The market is that. The regulatory function of the market is that
In a broad sense, the market is the sphere of manifestation of economic relations arising between people in the process of production, distribution, exchange and consumption. In a narrower sense, the market is the sphere of commodity circulation and the associated set of commodity-money relations that arise between producers (sellers) and consumers (buyers) in the process of buying and selling goods. An expanded interpretation reveals a very important essential aspect of the market, which makes it possible to determine its place and role in the reproduction process: the market provides an organic connection between production and consumption, is influenced by them and itself influences them. The market determines the real volumes and structure of various needs, the social significance of the production product and the labor spent on its production, and establishes the relationship between supply and demand, which forms a certain level of prices for goods and services. In addition to the special function of ensuring the movement of goods from producer to consumer, the market performs a regulatory, control and stimulating function in the economic system of society. Through his mediation it is determined what exactly, how much, when and how and for whom to produce. Due to the operation of the law of value and the law of supply and demand, the necessary reproduction and proportions are established, the distribution of investment, material and labor resources between spheres of activity and branches of production is optimized, and effective economic control over the rational socially acceptable level of production costs is ensured.
The stimulating function of the market is that it initiates the production of exactly those goods that consumers need. Through the mechanism of competition, market relations actively influence the increase in the range and improvement of product quality, the reduction of production and circulation costs, the exclusion from production and consumption of obsolete types of products that do not have prospects for expanding sales. The desire to gain an advantage in the market stimulates intensive innovative activities of manufacturers aimed at timely updating the technical and technological base of the enterprise, the development of new types of products and services, and also strengthens the incentives of employees to improve their skills, creative and highly productive work. Market relations are of a general nature, extend to all economic spheres and regions of the country, and penetrate into all parts of the economic system of the state. Many subjects enter into these relationships, and a variety of goods and services enter the sphere of circulation, which formulates a complex and multidimensional market structure. financial market consumer intermediary
The greatest coverage of market subjects, grouping them taking into account the specific features of market behavior is achieved by identifying five main types of market:
- · consumer market - individuals and households who buy goods or receive services for personal consumption;
- · producer market - a set of individuals and enterprises buying goods for use in the production of other goods and services;
- · the market of intermediate sellers (intermediaries) - a set of individuals and organizations that become owners of goods for resale or rental to other consumers at a profit for themselves;
- · the market of public institutions purchasing goods and services for public utilities or to support the activities of various non-profit organizations;
- · international market - foreign buyers, consumers, producers, intermediate sellers.
The uninterrupted functioning of a complex and multi-level system, like a market, which in developed commodity production is represented by more than twenty of its main types, requires a highly developed and widely ramified general and special infrastructure that takes into account market characteristics. The market infrastructure is a set of organizations with different areas of activity that ensure effective interaction between commodity producers and other market agents who circulate goods and promote the latter from the sphere of production to the sphere of consumption. The most important elements of market infrastructure include: commercial information centers, commodity and raw materials stock exchanges, currency exchanges; commercial, investment, emission, credit and other banks; transport and warehouse networks; communication systems, etc. In ensuring the continuous movement of goods, supply and sales organizations play a decisive role - intermediaries, a dealer network of wholesale and retail trade enterprises, rental and leasing points, repair and service centers for servicing products at consumers, insurance, audit, holding, brokerage companies, trading houses, auctions, advertising agencies, exhibitions, system of foreign trade organizations.
The market is a complex and diverse economic phenomenon. Many scientists have approached its systematization and created many classifications, none of which are comprehensive. The main classifications of markets allow us to see the depth and complexity of this phenomenon.
Market concept
In economics, the market is understood as a system of relationships between producer and buyer through supply and demand. This is a special economic system, which is determined by a system of diverse relations between market participants. Each subject acts simultaneously in at least two guises: he is both a seller and a buyer. Relations between subjects occur in different areas and at different levels, so the classification of markets is a complex question with several answers.
The concept of the market is associated with freedom and self-regulation, and the peculiarity of this phenomenon is that it must take shape under the influence of many factors; it cannot be created by order. The main difference between the market and other forms of management is the freedom of its participants. The second is the presence of property. It is this that is the main incentive for a manufacturer who is interested in creating quality goods at prices that are adequate to the market. The market is also characterized by high awareness of participants about the state of affairs and high mobility of resources. The market must quickly respond to changes in supply and demand so that the manufacturer has time to receive maximum profits and the consumer has time to satisfy their needs.
Market structure
Any market consists of producers and consumers - these are the two main elements of the market structure. The peculiarities of the market structure are due to the fact that an unlimited number of participants can operate on it. Only the presence of competition triggers market mechanisms. Competition not only regulates production and pricing, but also creates diffuse economic power that ensures fair business conditions for all participants. However, the classification of markets can be determined not only by the number of participants, but also by such features as control over the market price, the nature of the products sold, the presence or absence of barriers to entry into the market and the existence of non-price competition.
The degree of control over prices is one of the most important indicators determining the structure of the market. The more economic power is concentrated in one hand, the less competitive the market is.
Traditionally, taking into account the listed indicators, researchers distinguish 4 types of market structure.
- Monopoly. In this case, most of the power over the market is concentrated in the hands of one player. He can dictate his terms to the market, and this has a bad effect on the implementation of market principles. In such a market there are usually many buyers and few sellers; there are barriers to the entry of new producers into the market.
- Oligopoly is a type of imperfect competition when power is concentrated in the hands of a few players. There are high barriers for manufacturers to enter such a market; the market is characterized by low information openness and a large number of buyers.
- Monopolistic competition is a borderline type of structure between imperfect and perfect competition. Such markets are characterized by a large number of producers and buyers, the products of different manufacturers have subtle differences, and information in such markets is carefully protected.
- Perfect competition is a structure in which there are many producers and many consumers; it is an ideal self-regulating structure with unlimited competition and a large amount of market information.
Market functions
The complexity of the structure and the diversity of market participants with their own tasks and goals leads to the fact that the functions and classification of markets can be defined differently, depending on the situation. However, traditionally in macroeconomics we are talking about seven basic functions of the market, these include:
- Regulatory. The most important of all, it is to establish a balance between supply and demand. Regulation allows producers to find empty niches and reduce competition in oversaturated markets.
- Informational. The market provides information to producers and consumers about goods, market conditions, prices, and benefits.
- Sanitizing. The market is a tool for removing weak, uncompetitive companies from the market, which contributes to the growth and improvement of the economy.
- Distribution. The market ensures the movement of goods to those areas where demand is higher, eliminating shortages and overstocking.
- Mediation. The market ensures that the consumer finds the product and the manufacturer.
- Pricing. The market seeks a balance between supply and consumer purchasing power, forming an adequate price.
- Stimulating. The market motivates manufacturers to use scientific and technological innovations and search for more economical and safe production.
How markets operate
Any market in its full functioning is based on the following principles:
- Freedom. The main principle is the free choice of the form, scope and form of economic activity. Anything that does not contradict the law can become the subject of entrepreneurial activity.
- The primacy of the consumer. The market functions to satisfy the needs of the consumer, and the profit of the producer is secondary.
- Competition. Nothing in the market should restrict the free competition of goods producers.
- Equality of rights of owners of any form of property.
- Free pricing. The price should be formed on the basis of market mechanisms, and not under the influence of regulators.
- Responsibility. All entities must bear economic responsibility for their actions.
- Universality. The market must be accessible to everyone.
Types of markets
The variety of functions and goals of markets creates difficulty in dividing them into types. The main features of the classification of markets are as follows: geography, object of transactions, nature of sales, level of saturation, degree of maturity, industry and range of goods, and others. The concept of a market and the classification of markets come from a variety of bases, so you can find many of their varieties.
The most common markets are:
- commodity;
- services;
- finance;
- real estate;
- information;
- labor.
There are also private classifications of markets, which allow us to distinguish between equilibrium, excess and deficit; market for cars, clothing, food, etc.; sellers and buyers; government agencies; wholesale and retail; national and global.
Commodity markets: types and specifics
The redistribution and movement of goods and services occurs in product markets that are closest to the consumer. The classification of markets for goods and services is complex due to the huge variety of subjects of transactions. Traditionally, the services market is divided into the following segments: education, healthcare, insurance, transport, housing, household and utility services, culture and art. The peculiarity of this market is that some of the services for the consumer are free and funded by the state. There are usually few intermediaries in this market; the service provider communicates directly with the consumer.
Commodity markets are divided into: food markets, consumer goods markets, and raw materials market. They can also be classified by location into domestic, regional and global. There are many intermediaries here, so there are wholesale and retail markets.
Financial market structure
The turnover of financial resources occurs in a special market - financial.
The classification of financial markets includes two global varieties:
- stock market, or securities market;
- credit market.
In turn, the latter can be divided into:
- Cash, on which “short money” is sold for a period of up to 1 year.
- Capital, “long” money moves on it for up to several decades.
- Foreign exchange. Currency exchange and the purchase of money from other countries are carried out on this special market.
- Urgent. Ensures the conclusion of contracts for specific periods.
Securities market: types and functions
The sale of various securities to investors requires a special market, since the financial security of participants is especially important here. The classification of the securities market is usually based on the types of subject matter of transactions. Traditionally, there are markets for bonds, shares, and financial instruments. The financial market is also divided into primary and secondary, depending on when the securities enter the market.
Features of the labor market
The special market in which the movement of labor resources takes place is called the labor market. Typically, the classification of the labor market is based on a territorial principle, and in this case, external and internal are distinguished. Also, the labor market can be segmented according to the demographic characteristics of the personnel; in this case, the markets for youth, women, the elderly, and the disabled are distinguished. It is also possible to highlight professional labor markets: production, education, management.
Points: 1.00 from a maximum of 1.00
Mark a question
Question text
The regulatory function of the market is that:
Select one answer:
a. the market encourages manufacturers to create goods with the least amount of resources
b. the market determines the quantity and range of goods produced
c. the market contributes to the stratification of society by income level
Correct answer:
the market determines the quantity and range of goods produced
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Functions and role of the market in the economy. System, structure and infrastructure of the market. Advantages, disadvantages and market features
The economic literature identifies several functions performed by the market, which reflect its role in achieving specific economic goals of society.
- Regulatory function– the most important. In market regulation, the relationship between supply and demand, which affects prices, is of great importance. The implementation of this function allows you to find answers to the questions of what, how and for whom to produce. A rising price is a signal to expand production; a falling price is a signal to reduce production. The market tells producers what to produce, what goods and services to refuse or reduce the volume of their output. The market provides equally valuable information to consumers. Based on it, they constantly make choices about how best to satisfy their many needs. As a result, capital from less profitable industries with lower prices flows into more profitable industries with higher prices. Through the mechanism of the law of value, supply and demand, the market contributes to the establishment of basic micro- and macroproportions in the economy and ensures dynamic proportionality in trade turnover between different regions and national economies.
- Pricing function: is realized when demand and supply collide, as well as due to the action of competitive forces. As a result of the free play of market forces, prices for goods and services are formed, a connection is established between value and price, which is sensitive to changes in production, needs, and market conditions.
- Stimulating function. Through prices, the market stimulates the development of scientific and technological progress, cost reduction, quality improvement, and expansion of the range of goods and services. Since each subject of market relations directly experiences the results of the decisions made, he is interested in the most rational use of the resources available to him.
- Distribution function. The income received by market entities consists mainly of payments for the factors of production that they possess. The amount of income depends on the quantity and quality of the factor of production and on the price that is set on the market for this factor.
2.1.4. Market functions
- Information function. The market is a rich source of information, knowledge, and information necessary for business entities. It provides, in particular, objective information about the socially necessary quantity, range and quality of those goods and services that are supplied to the market. The availability of information allows each company to constantly compare its own production with changing market conditions.
- Intermediary function. Economically isolated producers in conditions of deep social division of labor must find each other and exchange the results of their activities. In a normal market economy with sufficiently developed competition, the consumer has the opportunity to choose the optimal supplier of products. At the same time, the seller is given the opportunity to choose the most suitable buyer.
- Sanitizing function. The market clears social production of economically weak, unviable economic units, and at the same time encourages the development of the most efficient, entrepreneurial, and promising structures. Enterprises that do not take into account consumer demands suffer losses and go bankrupt, while socially useful and efficiently operating enterprises develop successfully.
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Return to Market Economy
The functions of the market are determined by the tasks facing it. The market mechanism is designed to find answers to three key questions: what, how and for whom to produce? To achieve this, the market performs a number of functions:
Regulatory function. It is associated with the impact of the market on all areas of economic activity, primarily on production. Constant price fluctuations not only inform about the state of affairs, but also regulate economic activity. A rising price is a signal to expand production; a falling price is a signal to reduce production. Information provided by the market forces manufacturers to reduce costs and improve product quality.
Question 10. The regulatory function of the market is that:
At the same time, being a regulator of economic life, the market has repeatedly demonstrated that not all processes of macroeconomic regulation are subject to it. This is manifested in periodic recessions, inflation, and unemployment.
Information function. The price that emerges in each of the markets contains a wealth of information necessary for all participants in economic activity. Constantly changing prices for products and resources provide objective information about the required quantity, assortment, and quality of goods supplied to markets. High prices indicate insufficient supply, low prices indicate an excess of goods compared to effective demand.
Spontaneously occurring operations turn the market into a giant computer, collecting and processing colossal volumes of point-by-point information, producing generalized data on the entire economic space it covers. Market-concentrated information allows each participant in economic activity to compare their own position with market conditions, adapting their calculations and actions to market demands.
Pricing function. As a result of the interaction of producers and consumers, supply and demand for goods and services in the market, prices are formed. It reflects the utility of a product and the costs of its production.
Unlike the administrative-command system in a market economy, this assessment occurs not before the exchange, but during it. The market price represents its role as a result, a balance between the comparison of producers' costs and the usefulness (value) of a given good for consumers. Thus, in the process of market exchange, the price is set by comparing costs (costs) and utility of the goods exchanged.
Intermediary function. The market acts as an intermediary between producers and consumers, allowing them to find the most profitable purchase and sale option. In a developed market economy, the consumer has the opportunity to choose the optimal supplier. The seller, from his position, strives to find and conclude a deal with the buyer who suits him most.
Sanitizing function. The market mechanism is a fairly rigid, to some extent cruel, system. He constantly carries out “natural selection” among participants in economic activities. Using the tool of competition, the market clears the economy of ineffective enterprises. And on the contrary, it gives the green light to those who are more enterprising and active. As a result of the selection work of the market, the average level of efficiency increases and the stability of the national economy as a whole increases.
Experience shows that the average cycle of a small business does not exceed five years. Large firms often perish in the competition. Of course, in conditions of concentration of production and capital, monopolization distorts the sanitizing mechanism of the market. Yet monopolization nowhere suppresses competition so much that “natural selection” ceases.
In Russia, the total number of small enterprises has stabilized in recent years. The number of ceasing to exist and newly created enterprises became equal. One part of the enterprises went bankrupt as a result of the bankruptcy of banks, the other went into the shadow business environment: many cannot withstand the competition.
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Market- a set of interacting decisions of consumers, producers, a set of purchase and sale transactions.
Market- an extensive system of agreements, transactions, contracts, mutual obligations, reflecting in its entirety the market process of interaction between sellers, buyers and other market agents.
Market- a special kind of information system that is guided by price signals and ensures the use of knowledge of specific circumstances prevailing in a certain place and time; an objective system for generating and transmitting information.
Market- the sphere of voluntary exchange at a market price, at a price that suits both the consumer and the producer.
Market- the sphere of realization of private interests, a certain public institution operating within the framework of formal and informal norms of society. interests.
Market- the sphere of mutual transfer of property rights.
Market functions:
- Distribution function- through spontaneous pricing, resources, goods, capital and services are distributed between buyer and seller.
- Redistribution function- redistribution of limited resources from an ineffective to a more efficient owner. Effect is the difference between costs and results.
- Regulation function- regulates the level of consumption of limited resources. The market does not take into account demand that is below the market price, that is, it does not take into account insolvent needs.
The formation of market relations in Russia and other post-socialist countries has increased the practical significance of the theory of market economics.
The concepts of “market” and “market economy” are interrelated, but not identical. The market arises and develops along with the division of labor in society long before the formation of a market economy. Market economy is the result of a long historical development of market relations and the market
In a society based on the division of labor, practically no one can satisfy their economic needs on their own by producing all the consumer goods necessary for existence. Consequently, the market arises when commodity producers, as a result of the division of labor, are forced to enter into constantly renewed relationships with each other.
The concept of "market" is both simple and complex.
11.2. Market functions
Considering this category to be simple and understandable to everyone, some authors avoid defining it. Many sources provide a variety of definitions of the market. There are narrow and broad definitions of the concept “market”. In the narrow sense, the market reflects only the essence of the exchange process associated with the purchase and sale of material goods and services. In this regard, the market is defined either as a set of transactions for the purchase and sale of goods, or as the interaction of sellers and buyers, or as a place where sellers and buyers find each other.
In a broad sense, the market is a form of socio-economic life of society in which the reproduction of material goods, relationships and interests is carried out on the basis of the principles of commodity production and circulation, the main of which is freedom of economic activity for the purpose of making a profit. Both definitions, in their own way, correctly reflect the essence of the problem. A narrow definition reflects the essence of the market itself in its original meaning. The broad definition of the market is the definition of a market economy as a result of its further development.
The market is an integral element of a market economy. By itself, it does not create goods and commodity abundance. This is just one of the tools that affects the reproduction and economic interests of business entities. The market implements socio-economic relationships that are economically separated by the division of labor of economic entities. It is formed and can function in a certain market environment. The creation of goods and services is ensured by a market economy that operates according to the laws of commodity-money relations.
The market objectively has the following functions: communicative, evaluative, stimulating, distributive and informational.
The essence of the communicative function of the market is that the market, through such components of the market mechanism as needs, interests, demand and supply, provides direct and inverse relationships between production and consumption; coordination of economic interests of economic entities - producers-sellers and consumers-buyers, owners of available funds and persons in need of these funds, workers and employers; bringing the volume and structure of production into line with the volume and structure of effective demand; exchange of results of activities of economic entities in conditions of deep social division of labor; mutual benefit of technological and economic ties between participants in social production, satisfaction of their needs for various types of goods.
The evaluation function is to compare individual production costs with socially necessary ones, which determine the market value of products.
The latter, being adjusted to the ratio of supply and demand, constitutes the market price. It is the market value that determines the social significance of the goods and services produced and the labor spent on their production.
The stimulating function manifests itself to a decisive extent as a result of intra-industry and inter-industry competition, as well as changes in the relationship between supply and demand.
The distribution function provides distribution processes mediated by exchange on the principles of equivalence, namely: the distribution of economic (material, labor, monetary and financial) resources between commodity producers-sellers in the left and territorial sectors; realization of produced goods, bringing them to specific consumers-buyers, i.e. distribution of goods in accordance with the structure and dynamics of effective demand; formation of income of economic entities of the market (profit, wages, etc.), their subsequent distribution and redistribution in the process of exchanging the results of their activities.
The information function is manifested in the fact that through constantly changing prices and interest rates on loans, the market provides production participants with information about the socially necessary quantity, range and quality of those goods and services that everyone sells or buys.
When completing tasks A1 – A20, circle the number of the correct answer
Answer: ___________________
2. Below are a number of terms. All of them, with the exception of one, relate to the concept of “macroeconomics”.
World market, company profit, economic structure, exchange rates, unemployment, external costs, inflation.
Find and indicate a term that “falls out” from their series and relates to another concept.
Answer: ___________________________
3. Establish a correspondence between the types of markets and their examples: for each position given in the first column, select a position from the second column.
EXAMPLES | TYPES OF MARKETS | ||
1) | For the May holidays, the travel agency increased prices for bus tours to Europe | A) | consumer goods market |
2) | Due to the expansion of suburban construction, the demand for landscape design specialists has increased | B) | raw materials market |
3) | the company purchased roofing iron for the construction of country houses | IN) | labor market |
4) | the development of computer technology has led to an increase in demand for the services of operators and programmers | G) | consumer services market |
5) | With the onset of summer, sports clubs have reduced prices for gym memberships | ||
6) | a citizen ordered vegetables and fruits for the household from an online store |
Write down the selected letters in the table, and then transfer the resulting sequence of letters to the answer form (without spaces or other symbols).
Find items in the list below that characterize the role of the state in a market economy.
Answer:___________________________ .
5. Read the text below, each position of which is numbered.
Determine which provisions of the text are
A) factual nature
B) the nature of value judgments
6. Read the text below, in which a number of words are missing.
It is absolutely clear that _______________(1) as a mechanism that orients the economy only towards increasing solvency _______________(2), cannot neutralize “external effects”.
Market mechanism. Market functions
Their essence lies in the fact that the activities of _______________(3) in a market economy have, in addition to positive results, also negative ones, which really affect the well-being of other members of society. As an example, we can cite _______________(4), associated with environmental pollution, depletion of natural resources as a result of their increasing involvement in economic circulation, imbalances in production, etc.
Regulation of external effects should be undertaken by _____________________ (5). The state repays the negative impact of external effects by redistributing income through the state budget or redistributing benefits received from positive external effects, an administrative ban on the use of harmful technologies, the exploitation of natural resources, etc.
Thus, ___________________(6) by the state of the market mechanism mitigates or can completely eliminate the negative consequences of market forces manifested in external effects. Select one word after another, mentally filling in each gap with words.
Please note that there are more words in the list than you will need to fill in the blanks.
Answers to Part A assignments
Section 5
№ | otv | № | otv | № | otv | № | otv | № | otv |
1 | 1 | 11 | 2 | 21 | 2 | 31 | 2 | 41 | 2 |
2 | 3 | 12 | 2 | 22 | 3 | 32 | 4 | 42 | 3 |
3 | 3 | 13 | 3 | 23 | 1 | 33 | 3 | 43 | 4 |
4 | 4 | 14 | 4 | 24 | 3 | 34 | 4 | 44 | 2 |
5 | 2 | 15 | 4 | 25 | 2 | 35 | 1 | 45 | 2 |
6 | 4 | 16 | 4 | 26 | 2 | 36 | 3 | 46 | 3 |
7 | 3 | 17 | 3 | 27 | 3 | 37 | 1 | 47 | 3 |
8 | 3 | 18 | 3 | 28 | 3 | 38 | 2 | 48 | 2 |
9 | 2 | 19 | 2 | 29 | 2 | 39 | 2 | 49 | 1 |
10 | 3 | 20 | 1 | 30 | 2 | 40 | 1 | 50 | 3 |
answers part B
in 1. Answer: sanitizing (health-improving)
c 2. Answer: external costs
B 3. Answer: GVBVGA
B 4. Answer: 156
Q 5. Answer: AABB
Q 6. Answer: AGEZBI
CHAPTER 4. How the market works
ISSUES ADDRESSED IN THE CHAPTER:
1. WHAT PRICE WILL CLEAR THE MARKET?
2. WHAT IS A DEFICIT BAD?
3. WHAT IS A SELLER'S MARKET?
If there is a shortage of goods and such queues as in these photographs, there is no need to improve the quality of products and the organization of trade: everything will be bought as is.
The market price of each specific product is regulated by the relationship between its quantity that is currently offered to the market and the demand of those who are willing to pay its natural price for this product.
Adam Smith
We have found that the motives that guide buyers and sellers in the market are completely different. But in order for both of them to be satisfied, they need to come to an agreement and conclude a transaction for the purchase and sale of goods between themselves. And the main condition of such a transaction is the price at which sellers are willing to exchange goods for money, and buyers are willing to pay for the purchase of the desired good. And since the search for a mutually acceptable price plays a central role in the mechanism of market activity, we will begin by clarifying the patterns of the birth of market prices.
§ 8. Formation of market prices
§ 9. The market in practice, or How trade is actually organized
MAIN CONTENTS OF THE CHAPTER
Formation of market prices
Coordination of the interests of sellers and buyers during market trading leads to the formation of a compromise in the form of an equilibrium price. At this price, it is possible to sell the entire quantity of goods that manufacturers (sellers) agree to offer for sale. This volume of goods is called equilibrium. The emergence of an equilibrium price occurs because market deviations from the equilibrium state - a shortage or excess of goods - are disadvantageous for sellers and buyers. An excess of goods is disadvantageous for sellers, and a shortage of goods is disadvantageous for buyers. When the market reaches an equilibrium state, the interests of sellers and buyers are coordinated in the best possible way.
The market in practice, or How trade is actually organized. The creation and development of firms requires the acquisition of physical and intangible capital. To do this, firms need cash capital. They attract it from the capital market. The sellers in this market are the owners of savings, i.e. those families who have incomes exceeding their needs for current expenses and tend to consume less today in order to significantly increase their consumption in the future. To achieve these goals, owners of savings need the opportunity to use them in such a way that over time they not only do not lose their value, but also increase as much as possible. In solving this problem, savings owners are helped by the financial capital market, with the help of which they give their savings for temporary paid commercial use.
chemical companies. The capital market includes different sectors that differ in terms of purchase and sale of monetary capital. The most important such sectors are: the credit market, the stock market and the debt market of companies (primarily bonds). In addition, the state plays a large role in the Russian capital market, investing money in enterprises to support them, prevent bankruptcy and help in development. In the capital market, firms can obtain funds of different types: debt capital or equity capital.
Market. Functions, conditions and structure of the market.
Borrowed funds are attracted by firms for a limited time, and then returned to the owners along with a fee for using them. Equity capital is placed at the disposal of firms for an unlimited time, and its previous owners become co-owners of the firms and, as such, receive the right to part of their property and income. The main means of obtaining equity capital are the issue (issue) and sale of various types of shares. Owners of shares cannot return them to the issuing company, but have the right to sell them on the securities market - the stock market. The price of shares in this market is determined by expectations regarding the income that the firm can earn for its owners in the future.
ISSUES FOR DISCUSSION
1. Why does the one who is better informed win in the market?
2. Russian firms are trying to break into world commodity markets by selling goods at lower prices. How can we graphically represent the consequences of such a policy on the supply curves in these markets?
3. You've probably heard the expression “seasonal price fluctuations”? How do you understand its meaning?
The functions of the market are determined by the tasks it solves. The market answers the questions: what, how and for whom to produce? It performs pricing, informational, regulatory, intermediary and sanitizing functions (Fig. 1).
Rice. 1. Market functions
Pricing function
As a result of the interaction of producers and consumers, supply and demand for goods and services in the market, prices are formed. It reflects the usefulness of the product and its production.
Unlike the administrative-command system, this assessment does not occur before the exchange, but during it. The market price is a kind of result, a balance between the comparison of producers’ costs and the utility (value) of a given product.
benefits for consumers. Thus, in the process of market exchange, the price is set by comparing costs (costs) and utility of the goods exchanged.
Information function
The price that emerges in each of the markets contains a wealth of information necessary for all participants in economic activity. Constantly changing prices for products and resources provide objective information about the required quantity, range, and quality of goods supplied to markets. High prices indicate insufficient supply, low prices indicate an excess of goods compared to effective demand.
Spontaneously occurring operations turn the market into a giant computer, collecting and processing colossal volumes of point-by-point information, producing generalized data on the entire economic space it covers. Market-concentrated information allows each participant in economic activity to compare their own position with market conditions, adapting their calculations and actions to market demands.
Regulatory function
It is associated with the impact of the market on all areas of economic activity, primarily on production. Constant price fluctuations not only inform about the state of affairs, but also regulate economic activity. A rising price is a signal to expand production; the price falls - a signal to reduce it. Information provided by the market forces manufacturers to reduce costs and improve product quality.
Figuratively speaking, there is a regulating “invisible hand” in the market, about which Adam Smith wrote: “The entrepreneur has only his own interest in mind, pursues his own benefit, and in this case he is guided by an invisible hand towards a goal that was not at all part of his intentions. By pursuing his own interests he often serves the interests of society more effectively than when he consciously seeks to serve them.”
At the same time, being a regulator of economic life, the market has repeatedly demonstrated that not all processes of macroeconomic regulation are subject to it. This manifests itself in periodic recessions, inflation, and unemployment.
Intermediary function
The market acts as an intermediary between producers and consumers, allowing them to find the most profitable purchase and sale option. In a developed market economy, the consumer has the opportunity to choose the optimal supplier. The seller, from his position, strives to find and conclude a deal with the buyer who suits him best.
Sanitizing function
- This is a fairly rigid, to some extent cruel system. He constantly carries out “natural selection” among participants in economic activities. Using the tool of competition, the market clears the economy of inefficiently functioning enterprises. And on the contrary, it will give the green light to those who are more enterprising and active. As a result of market selection work, the average level of efficiency increases and the stability of the national economy as a whole increases.
Experience shows that the average cycle of a small business does not exceed five years. Large firms often perish in the competition. Of course, in conditions of concentration of production and capital, monopolization distorts the sanitizing mechanism of the market. Yet monopolization nowhere suppresses competition so much that “natural selection” ceases.
In Russia, the total number of small enterprises has stabilized in recent years. The number of ceasing to exist and newly created enterprises became equal. One part of the enterprises went bankrupt as a result of bank bankruptcy, the other went into shadow business; many cannot stand the competition.
Market functions
The modern highly developed market has a huge impact on all aspects of economic life, performing the following main interrelated functions:
1) The most important function of the market is regulatory . In market regulation, the relationship between supply and demand, which affects prices, is of great importance. A rising price is a signal to expand production; a falling price is a signal to reduce production. In modern conditions, the economy is controlled not only by the “invisible hand”, which A. Smith wrote about, but also by government levers. However, the regulatory role of the market continues to be preserved, largely determining the balance of the economy. The market acts as a regulator of production, supply and demand. Through the mechanism of the law of value, supply and demand, it establishes the necessary reproductive proportions in the economy.
2) The price-forming function of the market arises when there is a collision of commodity demand and supply, as well as due to competition. The free play of these market forces results in the prices of goods and services.
3) The stimulating function is carried out using market prices. In this case, the efficiency of the economy is stimulated. Prices “reward” with additional profits those who produce goods that are most needed by consumers, who improve production, increase productivity, and reduce costs. Through prices, the market stimulates the introduction of scientific and technological progress into production, reducing the cost of production and improving its quality, expanding the range of goods and services.
4) Information function of the market. The market is a rich source of information, knowledge, and information necessary for business entities. Current prices “tell” businessmen about the state of the economy. In particular, through a specific range of prices (say for tea, coffee and cocoa), through their fall and rise, business people learn about the size of production, the saturation of the market with goods, the range and quality of those goods and services that are supplied to it, consumer requests, etc. The availability of information allows each company to compare its own production with changing market conditions.
5) The intermediary function is that the market directly connects producers (sellers) and consumers of goods, giving them the opportunity to communicate with each other in the economic language of prices, supply and demand, purchase and sale. In a market economy with fairly developed competition, the consumer has the opportunity to choose the optimal supplier of products. At the same time, the seller is given the opportunity to choose the most suitable buyer.
6) The healing (sanitizing) function is cruel, but economically justified. The market “cleanses” the economy of unnecessary and ineffective economic activity - from economically weak, unviable business units and, on the contrary, encourages the development of effective, enterprising, promising firms. Those. entrepreneurs who do not take into account the needs of consumers and do not care about the progressiveness and profitability of their production are defeated in the competitive “struggle” and are “punished” by bankruptcy. Conversely, socially useful and efficiently operating enterprises flourish and develop. Solving problems with many economic variables, the market impartially and rigidly selects resources, goods and methods of production. For some market participants, the requirements of this selection turn out to be exorbitant, and they drop out of the “game” due to losses and bankruptcy. Economic success and the profits of other participants indicate well-chosen production solutions, methods of growth and areas of activity. This kind of natural selection in the economy, regardless of whether individuals approve or disapprove of it, allows for self-regulation in the flow of goods, income and money.
7) Through the social function, the market differentiates producers. It provides the state with better opportunities to achieve social justice in the national economy, which could not be achieved under conditions of total nationalization.
Taking into account the functions of the market, its elements are: producers and consumers; prices; supply and demand; competition (“the invisible hand of providence”, according to A. Smith).