems and weaknesses has led to the fact that at present there are practically no countries that have a market economy in its pure form. In most cases, a “market economy” today is commonly understood as a mixed economy, allowing for certain government regulation, and in some cases, the influence of the traditional way of life.
In the Scandinavian countries, the fusion of government regulation and the free market gave rise to a fusion called “functional socialism.” In its updated form, the market economy shows high efficiency, but in recent decades new problems have appeared in the development of society that the mixed economy cannot cope with.
Already at the beginning of the twentieth century, the teaching of John Keynes, which presupposed a certain state intervention in the market process, became widespread in the West, and after the Second World War it became the basis of the real policy of most developed countries.
Conclusion
The market economy has developed over centuries and is the result of the struggle of various social classes for their rights. The countries in which this struggle was most pronounced managed to build a developed market society.
3.1. CONCEPT OF ECONOMIC SYSTEM.
3.2. TYPES OF ECONOMIC SYSTEMS.
3.3. THE EMERGENCE OF A MARKET. THE CONCEPT OF THE MARKET AND ITS FUNCTIONS.
3.4. MODELS OF MARKET ECONOMY.
3.1. CONCEPT OF ECONOMIC SYSTEM
World experience shows that the well-being of different countries is influenced by numerous factors, and to a lesser extent it depends on the country’s natural resources, but more on the type of economic system and its qualitative characteristics.
Economic system is a complex, ordered set of elements, the interaction of which provides the material conditions for the life of society.
Elements economies as systems are small economic systems - households, firms, the state, as well as areas of activity. Households act as owners and suppliers of resources, as well as consumers of benefits; enterprises (firms)- as creators of economic benefits in the course of using the resources necessary for this. The state regulates the system and determines its general development goals. The driving forces of the economic system are needs, interests and competition (rivalry).
The factor that predetermines the content of the management system, the nature of the mechanism for coordinating elements and links (establishes all the rules of the game) in any economic activity is a factor - property , which represents historically established relations between people regarding the appropriation of the conditions and results of production.
Property is public relationship between subjects about appropriation-alienation any object.
There are several key points in the definition:
First of all, property is public relationships, that is, they are possible only in society;
secondly, property relations develop between subjects. WITH objects property - individuals, groups, state, society. Owners may be individuals or legal entities;
thirdly, property relations presuppose relations of appropriation-alienation. The central point of property relations is their exclusive nature. Everyone except the owner himself is excluded from access to the resource
Thirdly, an object property. Object property are use values. These can be material means of production, the natural environment, labor, means to satisfy personal needs, information, various socially significant functions, etc. Everything that can be appropriated and alienated, everything that can be owned and alienated, are objects of property. However, in order for an object of property to be such, it must, as its initial prerequisite, have such a property as rarity .
Economically, property is realized through income to its owner. This income comes in the form of wages, profits, interest on capital, dividends, rent or rent. Property becomes meaningless if there is no current income. Property relations include the use, possession and disposal of property objects.
Possession- physical possession of a thing, creating for the owner the possibility of direct influence on it. Legal ownership of property always has a legal basis (law, agreement, administrative act).
Use– consists in the right to consume a thing depending on its purpose. The owner can transfer his property for use to other persons for some time and under certain conditions.
The boundaries of the right of use are determined by law, contract or other legal basis (for example, a will).
Order- consists of the right to determine the legal fate of a thing.
There are two types of property: private and public (Fig. 3.1.).
Figure 3.1- Types of property
Private property– this is a type of property in which a private person has the right to own, dispose and use the property. Private property can operate in the form of: individual private property, p partner, or group, private property is formed as a result of the association of property objects by a group of entities; people's property- formed as a result of the transfer of the property of a state enterprise into the hands of the workforce; rental property, corporate property.
Public property operates in the form of state, federal and communal. State property is the property of all members of society. Management and disposal of property in this case is carried out by public authorities. There are two forms of state ownership in the Republic of Belarus:
· republican , which represents the property of all citizens of the Republic of Belarus. This includes: land and its subsoil, state budget funds, enterprises, educational institutions, banks and other property;
· communal (municipal) property – the property of citizens living in regions, districts and other administrative-territorial entities. Property rights here are exercised by local authorities. This includes: local budget funds, housing stock, trade and consumer services enterprises, transport, educational and cultural institutions, etc.
The development of various forms of ownership is carried out primarily through denationalization and privatization. Denationalization - transfer from the state to individuals and legal entities partially or completely (including through privatization) of the functions of direct management of business entities. Privatization - acquisition by individuals and legal entities of private ownership rights to objects owned by the state.
3.2. TYPES OF ECONOMIC SYSTEMS
The modern world is characterized by the presence of different economic systems, each of which was formed in the process of long historical development. They can be grouped, that is, classified, using any criterion as a basis. Since different economists have different understandings of the historical process of social development, the criteria they choose are not unambiguous. The following criteria are used:
According to the method of coordinating economic life, the following types of economic systems are distinguished: traditional, command-administrative (centrally planned), market, mixed ;
According to the forms of management, two economic systems are distinguished: subsistence farming and commodity (market) farming ;
Traditional economics, which existed in human history for a long time and was partially preserved in certain countries, for example, in India.
Characteristics of traditional economics:
1. Public ownership of the means of production;
2. Production in a given economic system is based on traditions and customs;
3. Backward technology, widespread use of manual labor.
4. High degree of conservatism;
Administrative-command (or command-administrative) is a method of organizing social relations, which is characterized by: strict centralism of economic life based on state property; the use of non-economic, ideological management methods; the dominance of the party-state bureaucracy in the absence of real economic freedom.
All decisions on the production, distribution, exchange and consumption of material goods and services in society are made by the state or relevant authorities.
Characteristic features of a command-administrative economy:
1. State ownership of the means of production;
2. State regulation of the entire economy; administrative methods of economic management;
3. Lack of economic incentives for efficient work.
1. more confidence in the future (a minimum of life support is guaranteed to everyone);
2. less inequality in society.
Flaws:
1. inefficient use of production factors and, as a consequence, a low standard of living of the population;
2. in the absence of market mechanisms in the economy, significant imbalances are created and formed.
3. The lack of incentives creates uninitiated and irresponsible workers who are not interested in the results of their work,
Market economy - a socio-economic system developing on the basis of private property and commodity-money relations. A market economy is based on the principles of free enterprise and choice. Market participants make all decisions independently, at their own peril and risk, guided by the desire to obtain the greatest benefit. Their activities are driven by competition
Characteristic features of a market economy:
1. Private ownership of the means of production;
2. Self-regulation of the economy by market mechanisms. Minimum government intervention in the economy;
3. High personal interest of participants in economic relations;
The advantages of such a system are:
1. Stimulates high entrepreneurship and efficiency
2. There is a mechanism for eliminating possible imbalances as soon as they arise. Inefficient and unnecessary production is rejected
3. Does not require a large staff of managers
Disadvantages: increases inequality in society; certain uncertainty about the future.
A comparison of command-administrative and market economic systems allows us to draw a conclusion about greater efficiency and motivation of economic activity in a market economy.
Mixed economy, which is characterized by the stable presence of elements of different types of economic systems. As a result, the main difference between a mixed type of economy is its heterogeneity (versatility). The main features of this type are: a combination of the private and public sectors of the economy; a combination of market and state regulatory mechanisms; combination of private market motivation with social sustainability motivation.
Natural economy is an economic system in which people produce products only to satisfy their own needs. The following features are characteristic of subsistence farming:
1. manual universal labor, excluding its division into types, low labor productivity;
2. direct economic connections between production and consumption.
3. closed system of organizational and economic relations.
4. historically the first type of economic organization of society.
5. slow pace of development, manual universal labor (without dividing it into types), low labor productivity, repetition of production in the same size (simple reproduction).
The main disadvantage of subsistence farming is that it provides only minimal conditions for survival. As a result, this type of economic system was replaced by another - the commodity, or commodity-market, type.
Main economic condition for the emergence of a commercial economy became social division of labor , representing the separation of various types of activities within the framework of the public economy
Commodity farming is an economic system in which products are produced for sale and therefore become commodities, and the connection between producers and consumers is carried out through exchange (trade).
The following features are characteristic of a commercial economy:
1. indirect economic connections between production and consumption through exchange;
2. open system of organizational and economic relations;
3. specialized labor, high labor productivity;
4. modern type of economic organization of society.
History knows two types of commercial farming:
· simple and
· large, or capitalist commercial farming.
Simple A commodity economy is a type of commodity economy in which the bulk of production is natural in nature, and the goods produced are consumed by the producers themselves without exchange. Main purpose of the exchange- obtaining additional items to directly satisfy one’s own needs.
Based on public (community) or private ownership of the means of production. Either one's own labor is used (craftsman, farmer) or forced labor (slave, serf). Production using hired labor is not dominant.
Capitalist A commodity economy is a type of commodity economy in which the main volume of production is of a commodity nature and is initially intended for exchange. Main purpose of the exchange- Receiving a profit.
Based on private ownership of the means of production. Mostly hired labor is used. Labor power becomes a commodity.
3.3. THE EMERGENCE OF A MARKET. THE CONCEPT OF THE MARKET AND ITS FUNCTIONS
Market relations could not exist in a subsistence economy. Since everything necessary for human life was produced within the farm, there was no need for the exchange of products. If acts of such exchange occurred, they were mainly of a random nature. The possibility and necessity of exchange arises only with the deepening of the social division of labor, when each producer specializes in the production of a certain product, thus, in order to satisfy social needs, the exchange of these goods on the market is necessary. The deeper the social division of labor and the specialization of producers, the higher the degree of development of market relations. Thus, we can conclude:
The market is based on:
1. The system of social division of labor and specialization of producers.
This premise presupposes the technical isolation of the participants in economic coordination and indicates that each of them is engaged in the production of specific goods and services, working directly to satisfy not their own needs for these goods, but the needs of other people. To satisfy the common needs of all participants in the social division of labor, they need to enter into exchanges with each other. But exchange in itself is not equivalent to the existence of a market. That is, the development of the social division of labor is a necessary, but not sufficient condition for the existence of a market economy. An example of this is the management system under the conditions of the ACS (administrative and economic system).
Along with technical isolation, the existence of a market requires economic isolation of business entities. In order to decide what to produce, to whom and at what price to sell it, the manufacturer must be the owner of the product produced, and therefore the means of production (tools and objects of labor) necessary for its production. Therefore, the institution of private property is necessary. It is private property that is a necessary condition for the existence of a market economy. We can formulate the second condition:
2. The right to private property.
A market is a form of relationship between production and consumption through the exchange of goods through the mechanisms of demand, supply and pricing.
The historical development of the market has led to the fact that it began to perform a number of functions, the most important of which are the following:
1. Information . The market is a rich source of information, knowledge, and information needed by its participants. This function allows you to take into account changing market conditions;
2. Regulatory . The market regulates social production, as it shows what is profitable to produce, how to produce and for whom it should be produced (who can buy);
3. Stimulating . The market encourages the development of scientific and technological progress, which leads to lower production costs, improved quality and expanded range of products;
4. Communicative – establishes effective relationships between the consumer and the manufacturer, when they act in concert, even sometimes without realizing each other’s existence
3.4. MARKET MODELS
All market functions are carried out through competition.
Competition(from lat. show jumping- collide) - rivalry, economic struggle between participants in market relations for the most favorable conditions for the production, purchase and sale of goods, for the acquisition of factors of production in order to obtain maximum profit.
There are several types of competition. Thus, from the point of view of the sphere of competition, competition is distinguished between intra-industry and inter-industry. Intra-industry competition is a struggle between producers of similar goods within the same industry for the best conditions for their production and sale. Inter-industry competition - this is competition between producers engaged in various branches of production for spheres of economic influence (sources of economic resources, consumer demand, areas of investment of capital).
From the point of view of the nature of competition, a distinction is made between perfect, or free, and imperfect competition (Fig. 3.2).
Figure 3.2- Types of competition
Perfect competition- this is the rivalry of market participants in conditions of production of approximately equal volumes of identical products. In conditions imperfect competition at least one of the conditions of perfect competition is not met and a type of market relationship develops in which an economic entity, possessing economic power, has the opportunity to impose beneficial actions on counterparties, influence prices and other conditions of commercial transactions. Within the framework of imperfect competition, the following types of markets are distinguished: monopolistic competition, oligopoly; pure monopoly.
Every person has heard about a market economy more than once. But few of us know what it really is. But various media pay a lot of attention to the market economy.
A market economy is a system based on private property, freedom of competition and choice. A market economy can constrain the government's role in the fate of a country's economy. This concept came to us to replace the command system. In this regard, Russia was closely close to capitalism. The main feature of a market economy is the transition from state ownership to private ownership. Also one of the principles is free private enterprise. Pricing policy went out of control of the state and began to depend on competition and solvency population. But at the same time, the state is the most important link in the social development of a market economy.
A market economy is built on market self-regulation. The branches of government only make adjustments to the actions of market participants. The division structure of this type of economy is determined only by the buyer-producer link.
Significant disadvantages of a market economy include social inequalities, monopolization, high inflation and growing unemployment. The main contradictions include the market’s inability to respond needs of society for the development of the latter, as well as to fully take into account social needs of society.
A market economy is not capable of providing social guarantees to participants in economic activities. Jumps in market behavior can be accompanied by crises, in which production stops and unemployment rises.
In modern economic science, the concept of an economic system means the totality of all economic processes occurring in society on the basis of property relations and organizational forms operating in it. The systems differ in their approach and methods for solving basic economic questions: “what?”, “how?”, “for whom?”. Having understood the essence of the system, one can understand many of the laws of the economic life of society. Within each system, the existence of regional models is possible, the differences between which are determined by the level of development of the productive forces in the country, national traditions and customs, cultural and historical past, resource availability and geographical location.
The main elements of the economic system are socio-economic relations, organizational forms of economic activity, economic mechanism and specific economic ties between economic entities.
In the last one and a half to two centuries of the development of human society, various economic systems have operated in the world. Among them, market ones are clearly distinguished.
Market system- this is a complex mechanism of interaction between producer and consumer, operating freely through a system of prices and markets, through a communication mechanism that serves to unite the actions of millions of individuals. The market system is a way of organizing economic life in which capital and land are privately owned, and the allocation of resources, production, exchange and consumption of goods and services are carried out on the basis of supply and demand.
In modern economic literature one can find a variety of definitions of the market, because The market has always been of interest to economists such as J.B. Say, W. Jevons, A. Smith, K. Marx, J. Keynes and others.
The first and most common definition stated that a market is an area, a public place for the purchase and sale of goods, i.e. benefits and services. Attempts have been made to introduce the pricing factor into the concept of the market. Thus, A. Marshall defines a market as any area in which all points at the same moment pay the same price for the same goods.
English economist of the 19th century. W. Jevons understood the market as a group of people entering into business relationships and concluding large transactions regarding any product. The modern American economist F. Kotlyar characterizes the market as a set of existing and potential buyers of goods, emphasizing the special role of buyers. The Encyclopedia Britannica interprets the market as a set of instruments through which goods and services are exchanged as a result of contacts of buyers and sellers with each other. Contact can be made directly or through individual intermediaries or organizations. The outstanding economist and Nobel Prize winner A. Hayek defined the market as a complex transfer device that allows the most complete and effective use of information scattered among countless individual agents. Later, the concept of the market was introduced into the relationship between buyers and sellers and the relationship between supply and demand. In this regard, definitions appeared:
- - The market is the interaction of sellers and buyers;
- - The market is a system of relations between supply and demand;
- - The market is a set of commodity exchange relations;
- - The market is a sphere of exchange that connects producers and consumers of goods into a single mechanism.
So, summarizing the available information, the characteristics of the market can be reduced to the following definition:
The market is a system of economic relations between economic entities, which is based on exchange relations and payment for all goods and services.
The market is not an area where individual buyers and sellers meet by chance, but a social mechanism that provides constant communication between producers and consumers of economic goods, between whom goods and services are exchanged at a price that can be agreed upon. In this case, there is a voluntary alienation of one’s property and the appropriation of someone else’s. Therefore, the market means the mutual transfer of property rights. During the exchange, a kind of accounting and public assessment of the goods sold occurs. The market acts as a specific form of relationship between producers isolated within the framework of the social division of labor, each of whom operates independently, at their own peril and risk. Social needs are identified through a price system. They convey information that serves as an incentive to apply the most economical methods of production and make the most efficient use of limited resources. Thus, the market contributes to the redistribution of income in favor of the best economic entities that use advanced technologies and high-quality resources.
The modern market is a market of new products, because novelty has become the most important property of goods and services that make them competitive. Goods and services that have no analogues, as well as improved versions or modifications of existing ones, are considered new. The market is interested in any innovations: in competition, providing higher productivity, reliability, durability; in design that makes products comfortable and aesthetically pleasing; in the management system, increasing the profitability of production. The modern market is characterized by the erasure of national borders, the formation of world markets for goods, services, technology, information, labor, capital and currencies.
There are basic conditions for the emergence of a market.
The first condition is social division of labor and specialization. In any large community of people, none of the participants in the economy can live on complete self-sufficiency in all productive resources and all economic benefits. Separate groups of people are engaged in a wide variety of economic activities, i.e. specialize in the production of certain goods and services. In industry, there are three main forms of specialization: subject (automobile, tractor factories), detail (ball bearing plant), technological - stage (spinning factory).
The determining factor of specialization is the principle of comparative advantage. The essence of the principle is the ability to produce products at a relatively lower opportunity cost due to differences in entrepreneurs’ skills, abilities, resources, etc.
The second condition is the economic isolation of producers, completely independent, autonomous in making economic decisions (what to produce, how to produce, to whom to sell the produced products). This isolation historically arises on the basis of private property. Subsequently, it began to rely on collective property, but necessarily limited to some local circle of interests (cooperatives, partnerships, joint-stock companies, state enterprises, mixed enterprises, i.e. with state participation, etc.).
The third condition is the resolution of the problem of transaction costs - costs in the sphere of exchange associated with the transfer of property rights. They include costs associated with obtaining permission (license) for the economic activity chosen by the entity, searching for information, conducting negotiations, and changing the properties of goods. If expenses are higher than expected income, then a market for such goods will not be created.
For the effective functioning of the market, a fourth condition is also necessary - producer independence, freedom of entrepreneurship, and free exchange of resources. Non-market regulation of the economy is inevitable in any system, however, the less constrained the commodity producer, the more scope there is for the development of market relations. Free exchange allows the formation of free prices, which will provide manufacturers with guidelines for the most effective areas of their activities.
The functioning of a market economy presupposes the presence of certain elements, which together constitute a market system.
The first and most important elements of a market economy are producers and consumers. They are formed in the process of social division of labor, when some produce goods, while others consume them. Consumption is divided into personal and productive. During personal consumption, goods are removed from the sphere of production and used to satisfy the personal needs of the population. Productive consumption acts as a continuation of the production process, when a product is used for further processing by other producers. In this case, the interaction between producers and consumers is established as an exchange of performance results. In a market economy it is constant, built on the basis of specialization and manifests itself in the form of wholesale market transactions.
The second element of a market economy is economic ownership, which is determined by private or mixed forms of ownership on the basis of corporate management of production units.
The third most important element of a market economy is prices. They are the subject of special research. Let's make two comments here. First, prices are formed as a result of supply and demand, the ratio of which fluctuates depending on the current market situation. Secondly, prices determine the scope of market relations for a given product produced in a given geographical area. The boundaries of this sphere are determined by transaction costs, i.e. circulation costs associated with exchange.
The fourth central link of a market economy is the two components of supply and demand. Demand appears on the market in the form of a need for goods. Consumers can buy these goods at prevailing prices and cash incomes. Demand acts as an incentive to use the most economical production methods and efficient use of resources. Supply and demand are the most important elements of the market mechanism, which provide a constant connection between producers and consumers of material goods.
The fifth element of the market mechanism is competition. It ensures profit maximization and, on this basis, expansion of production scale. Competition acts as a form of interaction between market actors and a mechanism for regulating proportions. A. Smith called competition the “invisible hand” of the market, thanks to which the selfish motives of individuals in the form of their own economic gain are turned to the benefit of the whole society and serve the forward movement of the economy. The main function of competition is to determine the value of economic regulators, which are prices, rates of profit, interest, etc.
In addition, an integral element of a market economy is market infrastructure. The market requires the creation and functioning of commodity exchanges, wholesale and retail trade structures.
The essence of the market is most fully manifested in its functions. A modern highly developed market performs six main interrelated functions:
1. Regulatory function is the most important. It assumes the impact of the market on all spheres of the economy, ensures coordination of production and consumption in the assortment structure, balance of supply and demand in price, volume and structure, proportionality in production and exchange between regions and spheres of the national economy.
An important role in market regulation is played by the relationship between supply and demand, which significantly affects prices. A rising price is a signal to reduce production; a falling price is a signal to reduce production. As a result, spontaneous actions of entrepreneurs lead to the establishment of more or less optimal economic proportions.
- 2. Stimulating function consists of encouraging producers to create new products, necessary goods at the lowest cost and obtaining sufficient profits, stimulating scientific and technological progress and, on its basis, intensifying production and the efficiency of the entire economy. The market's stimulating function is very important for economic development.
- 3. Pricing (or equivalent) function- this is the establishment of value equivalents for product exchanges. At the same time, the market compares individual labor costs for the production of goods with a social standard, i.e. compares costs and results, reveals the value of a product by determining not only the amount of labor expended, but also its benefits. The market recognizes only socially necessary costs, only those that the buyer agrees to pay.
- 4. Intermediary function provides a meeting between economically isolated producers and consumers for the purpose of exchanging the results of their work. Also, economically isolated producers in conditions of deep social division of labor must find each other and exchange the results of their activities. Without a market, it is almost impossible to determine how mutually beneficial a particular technological and economic connection is between specific participants in social production. In a normal market economy with fairly developed competition, the consumer has the opportunity to choose the optimal supplier (in terms of product quality, price, delivery time, after sales service and other parameters). At the same time, the seller is given the opportunity to choose the most suitable buyer.
- 5. Information function provides market participants, through constantly changing prices, with objective information about the socially necessary quantity, range and quality of those goods and services that are supplied to the market. Spontaneously occurring operations turn the market into a giant computer, collecting and processing colossal volumes of point-by-point information and producing generalized data on the entire economic space it covers. This allows each enterprise to constantly compare its own production with changing market conditions.
- 6. Last one, healing function as it were, “cleanses” the economy of unnecessary and ineffective economic activities. Those entrepreneurs who do not take into account the needs of consumers and do not care about the progressiveness and profitability (profitability) of their production are defeated in the competition and are punished by “bankruptcy”. Conversely, socially useful and efficiently operating enterprises prosper and develop.
The market has a complex structure and its influence covers all spheres of the economy. The economic structure is determined by:
- - forms of ownership (state, private, collective, mixed);
- - the structure of commodity producers (state, rental, cooperative, private enterprises, self-employed enterprises), which depends on the share of one or another form of economic entity in the overall economy;
- - features of the sphere of commodity circulation;
- - the level of privatization and denationalization of structural divisions of the economy;
- - types of trade used in the country.
By structure markets can be divided according to the following criteria:
- 1. According to the economic purpose of objects of market relations:
- - markets for goods and services;
- - markets for means of production;
- - markets for scientific and technical developments;
- - securities markets;
- - labor market.
The diversity of markets predetermines a radical change in the entire system of interaction between enterprises, the transition of the sale of goods on the basis of direct connections, the replacement of the formal accounting nature of purchase and sale with real purchase and sale, and the free choice of partners in economic relations. The instruments of such a market are structures in the form of commodity and stock exchanges, special bases, commercial centers, wholesale trade enterprises, etc.
- 2. By product groups:
- - markets for industrial goods;
- - consumer goods; food products;
- - markets for raw materials and materials, etc.
Thus, in the market for agricultural raw materials, a fund of agricultural products is formed to meet food needs, as well as to meet production needs for agricultural raw materials. The formation of a market for consumer goods involves a sharp increase in the volume of their production, the expansion of competitive principles to satisfy consumer demand, and the creation of branded stores.
- 3. By spatial basis:
- - intraregional;
- - interregional;
- - republican;
- - inter-republican;
- - international (world).
The formation of such markets actually ensures the acquisition of state sovereignty.
- 4. According to the degree of limited competition:
- - Free market - regulated on the basis of free competition of independent producers;
- - Monopolistic market - the conditions of production and circulation are determined by a group of monopolies, between which monopolistic competition remains;
- - An oligopolistic market is one in which most of the output is produced by a handful of large firms, each of which is large enough to influence the entire market through its own actions.
- 5. According to the types of subjects of market relations, markets can be divided into:
A. Wholesale trade markets, when enterprises and organizations act as buyers and sellers;
B. Retail markets, when the buyers are individual citizens;
C. Markets for public procurement of agricultural products, when the buyer is the state, and the sellers are the direct producers of agricultural products: collective farms, state farms, farmers, agricultural complexes, etc.
Wholesale trade is carried out in two types:
The first type is the establishment of direct connections between suppliers and consumers. This type is usually used in stable labor cooperation. With such connections, the contract becomes the initial and active lever for market formation.
The second type of wholesale trade is commercial centers and exchanges. This type is used when the supplier's products are used by numerous small consumers.
The transition to wholesale trade is possible under certain economic and social prerequisites:
- - a reasonable price system that takes into account the relationship between supply and demand;
- - creation of a developed market infrastructure.
- 6. Taking into account compliance with the rule of law in the economy, markets are divided into:
- 1) Legal market (open, legalized)
- 2) Illegal market (“black” and shadow) - most often arises either as an area of underground trade in goods, the free sale of which is prohibited by law (drugs, weapons, pornography) or as an area of trade in any goods, but in violation of the specified rules and norms of trade ( in the wrong place, in the absence of licenses, non-payment of fees, taxes, duties).
Research into the structuring of markets allows us to identify the main types of markets.
- - Markets for goods and services. This group includes markets:
- - consumer goods - food (food, food) and non-food (the market is intended for the sale of a wide group of consumer goods, including clothing, shoes, haberdashery and perfumery, household goods, medicines, certain types of building materials and much more) goods .
- - service markets - cover paid services for consumer services, utilities, transport services, information services, etc.
- - markets for housing and non-industrial buildings.
- - Markets for production factors. They include:
- - real estate markets;
- - tools;
- - raw materials and materials;
- - energy resources;
- - mineral.
The factor market involves the purchase and sale of economic resources or factors of production, which are divided into primary production factors provided by households, such as land, capital and labor, and intermediate factors provided by enterprises to other enterprises. The subjects of the factors of production market are producers, who are buyers of factors of production, and households, who are sellers.
- - Financial markets. This:
- - capital markets, i.e. investment markets. This is the market that is characterized by the most highly intellectual and creative work, cutting-edge investment goods and materials, and also which is associated with a high degree of risk. Objects of purchase and sale - patents, licenses.
- - credit markets;
- - securities markets, represented by shares, bonds, options, warrants, futures contracts, etc. There are two organizational forms of securities trading in the securities market: stock exchanges and over-the-counter trading
- - currency and money markets.
- - Markets for intellectual products - innovations, inventions, information services, works of literature and art.
- - Labor markets. They represent an economic form of movement of labor resources, in which labor migrates in accordance with the laws of a market economy.
- - Regional markets: local, domestic, national markets; external, international markets.
Having considered the concept, basic elements, functions and structure, it should be noted that it is impossible to unambiguously evaluate the market system. Like any other economic system, it has both positive features and disadvantages.
Arguments for the market system include:
Efficiency of resource allocation.
The main economic argument for a market system is that it promotes the efficient allocation of resources. According to this thesis, a competitive market system directs resources to produce those goods and services that society needs most. It dictates the use of the most effective methods for combining resources for production and promotes the development and implementation of new, more efficient production technologies.
Freedom.
An important non-economic argument in favor of a market system is the fact that it emphasizes the role of personal freedom. The market system provides choice and freedom of enterprise and, in fact, on this basis it succeeds. In a market system, they are free to seek to increase their own benefits, subject, of course, to the rewards and punishments they receive from the market system itself.
At the same time, several critical arguments are put forward against the market system:
- - its control mechanism and competition weaken over time;
- - Income inequality, the inability to take into account collective needs, and the presence of external benefits and costs inherent in the market system prevent the production of such a set of goods and services that society primarily needs.
- - a competitive market system does not guarantee full employment and stable price levels.