The market economy is based on severalfundamental laws. They developed over several centuries. The origin of these factors determined how economic laws operate in the market economy.
No market would not have appeared without the desire of peopleget a profit. Initiative entrepreneurs who create their companies, produce goods and services and offer them to the consumer are one of the most important pillars of a free economy. However, not a single businessman could develop his business if he had no access to various forms of ownership, as well as means of production. It is these phenomena that help to understand how economic laws operate in a market economy.
The ratio of supply and demand generates a priceon the goods. In another economic system (planned) it is determined by the state. At the same time, the authorities are guided only by their own ideas about the correctness of their own decisions. The market is independent of the state, therefore, the prices on it are determined freely.
An economy in which there are no governmentbarriers, nevertheless must be regulated by law. First of all, this principle concerns the establishment of relations between enterprises and individuals (in other words, economic entities).
The main feature of a market economy iscompetition. This is a struggle between different actors for profit, production, buyers, etc. The conditions for their rivalry may be different. For example, experts identify perfect competition. It is possible if the market has a huge number of companies, none of which can dictate the terms to their opponents. As a rule, this situation develops in a new industry. Signs of perfect competition is an unlimited number of market participants, as well as a free price rate.
But the situation on the market may be reversed.In addition to perfect, there may be imperfect competition. In these circumstances, one of the producers can influence the market and harm their competitors. To do this, there are many methods (setting dumping prices, creating barriers for the appearance of opponents in the industry, etc.). Market economy can lead to the formation of monopolies, when one company controls its entire segment. In this case, prices and quality of goods or services are dictated by only one party.
In 1890, the English economist Alfred Marshallformulated the features of the economic laws in the market economy. His main theory was the idea of the relationship between supply and demand. These two indicators are the most important characteristics of any market economy.
The principle of the law is as follows.The lower the price of a product, the greater the consumer demand for it and the smaller the supply of producers. The reverse situation is also true. As a rule, the price is set at the point of equilibrium, which is facilitated by economic laws in the market economy. How do these principles work? To answer this question, first of all, it is necessary to determine exactly what demand is.
This term was formulated in the XIX century.Demand is the request of a potential buyer or an actual buyer to receive a certain product in exchange for some funds. This characteristic shows two important features of the consumer - his desire to acquire something and his ability to pay the cost of the desired.
An important characteristic of demand is itselasticity. This term refers to the buyer's reaction to the change in commodity prices. To determine it, there is a special coefficient, influenced by economic laws in the market economy. Their action is such that the presence of competing products is extremely important for the buyer. Suppose that the price for one model of the car has increased. If the buyer knows that he can buy a similar car cheaper, then his choice will be predetermined in advance.
The market system is such that competitorsIt is not profitable to raise prices if their opponents have a lower commodity price. This relationship governs companies' policies better and more effectively than antitrust laws. It is influenced by objective economic laws in the market economy.
The elasticity of customer demand has risen extremelyin the last decade due to technical progress. The presence of the Internet and free access to any information allowed consumers to quickly find out the state of prices for the same goods from different companies. This is an excellent example of how economic laws operate in the market economy.
Each person chooses their purchases based onown earnings. Welfare directly affects what the consumer can afford. In the XIX century, this relationship was investigated by Ernst Engel - a German scientist who became the creator of important scientific theories.
The economist noted that along with the growththe welfare of a particular buyer, his preferences in goods change. Engel suggested (and later justified his idea) that the less a person's income, the more he spends on food. There is nothing surprising in that poor people can not afford, for example, to travel often.
However, the German scientist in his theory emphasizedthe fact that, together with enrichment, the costs for different groups of goods do not grow proportionally. Economic laws in the market economy and their effect are determined by the thickness of the buyer's wallet. If a poor man spends half his earnings on food, the rich man will spend his surplus on completely different things, not on additional supplies of food.
In the twentieth century, economicindicators of advanced countries. There was a so-called golden billion. So called the inhabitants of the most prosperous states. In a society in which there is no problem of survival or uncomfortable living conditions, people are trying to consume more and more. This pattern interested economists. So there was a theory of consumption.
What it is?The main postulate of the theory is the assumption that each person wants first of all to consume (buy everything new). Daily purchases, shopping, etc. - all these are signs of such a market participant. In this theory, consumption is considered the main factor determining the effectiveness of the economy.
Important for any economy is the problemthe correct organization of any production activity. Both the state and businessmen face a choice: how to allocate their resources in order to achieve maximum efficiency from the company or company. There is a universal Pareto law, which states that 20% of efforts give 80% of the total result, and the remaining 80% of efforts give only 20% of the result.
What does this mean in practice?Each owner must determine how to properly optimize their business, so that a minimum of important actions will give the maximum possible result. This is the problem of the effectiveness of the economy.
Of the many market factors, only a fewhave a lot of weight. That is, correct single actions can lead to an important result. At the same time, dozens of incorrect decisions will not give half the profit. The Pareto law is especially important for business and entrepreneurs. Successful companies work only in certain segments of the market, where they can get the most profit with the least effort.
In today's world, states can not achievejust a few mutually exclusive results, as economic laws say. What are the economic laws of today in the market economy? There is a hypothesis about the so-called impossible trinity. It is that you can not simultaneously achieve a fixed exchange rate, freedom of capital, and independence in monetary policy.
This theory was proposed by Nobel laureateon the economy of 1999 by Robert Mundell. This economic law forces states to choose a certain course in their policies, gaining some market advantages at the expense of others.
Many factors determine how themarket economy economic laws. Some of them directly interact with each other. One of the most important and defining laws for the market is the law of value or the law of prices. It says that the goods are sold for a value that corresponds to the amount of labor invested in it.
Most of the products of the economicactivity is produced by several manufacturers. In order to adequately assess the invested labor of different parties, an equivalent exchange is necessary. Before taking part in it, the manufacturer must begin to offer goods that are important to society and are in demand in it. This is an important factor, without which there will be no profit. In addition, any company should evaluate its costs. In order to get income, the manufacturer needs to keep its costs at a level no higher than socially necessary. This is how economic laws operate in the market economy.
In today's world, there are variouseconomic laws in the market economy. How do these norms work in an ever-changing system? The market economy differs from the planned one, that it is impossible to predict in what direction it will move tomorrow. Free trade and entrepreneurship generate many factors that affect prices.
Based on these data, specialistsformulated the law of market equilibrium. It comes at a time when the volume of supply and demand is compared. The main regulator of this ratio is price. Demand and supply allow economists to determine how much resources and goods are needed for a common household. When the market equilibrium comes, it is in the hands of both producers and consumers.
In such a situation, buyers are offeredjust as many products as they can afford. There is no more important condition for the operation of economic laws in the market economy. In the presence of this factor, the manufacturer does not have to get rid of surplus goods, which causes him losses. Market equilibrium allows the owner of a product or service to grow rich and develop his business, which benefits the entire economy.
The market economy has its own directlimitations. Such a system can not guarantee to all people social equality. Especially it concerns the situation with the distribution of income. The market is arranged so that some necessarily grow rich, while others may become depleted.
Such an economy does not always ensure everyonecitizens work. In the conditions of market relations, each person has to take care of himself independently. The UN estimates that over the past fifty years the gap between rich and poor has more than doubled. This pattern is the object of criticism of supporters of leftist ideologies and opponents of capitalism.
