Market. Market functions

1. Market and its functions

2. Fundamentals of a market economy - diversity of forms of ownership, privatization, competition

Literature

1. Market and its functions

In its most general form, a market is a system of economic relations that develop in the process of production, circulation and distribution of goods, as well as the movement of funds. The market develops along with the development of commodity production, involving in exchange not only manufactured products, but also products that are not the result of labor (land, wild forest). Under the dominance of market relations, all relationships between people in society are covered by purchase and sale.

More specifically, the market represents the sphere of exchange (circulation), in which the connection between agents of social production in the form of purchase and sale takes place, that is, the connection between producers and consumers, production and consumption.

Market subjects are sellers and buyers. Households (consisting of one or more individuals), firms (enterprises), and the state act as sellers and buyers. Most market participants act simultaneously as both buyers and sellers. All economic entities interact closely in the market, forming an interconnected “flow” of purchase and sale.

The objects of the market are goods and money. Not only manufactured products, but also factors of production (land, labor, capital), and services act as goods. Money is all financial means, the most important of which is money itself.

The market as an independent entity includes three main elements: the market for goods and services, the labor market, and the capital market. All these three markets are organically interconnected and influence each other. The development of the market and market relations depends on the development of all its components.

The most important condition for the emergence of a market is the social division of labor. Through the division of labor, an exchange of activities is achieved, as a result of which a worker of a certain type of specific labor gets the opportunity to use the products of any other specific type of labor.

No less an important condition the emergence of a market is specialization.

Specialization is a form of social division of labor between various industries both spheres of social production and within the enterprise at various stages of the production process. In industry, there are three main forms of specialization: subject (for example, automobile, tractor factories), detail (for example, a ball bearing plant), technological - stage (for example, a spinning factory).

Improvement and perfection of the production profile of subject-specialized enterprises, the development of detail and technological specialization lead to the expansion of production relations - cooperation.

The specialization of production in a number of industrialized countries has mainly followed the path of expanding detail and technological specialization.

Specialization scheme, i.e. a set of specialties is becoming more and more complex as the labor process itself becomes more complex and deepening. In the old days, humanity had several specialties, primarily hunter and farmer. Today's lists of specialties include many thousands of very different professions. The vast majority of them require training (sometimes many years) in special skills and techniques. Specialization has now reached such a degree that the objects around us can no longer, as a rule, be produced alone.

The need for constant exchange of the fruits of specialized labor today determines the nature of relationships between people in society.

An important reason for the emergence of the market is the natural limitation of human production capabilities. Even the most capable person can produce only a small amount of good. Not only human production capabilities are limited in society, but also all other factors of production (land, technology, raw materials). Their total number has limits, and their use in any one area excludes the possibility of the same production use in another. In economic theory, this phenomenon is called the law of limited resources. Limited resources are overcome by exchanging one product for another through the market.

The reason for the formation of the market is the economic isolation of commodity producers so that they can freely dispose of the results of their labor. Benefits are exchanged by completely independent producers who are autonomous in making economic decisions. Economic isolation means that only the manufacturer himself decides what products to produce, how to produce them, to whom and where to sell them. An adequate legal regime for the state of economic isolation is the regime of private property. The exchange of products of human labor primarily presupposes the existence of private property. With the development of private property, a market economy also developed. Most high level private property and market relations achieved under capitalism.

Private property objects are diverse. They are created and increased through entrepreneurial activity, income from running their own household, income from funds invested in credit institutions, shares and other securities.

Subsequently, the isolation of commodity producers began to spread to collective and other forms of ownership. Cooperatives, partnerships, joint-stock companies, state and mixed enterprises arose.

In addition, the reason for the emergence of the market lies in the opportunity (freedom) for each economic entity to ensure its interests.

The market presupposes freedom of competitive behavior, freedom of management, and protection of the interests of a particular producer. 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.

Market functions.

The market has a huge impact on all aspects of economic life, performing a number of economic functions.

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.

The market performs a stimulating function. Through prices, it 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.

The next function of the market is information. The market is a rich source of information, knowledge, and information necessary for business entities. It provides, in particular, information about the quantity, range and quality of those goods and services that are supplied to it.

The availability of information allows each company to compare its own production with changing market conditions.

The intermediary function of the market is that 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.

The market performs a sanitizing function. It clears social production of economically weak, unviable economic units and, on the contrary, encourages the development of efficient, enterprising, promising firms.

The market also makes it possible to solve problems of living standards, structure and efficiency of production.

The market makes it possible to enjoy universal human values. The market itself is the property of world civilization. He demonstrates his capabilities in developed countries, in developing countries, regardless of national, ideological and other characteristics.

The market mechanism frees the economy from shortages of goods and services. Both in theory and in practice, a market economy is predominantly deficit-free within the limits of those resources (including imports) that the country has.

The market realizes value and brings goods to the consumer. The market serves as a link between production and consumption.

2. Fundamentals of a market economy - diversity of forms of ownership, privatization, competition

The modern market economy is a complex organism, consisting of a huge number of diverse production, commercial, financial and information structures interacting against the backdrop of an extensive system of business legal norms.

The key concept expressing the essence of market relations is the concept competition.

The word competition translated from Latin means clash, competition. Translated into economic language, competition is the struggle between participants in market relations to obtain the maximum effect, for a profitable deal, i.e. This is competition between people, firms, organizations and territories interested in achieving the same goal.

The subject of competition is a product through which rivals seek to win the consumer and his money.

The object of competition is the consumer and buyer, for whose position opposite parties are fighting in the market.

There are many definitions of competition:

Competition is an economic struggle, rivalry between individual producers of products, works, and services to satisfy their interests related to the sale of these products, performance of work, and provision of services to the same consumers. Competition is competitive work between commodity producers for the most profitable areas of investment of capital, sales markets, sources of raw materials and at the same time a very effective mechanism for spontaneous regulation of the proportions of social production.

Competition is the motivation for the behavior of an economic entity in the economic sphere.

Competition is a procedure for discovering factors that, without recourse to it, would remain unknown to anyone or at least unused.

Competition is the procedure of discovering ways to offer better or more valuable goods than those already supplied to the consumer.

Depending on the socio-economic relations that have developed in a particular country, different types and types of competition can be distinguished. In farms based on private property, several main types of competition develop:

Simple commodity producers;

Sole capital:

Monopolies:

National capitals;

International capitals.

For former social workers countries with developed market relations are characterized by the following types:

Between individual manufacturers of goods:

Between large commodity producers (state and collective enterprises, joint-stock companies seeking to make more profit;

Between regional economic entities;

Between CIS enterprises;

With foreign capital.

There are several types of competition in marketing:

Functional competition (products that can satisfy a need are competitive with each other;

Specific competition (the result of the fact that there are goods serving the same need, but differing from each other in some significant characteristics:

Subject competition (arises due to the fact that manufacturers create identical products that differ only in quality, and are often identical in quality).

Functions of competition:

Identification and establishment of the market value of goods:

Alignment of individual costs and distribution of profits depending on various labor costs:

Regulating the flow of funds between industries and productions.

The core element in the system of economic relations is ownership of the means of production. It determines the socio-economic structure of society.

Own characterized variety of forms. This diversity is objectively determined by the level of development of the productive forces (the development of the division of labor, the level of technical equipment, the degree of concentration of production, the potential of universal human economic culture).

There are 3 main forms of ownership:

Private (individual);

Mixed.

Common property means that relations between people are built as relations of equal owners. This form of ownership has several types:

Communal (property of the tribal community);

Family (property of the family community);

Nationwide.

Private property means that the means of production and the results of production belong to individuals. There are 2 types of private property:

Labor;

Unearned.

Private labor property is based on the personal labor of the owner of the means of production. The results of the labor belong to him.

Private non-labor property is based on the use of someone else's labor (i.e., alienated from the means of production). The results of labor go to the owner of the means of production.

Mixed property is property that combines labor, non-labor and social forms property.

One of the main directions of denationalization of the economy is privatization. This process is characterized by the transfer by the state of ownership of enterprises, property complexes and other property to citizens and legal entities whose activities are based on non-state ownership. As a result of privatization, the state loses the right to own, use and dispose of state-owned objects, and state bodies lose the right to manage them.

Privatization represents a special system of economic relations that arise in connection with a change in the form of ownership of the means of production: from “state” to “private”. It includes the interconnection of priorities, reflecting the combination of interests of public authorities, labor collectives enterprises, the population as a whole in the process of profound changes.

Privatization serves two functions. On the one hand, it should become an element of economic reform, the core of radical transformations, and on the other, an instrument of long-term state regulation. The immediate goals of privatization are:

Formation of a layer of small and medium-sized owners;

Reducing the share of property in state and municipal ownership;

Redistribution of economic bases of power.

Privatization carried out on the basis of the following principles:

Providing benefits for the acquisition of state property to the labor collectives of the privatized enterprise;

Principle of legality;

Ensuring social security and equality of citizens in the process of privatization;

Priority provision of property rights to citizens;

Free transfer of part of state property to each citizen;

The principle of privatization of state property at its real value on a paid basis for the personal funds of citizens and their business associations, credit resources and privatization securities;

The principle of free choice of method and objects of investment and financial intermediaries;

The principle of complete, timely and reliable information to the public about all actions, about privatization and control over its implementation.

Privatization objects.

Enterprises, workshops, production, sites and other divisions that can be separated into independent enterprises or structural units of associations;

Equipment, houses, structures, inventories, licenses, patents, financial and other intangible and tangible assets;

Construction in progress.

The following are not subject to privatization:

a) property of state authorities and administration, armed forces, national guard, border troops, law enforcement and customs authorities;

b) gold and currency funds and reserves, state material reserves, emission and reserve systems;

c) enterprises for the production of securities and banknotes;

d) means of government and special communications;

e) objects of the state metrological service;

f) objects of culture, art, architecture, memorial complexes of national significance;

g) enterprises for the production and sale of narcotic drugs,

weapons and explosives.

Literature

1. Semenov V.A. Market economy. M., 2002.

2. Economic theory // edited by Andreev V. K. M., 2008.

Securities from the point of view of their economic essence are: Share - a single contribution to the charter...: commercial function, i.e. function making a profit from an operation on this market; price function, i.e. market, provides the process...

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. As a result free play These market forces determine 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 achievements into production scientific and technological progress, reducing production costs and improving their 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 price range (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, the demands of consumers, 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 social function the market differentiates producers. It provides the state with better opportunities to achieve social justice in 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).

Chapter 5. Market

2. Types of markets and their structure
3. Market functions
Pricing function
Information function
Regulatory function
Intermediary function
4. Competition
Competition concept
Protecting the competitive environment
5. Economic uncertainty and risks
6. Market imperfections
conclusions
Terms and concepts

The market as an economic mechanism, which replaced the natural economy, was formed over thousands of years, during which the content of the concept itself changed.

1. The essence and conditions for the emergence of the market

In economic theory, the term “market” has several meanings, but its main meaning is this: a market is a mechanism for interaction between buyers and sellers of economic goods.
The relationship between buyers and sellers, i.e. market relations began to take shape in ancient times, before the emergence of money, which then appeared largely in order to service these relations.
As the natural economy decomposed and the production of goods for sale developed, the very idea of ​​the market changed. The modern market, while remaining a mechanism for interaction between buyers and sellers, has turned into a system for regulating economic life (the economy).
The market serves production, exchange, distribution and consumption. For production, the market supplies the necessary resources and sells its products, and also determines the demand for it. For exchange, the market is the main channel for the sale and purchase of goods and services. For distribution, it is the mechanism that determines the income of owners of resources sold on the market. For consumption, the market is the channel through which the consumer receives the bulk of the consumer goods he needs. Finally, the market is where price is determined, which is the main indicator of a market economy.
What are the historical conditions that made the market objectively necessary?

Conditions for the emergence of a market

The first condition is the division of labor, which leads to specialization and exchange.
Initially, the exchange took primitive forms. According to the observations of ethnographers, on the island. This is how it happened in Kalimantan and what is now Malaysia. The “sellers,” having laid down their products for exchange, moved away to give the “buyers” the opportunity to come up and examine them. If the “buyers” wanted to purchase the items offered to them, they left theirs and left. Then the “sellers” returned and, if they agreed, took the left items, leaving their own in return.
Here we observe the embryo of barter - one of the simplest forms of exchange. Of course, it still has a long way to go to reach a genuine market. After all, the interests of the “buyer” and the “seller” might not coincide. Then you had to make not one, but several exchanges in order to get what you needed for your product.
The development of exchange led to the emergence of money, which expanded the incentives to produce certain goods specifically for sale. Only then could commodity production emerge in the true sense of the word, i.e. the production of such products that their manufacturer needs not for his own consumption, but as a carrier of value, allowing him to receive in return dozens of other items he needs. In other words, production appeared on the market to meet the needs of other economic agents.
The second condition is the independence of economic agents, or, as economists often say, the isolation of economic entities. Commodity exchange necessarily presupposes the desire for mutual benefit. Nobody wants to lose, that is. everyone wants to receive the desired amount of another in exchange for their product. And such a desire arises on the basis of economic independence, expressed in economic limitations and isolation of interests. This independence (separation) 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-owned enterprises, mixed enterprises, i.e. With state participation, etc.).
For the effective functioning of a market economy, a third condition is also necessary—freedom of enterprise. Non-market regulation of the economy takes place in any system. The institutional system complements the market. Institutions are laws, norms, traditions, organizational structures. It is institutions that create the environment in which markets operate and determine the system of checks and balances that counter arbitrariness and deformation of market relations. But in general, the less constrained the commodity producer is, the more space there is for the development of market relations.

Transaction costs

Thus, the market is a complex mechanism in which transactions are made between buyers and sellers of economic goods. The costs of carrying out market transactions are called transaction costs. These are the costs of collecting and processing information about the state of the market, searching for a buyer (seller) and negotiating with him and concluding a contract, as well as monitoring its compliance. Nobel laureate Ronald Coase, in his famous article “The Nature of the Firm,” advanced the concept (now shared by most economists) that market transactions most efficiently occur through firms rather than between individuals. In other words, when buying a product in a store, the buyer saves on transaction costs. According to R. Coase, “savings on transaction costs compared to individuals is one of the main reasons for the existence of firms in general.”

"Coase R.G. The nature of the firm // Theory of the firm / Edited by V.M. Galperin. St. Petersburg, 1995. pp. 11-32.

2. Types of markets and their structure

The market as a mechanism (“big” market) consists of separate (“small”) markets - capital, labor, food, housing, insurance services, etc. “Small” markets are of two types: resources and products (goods and services).
Economic agents emerge in the “big” market as owners economic resources(labor, land, capital, entrepreneurial abilities, knowledge). Through appropriate markets, they sell their resources to firms, receiving income for it.
Manufacturers use acquired resources to organize the production of products, which are then sold in product markets. Here it is purchased by consumers for their income.
Any market can be divided into increasingly narrower ones. Thus, if we single out the labor market in the resource markets, then it, in turn, consists of markets for groups of specializations (engine engineers, transport workers, financiers, etc.) and for individual specialties.

3. Market functions

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 (Fig. 5.1)

Rice. 5.1, 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 utility of the product and the costs of its production (see 6.2).
Unlike the administrative-command system in a market economy, this assessment occurs not before the exchange, but during it. The market price is a kind of result, a balance between the costs of producers and the utility (value) of a given good for consumers. Thus, in the process of market exchange, the price is set by comparing costs (costs) and the 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- about the 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. In pursuing his own interests, he is often more in an effective way serves the interests of society than when it consciously seeks to serve them."

"Smith A. Research on the nature and causes of the wealth of nations. M., 1962.

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 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 inefficiently functioning enterprises. And on the contrary, it gives the green light to those who are more enterprising and active. As a result of breeding work, the market increases average level efficiency, 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 in last years has stabilized. 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.

4. Competition

The formation of market prices is a process of interaction between producers (sellers) and consumers (buyers) pursuing diametrically opposed goals.
How are these different aspirations of economic agents interconnected? How, when a shortage or, conversely, an excess of goods occurs, are these imbalances relatively quickly eliminated? Who stimulates the actions of millions of producers and buyers, forcing them to expand the production of some goods and reduce the supply of others?
This permanent job carries out the mechanism of prices and competition. At the same time, price is able to fulfill its function as a regulator of cash and commodity flows only in the presence of competition among participants in economic (economic) activities. Competition largely guides the actions of the “invisible hand” that Smith wrote about.

Competition concept

By its most general definition, competition is rivalry between market participants. At the same time, regarding the essence of competition, there are various interpretations depending on the positions taken by theorists.
According to neoclassics, competition is a struggle for economic resources, for establishing a stable niche in the market. J. Schumpeter believed that the main thing in competition is the introduction of innovations, the “creative destruction” of the obsolete; Competition itself is not at all an ideal; technological progress is often ensured by a monopoly. Considering the process of competition, one of the pillars of the neoliberal movement, F. Hayek, focuses on the role of information, which occurs through the movement of prices and connects producers and consumers.
The advantage of competition is that it makes the distribution of limited resources dependent on the economic arguments of the competitors. You can usually win the competition by offering goods (economic resources and products) more High Quality or at a lower price.
Therefore, the role of competition is that it contributes to the establishment of a certain order in the market, guaranteeing the production of a sufficient quantity of high-quality goods that are sold at an equilibrium price.

Conditions and types of competition (forms of market structures)

The positive effect of competition largely depends on the conditions in which it operates. Typically, there are three main prerequisites, the presence of which is necessary for the functioning of the competition mechanism: first, equality of economic agents operating in the market (this largely depends on the number of firms and consumers); secondly, the nature of the products they produce (the degree of homogeneity of the product); thirdly, freedom of entry into and exit from the market (primarily the absence of barriers to entry in the form of organizational associations and structures).
There are several types of competition, or so-called forms of market structures.
Perfect(pure) competition occurs under the following conditions:
. there are many small firms offering homogeneous products on the market, while the consumer does not care from which company he purchases these products;
. each company's share in total volume the market supply of this product is so small that any decision to increase or decrease the price does not affect the price market equilibrium;
. the entry of new firms into the industry does not encounter any obstacles or restrictions; entry and exit from the industry is absolutely free;
. there are no restrictions on the access of a particular company to information about the state of the market, prices for goods and resources, costs, quality of goods, production techniques, etc.
Competition, which to one degree or another is associated with a noticeable restriction of free enterprise, is called imperfect. This type of competition is characterized by a small number of firms in each field of business activity, the ability of any group of entrepreneurs (or even one entrepreneur) to arbitrarily influence market conditions. With imperfect competition, there are strict barriers to entry into specific markets for new entrepreneurs, and there are no close substitutes for products produced by privileged manufacturers.
Between perfect and imperfect competition lies that type of competition that is very often encountered in practice and is, as it were, a mixture of the two noted types - this is the so-called monopolistic competition.
It is a type of market in which a large number of small firms offer heterogeneous products. Entering and exiting the market is usually not associated with any difficulties. There are differences in quality, appearance and other characteristics of goods produced by different companies that make these goods unique in some way, although interchangeable
The opposite of competition is monopoly(from the Greek monos - one and poleo - I sell). In a monopoly, one firm is the only seller of a given product that has no close substitutes. The barriers to entry for other firms in the industry are virtually insurmountable. If the buyer is in the singular, then such competition is called monopsony(from the Greek monos - one and opsonia - purchase).
In a monopoly, the seller usually wins; monopsony provides a privilege for buyers. In some industries, a kind of bilateral monopoly occurs, when there is one seller and one buyer on the market for a certain product (for example, in the field of military production: the customer is the state, the supplier is a single company).
Pure monopoly and pure monopsony are relatively rare phenomena. Much more often, in a number of industries in countries with market economies, the so-called oligopoly(from the Greek oligos - few and poleo - I sell). This type of competition presupposes the existence of several large firms in the market, whose products can be both heterogeneous (cars) and homogeneous (aluminum, steel). Entry of new firms into the industry is usually difficult. A feature of oligopoly is the mutual dependence of firms in making decisions on prices for their products.

Protecting the competitive environment

The experience of countries with market economies shows the need to protect competitive environment state funds. The main goal of using these means is to achieve an optimal combination of different types of competition, to prevent some of them from suppressing others and thereby weakening the overall positive results of competition.
To form competitive markets, an appropriate institutional environment, effective operation of the financial and credit system, and protection of national producers are necessary. The problem of overcoming monopolism inherited from the Soviet Union is extremely acute for modern Russian market. The RSFSR Law “On Competition and Restriction of Monopolistic Activities in Commodity Markets,” adopted on March 22, 1991, was the first in the history of Russia; normative act aimed at developing competition. On May 25, 1995, amendments and additions to this Law came into force. These documents define the concepts of monopoly high and monopolistically low prices, the concept of “dominant position” of an economic entity whose market share of a certain product is 65% or more, and in some cases - 35% or more.
However, having a dominant position in itself is not illegal. The law prohibits such entities from abusing their market position. Article 10 of the Law is aimed at suppressing unfair competition; Art. 17 is aimed at preventing monopoly and oligopolistic mergers; Art. 19 provides for an extreme measure in relation to business entities that abuse their dominant position - the forced separation of business entities.
In the practice of market relations, a distinction is made between fair and unfair competition. Conscientious competition is one in which legal and ethical standards relationships with partners. Under unscrupulous competition means technical espionage, bribery of a competitor's employees, false advertising, unauthorized use of someone else's trademark, copying the external design of another company's product, etc.

5. Economic uncertainty and risks

Achieving the desired result in a competitive environment is very difficult. As I. Schumpeter noted, success in entrepreneurial activity requires great endurance, the presence special abilities, which are characteristic of only a small part of the population. “The romance of former commercial adventures is becoming a thing of the past, since much of what previously could only be given by a brilliant insight can today be obtained as a result of strict calculations.”

Schumpeter J. Capitalism, socialism and democracy. M., 1995. P. 184.

But the most rigorous calculations are not a guarantee of success. Any economic activity is associated with uncertainty, i.e. a situation in which it is unknown how upcoming events will develop. For example, the degree of price fluctuations and the amount of expected income are unknown.
Uncertainty- a situation that cannot be assessed, complicating the choice of options and the behavior of participants in economic activities. If the probability of an expected event is unknown, it can develop and occur in various ways, i.e. there is uncertainty. Often the final outcome is generally known, but the timing, deviations from the predicted option, and unforeseen consequences are unknown.
In conditions of uncertainty, business decision-making is at risk. Risk is an estimate of the probability of an expected event. It cannot be absolutely accurate. Economic activity is associated with the risk of deviations from the estimates and calculations made, with the risk of failures, losses, and unexpected changes in the market situation. Opening your own business, participating in an investment project, purchasing a block of shares - all these actions are associated with risk. It is diverse, therefore, when speaking about risk, they often mean different types of it or risk in different areas.
What type of business to start, what to produce and how much, where to invest free money? When solving these and other similar issues, one has to take into account many conflicting factors and go through countless options. And the probability of an optimal choice is usually low.
Risk under conditions of uncertainty is inevitable; it implies both the probability of an event and the degree of deviation from the expected result. Let's say the owner of a stock has a one in ten chance of winning from an increase in price. The size of the gain or loss for the same odds ratio can be very different - this depends on price fluctuations and the number of shares purchased.
Attitudes towards risk vary. People strive to reduce uncertainty to a minimum. Everyone who is engaged in entrepreneurial activity takes on a certain amount of risk. At the same time, he strives to reduce the degree of risk, more accurately predict the situation, and insure against possible losses.
So, risk is associated with an element of uncertainty, which in one way or another is reflected in the behavior of economic agents and the results of economic activity. The problem of risk is of particular importance in such areas as investment, insurance, and credit.
Investing in production or securities for the purpose of generating income involves assessing the expected profitability of the operation. The insurance process involves compensation for possible losses. Risk insurance presupposes, on the one hand, the possibility of statistically assessing the probability of losses, and on the other, the possibility on the part of the insurer of compensation for a certain number of risks. Credit risk is a key problem in managing banking activities, determining the solvency of the debtor, organizing a guarantee system, and ensuring the completeness and objectivity of information.
Exist various ways reducing risk in conditions of uncertainty. The principle of diversification—diversified and diverse allocation of funds—is quite widely used. For example, securities of many companies operating in various fields are purchased; An investor invests in various assets with different returns and degrees of risk. One way to reduce risk is insurance. There is a developed system of insurance for banking operations: transfer of property by the debtor as collateral; guarantee of another person; development of technical means of providing credit.
Learning and decision making in a market economy is based on choice. Detailed information and variety of assets provide a breadth of choice. However, these are only prerequisites for its reliability and risk reduction. There are no universal rules for making optimal decisions.

6. Market imperfections

The functions of the market make it, in principle, very effective system. However, this does not mean that market relations are completely perfect and ensure progressive economic development. The isolation of economic agents, the incomplete coincidence of their interests, and often antagonism inevitably lead to the aggravation of many contradictions.
Basically, market imperfections are associated with deviations from conditions that ensure perfect competition. In addition, the market economy is unable to ensure the production of important goods or creates them in insufficient quantities.
What are the imperfections, or, as they are often called, “failures” of the market?
1. The market is not able to resist monopolistic tendencies. In market conditions, monopolistic structures inevitably arise that limit freedom of competition. When the market environment is uncontrolled, monopolies are formed and strengthened. Unjustified privileges are created for a limited number of market participants.
To support extremely high prices, monopolists artificially reduce production. This makes it necessary to regulate prices, say, for the products of raw material monopolies, electricity, and transport.
2. The market is not interested and unable to produce public goods(“public goods”). These goods are either not produced by the market at all or are supplied to them in insufficient quantities.
The peculiarity of public goods is that everyone can use them, but they do not have to pay for them. In addition, their use cannot usually be limited.
Road signs regulating traffic rules, everyone must use them to avoid undesirable consequences. Vaccination must cover all residents, otherwise it will not be possible to exclude infectious diseases. Public goods are non-rival goods and services available to almost everyone.
Public goods are free to the consumer, but not free to society. The production of “free” goods is associated with costs that the market is not able to bear.
The market cannot solve the problem of producing goods for public use, because it is impossible to limit their consumption, reconcile costs with “utility,” and eliminate inevitable collisions (for example, the “free rider” problem, defining categories of users). Satisfying the needs of society that are not directly related to business requires the creation of an appropriate institutional structure and the direct participation of the state (see Chapter 26).
3. The market mechanism is unsuitable for eliminating external (side) effects. Economic activity in market conditions affects the interests of not only its direct participants, but also other people. Its consequences are often negative.
As social wealth increases, the problem of externalities becomes more acute. The increase in the number of cars in use is accompanied by air pollution. Pulp and paper mills are poisoning water sources. The widespread use of chemical fertilizers makes food unfit for consumption.
The market itself is unable to eliminate or compensate for the damage caused by externalities. Agreement between interested parties without external intervention can be reached only in rare cases when the negative effect is insignificant (see Chapter 7). In practice, when serious problems State intervention is necessary. It introduces strict standards and restrictions, uses a system of fines, and determines the boundaries that participants in economic activities do not have the right to cross.
4. The market does not have the ability to provide social guarantees and neutralize excessive differentiation in income distribution. The market by its nature ignores social and ethical criteria, i.e. fairness in the distribution of resources and income. It does not provide stable employment for the working population. Everyone must independently take care of their place in society, which inevitably leads to social stratification, increases social tension.
A “normal” market generates abnormal proportions of the distribution of created wealth. Market relations create favorable conditions for the manifestation of narrow selfish interests that give rise to speculation, corruption, racketeering, drug trafficking, and other antisocial phenomena.
5. The market mechanism generates incomplete and insufficiently perfect information. Only in a fully competitive economy do market participants have sufficiently comprehensive information about prices and prospects for production development. But competition itself forces firms to hide real data about the state of affairs. Information costs money, and economic agents—producers and consumers—possess it to varying degrees.
The lack of perfect information, incompleteness and uneven distribution of information create advantages for some and undermine the ability to make optimal decisions for others. Sellers and buyers, entrepreneurs and workers do not have equivalent information. Meanwhile, information is in some respects a public good. The most complete and reliable information is provided not by the private market, but by government institutions. So, the market is not an ideal mechanism for regulating economic activity.
Imperfections (“failures”) of the market can be mitigated by the creation of appropriate institutional structures, state participation in the distribution of resources, and solving problems that cannot be provided by purely market instruments.

conclusions

1. The market is a complex sphere of interaction between buyers and sellers, producers and consumers, carried out through price movements under the regulating influence of institutional norms and rules. The prerequisites for the emergence of a market are the social division of labor, economic independence (isolation) of commodity producers, and freedom of entrepreneurship.
2. The market as a developed system of commodity exchange relations is a collection of individual markets, primarily resource markets. Markets are classified depending on the objects of exchange, the nature of the goods exchanged, operating conditions, etc.
3. 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.
4. Competition is one of the fundamental concepts of a market economy. This is the driving mechanism of the market, a factor of internal development, the struggle of market participants for Better conditions production and sales of products.
A competitive market promotes production efficiency and optimal allocation of economic resources. It is customary to distinguish between perfect and imperfect competition, monopolistic, price and non-price, fair and unfair. The conditions for the formation of competition are certain prerequisites and the creation of the necessary institutional environment.
5. Economic activity involves uncertainty and risk. The uncertainty of choice is determined by the incompleteness and inaccuracy of information and the inevitability of errors in the forecasting process. There are no “proprietary” recipes for reducing risk. The reliability of choice can be increased by diversifying the allocation of funds and a comprehensive assessment of the decisions made.
6. The positive functions of the market make it, in principle, a fairly effective system. At the same time, the market needs institutional regulation. Deviations from the conditions of perfect competition indicate market imperfection.
7. The market is not able to resist monopolistic tendencies. It is not suitable for eliminating external effects. The market is not interested in and cannot produce public goods. It is unable to provide social guarantees and counteract social stratification. Market imperfections are neutralized by government economic and social policy measures.

Terms and concepts

Market
Transaction costs
Competition
Perfect competition
Monopolistic competition
Monopoly
Monopsony
Oligopoly
Economic uncertainty and risks
Market imperfections

Self-test questions
1. What is a market? Give the most significant definitions.
2. Is it correct to say that exchange and market are synonyms?
3. What are the historical conditions for the emergence of the market?
4. What criteria can be used as the basis for classifying markets?
5. What are the main functions of the market? Explain how they are interrelated.
6. What role does competition play in the market?

1. What is the difference between perfect and imperfect competition?
2. Why is there such a thing as monopolistic competition, since monopoly is the opposite of competition?
3. Is it correct to say that the market cannot eliminate the consequences of externalities?
4. What explains market imperfections?

Today it is becoming an integral part of our lives, because in order to live and prosper, a person today needs not only a number of vital goods and products, but also their choice. The functions are aimed at improving the quality of service and raising the consumer's standard of living. For the market to function normally, three conditions must be met: competition and free prices.

Main functions of the market:

1. Regulating. The regulator of production here is the market through supply and demand. Thus, it establishes the necessary proportions in the economy.

2. Stimulating. Here the market stimulates the introduction of scientific and technological progress into the enterprise, expansion of the product range and reduction of production costs.

1. Informational. Provides objective information about the quality, quantity and services available on the market.
2. Mediation. The consumer is given the right to choose the optimal supplier of products.
3. Sanitizing. In market conditions, only strong, viable business units survive.
4. Social. Market participants are differentiated depending on income.

Structure, types and functions of the market:

1. Types of market:

• market of goods and services
• labor market
• capital market
• information market
• financial market

2. Market mechanisms:

• free competition market
• regulated market
• monopolized market

3. Degree of market saturation:

• in short supply
• equilibrium
• excess

5. The legislative framework:

• legal market
• "black market

The securities market can be considered as an independent sector; it is the source of attracting capital to the market economy. The functions of the securities market are conventionally divided into two groups: general market functions and specific ones, which significantly distinguish it from other markets.

General market functions:

1. A commercial. Responsible for generating profit from operations in this market.
2. Price. Responsible for the constant movement of prices provided by the market.
3. Informational. Provides information about trade objects to all participants.
4. Regulatory. Creates trade rules, dispute resolution procedures, and sets priorities.

Specific market functions:

1. Redistribution.

Responsible for:

• redistribution of funds between spheres and sectors of activity.
• transferring consumer savings into productive form.
• financing the state budget without issuing new funds into circulation.

2. Function of insurance of financial and price risks.

A market economy is a system based on freedom of choice, private property and competition. First of all, it guarantees freedom to the consumer, since it provides him with freedom of choice in the market for food and other goods and services. The main driving force of a market economy and the main motive is personal interest; only for buyers it represents maximum benefit, and for producers - maximum profit. The basis of healthy competition is complete freedom of choice.

Healthy competition requires:

• Homogeneity of services and goods;
• A large number of buyers and sellers;
• No price discrimination;
• Full information about prices;
• Absolute mobility of all resources.

Private property is a guarantee of non-interference by third parties in voluntarily concluded contracts, and it also constitutes basic foundation market economy. Meanwhile, the classical market economy is a method driven by government intervention in the economy. The government here acts as an organizer, determining the rules of the game in the market and carefully monitoring the implementation of these rules.