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Lecture notes, cheat sheets
Microeconomics. Lecture notes: briefly, the most important
Directory / Lecture notes, cheat sheets Table of contents
LECTURE No. 1. General characteristics of the market economy 1. Demand: its factors and law The functioning of the market and the economy as a whole is ensured by balanced sales relations. In this regard, buyers and sellers operate on the market as independent economic entities. Sellers sell finished products, services, semi-finished products, etc., and buyers show demand for all this. Demand - This is an economic category that shows the desire of the buyer to purchase the product he needs, taking into account the current pricing process and other economic indicators. Any item of production can act as a commodity, depending on its specialization: products, fabrics, services, ideas, and everything that can be evaluated by economic entities as a good with high utility. To determine the place of demand in the system of economic relations, it is necessary to introduce such a concept as law of demand. It is characterized by the fact that the quantity of products purchased by the subject on the market is determined mainly by its cost or market valuation. Consumer is a rational subject of economic activity, therefore, he seeks to minimize his costs (expenses). Of course, this does not mean that the pursuit of cost minimization should be accompanied by the purchase of low-quality or too cheap discounted goods, of course, if the markdown is not simply related to seasonal cycles. Today, in general, the price does not guarantee quality, so even the most expensive product sometimes does not have high quality characteristics. The magnitude of demand is made up not only of the cost of goods, but also under the influence of the following non-price factors: 1) current consumer income. As you know, the higher the income, the more dynamic the structure of an individual's consumption becomes: his savings grow, and with it the sums of money spent on the purchase of necessary goods and services; 2) consumer tastes and preferences. They are subject to change over time, for example, under the influence of ever-changing fashion. Some buyers are constant and, adhering to one brand, prefer to satisfy their needs with products exclusively from a specific manufacturer, often even regardless of price characteristics; 3) the price of substitute goods and complementary goods: a) competing goods, i.e., substitute goods. An example is tangerines and oranges. If there is a change in the market (in this case, an increase) in the price of tangerines, the buyer will be inclined to buy oranges, since they can also satisfy the need for fruit consumption at a lower cost; b) products that complement each other, or complementary products. For example, if gasoline prices begin to rise, the demand for cars gradually decreases, since fuel is the leading factor determining the operation of cars, at least creates all the conditions for this; 4) consumer expectations. When consuming, the buyer evaluates the economic situation in the country: the price level, the dynamics of interest rates, the amount of inflation. An increase in inflationary expectations (price instability), as a rule, contributes to the fact that the subjects are trying to buy an increasing volume of goods, i.e., increase consumer demand. This can also cause a rise in prices, mainly for essential goods; 5) number of consumers shopping in the market. 2. Supply: supply factors, law The market situation is formed under the influence of two economic categories: supply and demand. Buyers, in order to satisfy their own needs and under the influence of preferences, are forced to purchase certain goods or services on the market. However, their capabilities are limited by the behavior of manufacturing firms that directly supply the market with the product in demand. Proposal in the market of goods and services is characterized by the volume of marketable products that manufacturers, intermediaries or sellers are ready to put up for sale at various alternative prices within the same time period. The size of the supply on the market, its structure is directly determined by consumer demand, i.e. the desire of the buyer to purchase this particular type of product for current or future consumption, as well as the level of profitability or solvency of the economic entity. In accordance with the above, it turns out that the law of supply reflects a direct relationship between production volumes and the level of established market prices. In other words, if prices in the market of goods and services, factors of production, the financial market, etc. systematically grow upwards, the manufacturer automatically decides to produce and supply to the market for sale an increasing volume of products, works, services. There are two types of factors that affect supply: 1) price factors. They are inextricably linked with the pricing process, whether it be the prices for finished products or for the primary raw materials that go into its manufacture. Accordingly, if the general level of market prices is low, this will be accompanied by high costs for producers, especially if the prices of inputs and factors of production are too high. In this case, the proceeds from the sale of manufactured products will almost all go to cover costs and pay taxes; 2) non-price factors: a) resource price dynamics. For the implementation of production activities, the company makes purchases of raw materials and the necessary equipment. With an increase in prices for fixed, circulating assets and production resources, the costs of the enterprise will also grow steadily. The increase in costs, in turn, forces the firm or enterprise to reduce production activities until the price per unit of output is equal to or lower than marginal cost; as a result, the supply begins to decline; b) development of new technologies allows the manufacturer to increase production efficiency and, as a result, the quantity of products produced. The introduction of new fixed production assets and technological discoveries (machinery and equipment) in production contributes to a decrease in material and labor intensity and an increase in capital productivity. In other words, the process of expanding the scale of production becomes real; at) the dynamics of the amount of taxation. Taxes are the regulator of the state budget; they are periodically (usually once a month) withdrawn from the income of all economic entities. The higher the tax rate and the amount of tax to be deducted, the lower the potential for further development becomes. This may be the cause of such a problem as the shadow economy and concealment of income. For example, an increase in the rate of income tax and land, the interest rate on rent, as well as other deductions. For example, an increase in the value of the unified social tax leads to the fact that the organization has less and less opportunities for further development, since the total costs as a whole may be at the level of profit or, if the organization is in a state of crisis, even exceed it; d) the number of sellers in the market. Under perfect competition, due to the homogeneity of the goods produced, the dynamics of supply may be disrupted, since the supply of products in terms of its value does not correspond to the value of demand. 3. The concept of elasticity, the elasticity of demand Demand - this is the volume of goods or services that an economic entity wants to include in its consumer basket at a favorable price for it. Elasticity represents the flexibility of supply and demand in relation to a dynamic external market environment. The elasticity of demand shows the ability of its value to change due to the dynamics of various factors that have a qualitative impact on it. In other words, this is the principle of determining the dependence of the value of consumer demand on market mechanisms, such as price, interest rate, etc., as well as on quantitative indicators of the standard of living and the prosperity of economic entities. There are three types of elasticity of demand: 1) price elasticity of demand. This value characterizes changes in the structure of demand as a result of changes in market prices for a particular product:  where Q is the quantity of goods; P - its price; ΔQ and ΔР are changes in the volume of goods and their price. It is important to note the fact that the magnitude of the elasticity of demand, as a rule, corresponds to three states: a) elasticity close to zero mainly develops for essential goods, which are extremely important for any economic entity to meet its physiological needs (for good nutrition, clothing). The demand for their satisfaction is a constant value, since consumers, regardless of changes in income levels and price dynamics, do not stop buying them; b) in the case when elasticity tends to positive infinity, it is generally accepted that demand reacts strongly to any economic phenomena, and especially to the slightest price changes. This situation is typical, for example, for the securities market; c) full elasticity is characteristic of luxury goods, i.e., tertiary needs that do not require immediate satisfaction and are present in those economic entities whose solvency is high (cars, dachas, etc.). In other words, these are people with high incomes, whose primary physiological needs are fully satisfied; 2) income elasticity of demand:  where I is the amount of income; ΔI is its corresponding changes. Here it is necessary to single out goods with negative elasticity, the so-called goods of a low category, as well as those for which the elasticity is a positive value (normal goods). If the level of income of the consumer begins to grow, he changes the system of his preferences and tastes, he can afford to buy more expensive goods; 3) cross elasticity. This indicator is designed to determine the magnitude of demand for a product, depending on the dynamics of prices for another:  where A and B are the two products being compared. There are alternative products that, if necessary, can replace each other (butter and margarine), and complementary products (gasoline and a car). The demand for margarine may rise if the general level of butter prices rises by a certain amount. This is due to the fact that margarine is cheaper, so buyers will begin to show more demand for it. Similarly, the demand for cars theoretically depends on the dynamics of gasoline prices. The presence of alternative products on the market expands consumer opportunities. This provides the buyer with a wider choice, on the basis of which the likelihood that a purchase in the market will be made increases dramatically. 4. Supply elasticity Proposal represents an economic category that shows how much goods, works, services a manufacturer or other intermediary organization is ready to put on the market for sale at certain prices. Elasticity - this is the flexibility in this case of the proposal, its ability to respond as quickly and accurately as possible to any changes in the external environment and its indicators. The elasticity of supply shows how much the scale of production and, as a result, the volume of finished products are dependent on such market factors as price, including the price of complimentary goods and substitutes. In other words, this indicator determines the ability of the manufacturer to increase or cut the scale of production, depending on the current economic situation on the market. 1. Price elasticity shows the dependence of demand on price:  where Q is the amount of the good offered by the manufacturer; P is the price at which this good is sold on the market; ΔQ and ΔP are the corresponding changes in price and, as a result, sales volume. Price elasticity of supply is a direct relationship between price and scale of production, and in accordance with this elasticity can take several possible states. As you know, in a few days, in a short period of time, it is impossible to increase production, so the offer in this case is inelastic, it does not immediately respond to the desires of the buyer. Indeed, in the short term, when the volume of harvested resources and factors of production is a certain planned value, the entrepreneur cannot reduce the value of production, since the period between its planning and implementation is too short. Otherwise, the enterprise will be forced to send excess material resources to the stock and, as a result of equipment downtime, will incur additional costs caused by underproduction. When planning for a long period of time, the proposal, on the contrary, is absolutely elastic, since there is time for transformations and the establishment of production activities. If the external environment and the market require a higher quality of production or expansion of output due to a change in the value of consumer demand, the enterprise in the long-term relevant period can fulfill these conditions. For example, it is possible to introduce new, more powerful fixed production assets into production or qualitatively change the technological process itself. 2. When cross elasticity it all depends on what the goods are in relation to each other. Substitute goods are goods that are approximately the same in their functions, but differ in certain categories, for example, in price. Such goods are capable of replacing each other if something happens. With an increase in the price of butter, the producer will reduce the production of margarine, thereby increasing the supply of butter. Such an action will help him get more income, and possibly superprofits. Complementary goods complement each other, i.e., the use of one good is impossible without the consumption of another. If, for example, the price of gasoline rises, the manufacturer will automatically increase the supply of cars, which will again allow him to win in profit:  where QA - the volume of production of good A; Рв - price per unit of good B; ∆QA and ΔРВ - changes in the price and quantity of goods. The theory of elasticity is of great importance in business planning. To increase profits, it is necessary to increase prices, but in this case, demand and sales may fall. It is important to take into account the coefficient of elasticity: if it is < 1, then there is no risk and you can safely raise prices, otherwise you should refrain from fundamental actions. 5. The balance of supply and demand in the market. Equilibrium price For the effective functioning of a market economy, the demand for factors of production and goods and services must be satisfied in one way or another. In other words, the economy must be in a state where it can still offer some product. In this way, market equilibrium - a state of the market in which the desire of firms to produce coincides with consumer choice and the desire of the buyer to purchase a certain set of goods. In other words, such a market situation is characterized by the absolute coincidence of all economic interests that determine the behavior of each subject of market relations: producers, buyers and intermediaries. Respectively, equilibrium price - the price established as a result of the coincidence of supply and demand, i.e. prices that suit all economic entities. This is nothing more than the minimum price at which the manufacturer is willing to sell a given product, and the maximum price that the consumer is willing to pay for the purchase. Depending on the ratio of supply and demand in the market and on their changes, the dynamics of market equilibrium implies 5 options: 1) consumer demand is undergoing significant changes. Such a situation is possible, as a rule, in the long run, in a state of full employment. Firms do not have additional resources and factors of production to expand their activities. And the desire of buyers to purchase a certain product moves the demand curve along the supply curve; 2) the demand for goods and services, factors of production is constant, and the supply is extremely dynamic. In this case, entrepreneurs regulate production at their own discretion. Finally, there is a state of the economy in which supply exceeds demand, which causes prices to fall and marginal cost per unit of output to rise; 3) if supply and demand simultaneously and proportionally change in the same direction, then the equilibrium in the market is maintained, while changes occur only when the equilibrium price is established: it increases with an increase in supply and demand and decreases with their decline; 4) if demand continues to grow with decreasing supply, then the selling price is set at the maximum level. The offer, as a rule, depends on the amount of resources that can be actually involved in production. When their value is limited, the scale of production cannot be changed, and the proceeds must be made exclusively by raising prices; 5) if demand, on the contrary, decreases, and supply grows, an overproduction crisis sets in, in which case the equilibrium prices turn out to be at a lower level than the producer would like. In addition, in addition to these classifications, market equilibrium can be both general and partial. Partial market equilibrium can arise only on one type of market (on the only one), when the volume of output is extremely limited, and it is most proportionally distributed among all economic entities, potential buyers. Prices in the market are dynamic, this is primarily due to the dynamics of market equilibrium caused by real changes in the structure of supply and demand. One way or another, any changes that take place in the market are in a certain relationship. The movement of prices in one type of market gradually reaches others, as a result of which the pricing mechanism develops in a spiral, covering an increasing volume of goods, ideas, services and works. As a result, with a certain degree of probability, there is such a set of market prices that allows you to choose one single, equilibrium one. This mechanism describes the general equilibrium in the market. The market is a dynamic living organism, it independently regulates economic processes. However, when the market fails, the state comes to its aid, which is responsible for the economic situation in the country as a whole. LECTURE No. 2. Theory of consumer behavior 1. Consumption, need and utility In the process of life and functioning, any economic entity acts as a consumer of certain goods. Firms buy resources, individuals buy finished products. Thus, consumption is nothing more than a set of economic relations that are characterized by the final use of the goods and services produced, for example, eating, or the creation of new goods in the process of production processing. For example, the operation of the machine ensures the production process and its continuity. Its energy, labor force are consumed to create new products. This is a classic example of industrial consumption. In general, consumption is called negative production, since in the process of consumption there is destruction, a decrease in utility. Need represents nothing more than an urgent need for the consumption of any product or service that requires timely satisfaction. It can be represented in the form of material production, i.e., goods created in the process of production. The basic classification of needs can be represented as follows: 1) primary needs, or physiological, i.e. the need for food, the presence of clothing. In other words, this type of commodities are called essential commodities: they are essential for maintaining the viability of the individual, and therefore their utility is extremely great; 2) secondary needs can be satisfied through the consumption of durable goods. They do not directly determine the general physiological state of health of the individual and are not a necessary condition for his existence. However, for some reason, a person still prefers to have them. Such goods are purchased, as a rule, after the primary needs are fully satisfied, otherwise the interest in such a purchase will be small, as well as its usefulness. Various household appliances, etc., can serve as an example here; 3) tertiary needs represented by luxury goods (additional cars, cottages, summer cottages, etc.), which can be purchased only when the first two types of needs are already satisfied. Such purchases can be afforded, as a rule, by financially secure people who have fully and completely satisfied all previous needs. Needs have no boundaries, with the satisfaction of one person is at the mercy of others. But one way or another, all needs directly depend on the amount of income. Human needs are unlimited, they can have different forms, quantitative and scale indicators and, as a rule, are not limited by absolutely any framework, that is, they do not have a degree of saturation. However, the resources required for the production of goods are limited, therefore, a dilemma arises before the consumer: either limit yourself to something and get maximum satisfaction from it, or purchase everything at once in small quantities, but the utility of the purchased will be low. Utility determines the quality side of the product, and it is a necessary condition for it to be acquired. On the part of the buyer, the product must have such properties that can satisfy its current needs and will correspond to consumer preferences. To measure utility, the unit "util" was proposed, on the basis of which it is possible to correlate the utility of various goods. But again, for one subject, a unit of meat is, for example, nine utils, and for a vegetarian, it is, accordingly, equal to zero. Therefore, the problem of measuring the utility of goods remains relevant today. Useful types: 1) total utility can only be obtained as a result of the acquisition and consumption of a large volume of products in the assortment, for example, the entire consumer basket; 2) marginal utility is determined by the utility of each additionally produced or consumed unit of a particular good. 2. Marginal utility, the law of diminishing marginal utility The main goal of the consumer is to maximize the utility of the goods he consumes under conditions of limited income. The term itself "utility" was formulated by the English philosopher Jeremy Bentham. Utility - the ability of goods to satisfy certain needs. Thus, this is a subjective concept, since the same goods are useful in different ways for each individual. An economic subject always, choosing certain goods for consumption, from his point of view evaluates the benefits that they can bring, and how well and fully they can satisfy his urgent needs. At the same time, by regularly carrying out the process of consumption, we gradually begin to understand that the old goods do not bring the same pleasure as before. In other words, we get less and less satisfaction from each subsequent unit of the consumed good. Such a pattern in science is presented in the form of the law of diminishing marginal utility. Marginal utility as an economic category shows the additional utility of each additional unit of goods. This concept has a practical basis. After all, utility in itself characterizes the same value of the same good, regardless of its volume, we can say it is the average utility, or the utility of one unit. And marginal utility makes it possible to determine the optimal amount of consumed goods, taking into account a given amount of income of a certain degree of need. Law of diminishing marginal utility was discovered by Heinrich Gossen. It represents the dependence of the value of utility on the current consumption of each additional unit of the good, i.e., with a repeated act of consumption, the utility of the product is already significantly lower than the initial one. For example, let there be a bun in the role of good. When we eat the first of them, we get deep satisfaction, especially if there was an urgent need for it. Gradually filling up, the economic subject stops consuming it, and its utility begins to fall until it reaches zero, when the process of consumption stops. In other words, the law of diminishing marginal utility can be represented in a plane as an inclined curve convex to the center of the X and Y axes, like a demand curve. The concept of utility maximization is closely related to this law. In order to obtain the greatest total utility from the entire set of consumed goods and services under conditions of limited income, time, and other factors, it is necessary to consume each of these goods strictly in such quantity that their marginal utilities with respect to prices are the same value. In other words:  where MU is the marginal utility of each good; P - their prices. It turns out that the last ruble that the consumer pays for the purchase, for example, meat, should be exactly the same utility as the ruble spent on the purchase of bread or other goods in the consumer basket. Otherwise, the utility maximization rule is called the consumer equilibrium condition. It turns out that from all the benefits that the economic entity consumes, it remains equally satisfied. In this case, the buyer most rationally uses the funds of his own budget and maximizes the benefits of his consumer choice. 3. Consumer choice theory As a rational economic entity, the consumer sets the main goal of his economic activity to maximize the utility of consumption in conditions of limited resources, including income. He always strives to obtain as many goods as possible for his own consumption, while having minimal costs. Rational choice of consumption is the basis of consumer theory. When implementing the decision made regarding the composition of the consumer basket, the economic entity always pays attention to the current market situation, therefore, it is guided by the following factors. 1. consumer preferences. The buyer in his choice primarily relies on his own preferences, tastes and desires, since it is they who primarily determine the composition of his consumer basket. However, such a built-in market structure as advertising can create artificial needs. As a result of this, an economic entity acquires those goods that it does not need at all, but which are actively advertised from the best side on television and in the media. 2. Rationality of choice. The consumer in the market seeks to purchase such a set of goods, the utility of the consumption of which would be maximum. This can be achieved when the consumer makes his choice consciously, while taking into account the possible utility of various alternative goods. 3. budget restrictions. The subject and his choice is always limited by the amount of income that he has at a certain point in time. It is within this framework, minus the amount of money for savings, that he acquires certain benefits. In other words, according to the first economic law, income is always limited, and human needs have the property of infinite growth, so the buyer is forced to limit his desires. 4. Relativity of prices. In a perfect market, an indispensable condition for the entrepreneur to receive his profits are the prices for goods and services established as a result of the relationship of supply and demand. Prices are a determining factor in the implementation of consumer choice, therefore, they also have a great influence on the magnitude of market demand. The system of relative prices is especially important, in other words, the consumer will choose the cheaper one from all high-quality goods, and the better one from homogeneous in price. This determines the rationality of the consumer, his desire to make the most useful choice. Two goods satisfy needs in different ways, so their various combinations (equally useful) form indifference curve. Denying himself the consumption of one commodity, the subject can compensate for this by consuming exclusively another in larger quantities. Consequently, the buyer does not care what combination of goods he receives, as long as their utility is the same. All indifference curves superimposed on the same plane give us a map of indifference curves, whereby all possible combinations of goods are found. The equilibrium of the consumer is achieved in the case when he can get the greatest utility from consumption for a given amount of income, market prices and other market characteristics of the economy. The utility maximization rule states that the last ruble spent on one type of product should be equal in utility to the ruble spent on the purchase of another product. 4. General model of consumer behavior Every economic entity in the course of its life, sooner or later, faces the problem of profitability, which is understood as the financial ability to acquire the necessary goods and services. Consumers, making their choice in the market of finished products, are guided by their own needs, preferences and tastes. It is they, as well as the structure of income and the price level, that determine the composition of the consumer basket. In this way, consumer behavior can be represented as an economically complex process of generalization and analysis of potential needs and habits that somehow form the magnitude of demand and have a significant impact on the structure of supply in the consumer market. It should be noted that economically man is a rational being, therefore he seeks the greatest benefit from transactions, that is, he strives to make such a purchase that would satisfy his needs and at the same time be suitable for the price. The system of relative prices plays an important role here. This means that between two goods that are identical in all quality characteristics, but differ in price, the consumer will certainly choose the cheaper one. Usefulness of a good characterizes its importance, the need for acquisition for an economic entity. Accordingly, goods that are aimed at meeting primary needs are most useful. But according to G. Gossen's law, it turns out that, while carrying out the process of consumption, an economic entity initially receives the greatest utility and satisfaction, and then with each additional unit of the good - less and less, and at the moment of saturation, the utility is equal to zero. In this regard, we can say that consumer behavior can be studied in terms of certain factors. This will allow us to create a general model of a rational consumer: 1) the subject always strives for rationality based on existing needs, he makes a decision, sets a goal and tries to get the maximum benefit from his actions; 2) economic choice is made solely on the basis of consumer preferences and opportunities, and as a fact, trade transactions are made in the market for goods and services; 3) the presence of budgetary constraints. The buyer, purchasing goods and services, relies only on the monetary amount of his income or savings. Sometimes this value severely restricts the subject in his choice, especially if wages or other factor incomes do not correspond to the price dynamics in the country and the standard of living; 4) an important condition for the purchase is its affordability, as well as the existing contradiction between price and quality. The desire to buy a cheaper product does not always turn out to be a benefit for the consumer, since such a product may have negative characteristics that are harmful to health. However, there are a number of cases where the price is not responsible for the quality, for example, sales, discounts and other program promotions of manufacturers. 5. Income effect and substitution effect The law of demand is characterized by the fact that the volumes of purchases and goods intended for consumption are inversely related to the price. The very structure of demand directly depends on the operation of the market mechanism and the conditions of sale, which must suit both parties: producers who supply finished products to the market for goods and services and buyers who act in accordance with their needs. Thus, in order to explain the structure and motive of the subject's actions, it is necessary to define the essence of the concepts of "income effect" and "substitution effect". Income effect (Y). By means of this indicator, the degree of dynamics of consumers' incomes is determined and, accordingly, the formation of their demand for a particular product when the general level of market prices changes. So, for example, if you reduce the price of a product by half, this means that with real income that has remained unchanged, you can buy twice as much goods and services. As a result, there is a wealth effect that operates at the level of macroeconomics: if prices fall and the level of income remains the same, then the economic entity feels richer exactly as many times as the amount of goods purchased increases. That is, it turns out that the money is the same, but there are more goods. However, if the volume of consumption must be left at the same level, then a certain amount of other goods can be purchased with the remaining money. This makes the consumer really richer and thereby increases the demand in the market for goods and services. Note that even if the growth in demand stops, with a further decrease in the price, the number of sales of this product will increase, since people with lower incomes will begin to satisfy the needs. Thus, income effect represents a quantitative change in the structure of buyers' demand as a result of the dynamics of their income and solvency. In turn, substitution effect represents the dependence of consumer demand on the dynamics of the price level without the influence of income structure. At the same time, demand is guided by a system of relative prices. Based on the above example, we can conclude that compared to other goods on the market, those for which prices were reduced became cheaper. This accordingly causes an increase in demand, since consumers will begin to purchase precisely these goods, and not those that have the same purpose, but cost relatively more. This is explained by the desire of the individual to maximize the utility of consuming a given set of goods. It should be noted that these two concepts (the income effect and the substitution effect) do not exist separately, but act together in the economy. As you know, all goods on the market can be ranked according to the degree of quality: normal, low-quality and Giffen goods. This is when normal goods are consumed, both effects act in the same direction, and the consumer, as income rises, increases the demand for them. Each stage in the decline in the level of market prices creates more and more demand. When prices fall in the market for inferior goods, the income effect works in the opposite direction from the substitution effect. On the one hand, the demand for discounted goods theoretically begins to increase. At the same time, when prices fall and income remains the same, a wealth effect occurs, causing consumers to prefer more expensive goods. For Giffen goods, the income effect outweighs the substitution effect. In other words, when the prices of essential goods begin to rise during a shortage, the demand for them not only remains unchanged, it grows systematically and at a rapid pace. This consumer reaction is explained by the fact that Giffen products essentially satisfy primary needs, and their consumption does not decrease even with an increase in price. For example, if potatoes or bread begin to rise in price, people still continue to buy them, and in a crisis, a rush begins in general. 6. Budget constraint and the concept of a consumer basket The consumer, obeying the principle of rationality of preference, always strives to acquire such a set of goods that best meets his needs, is able to bring the greatest utility and corresponds to his ability to pay, that is, a certain amount of income at that time. Therefore, it is impossible to acquire everything at once, because the choice of an economic entity is not arbitrary, it is influenced by a number of market factors. The main non-price factor is the level of income, since it determines the solvency of an economic entity, i.e. its ability to make certain purchases. The amount of income plays the most important role in the formation of demand and has a significant impact on the establishment of market equilibrium. budget constraint acts as a barrier to the completion of a sale and purchase transaction in the market, it may arise due to the instability of prices or incomes. In other words, the economic subject has the opportunity to choose only within the limits of the amount of money available to him. On the other hand, with the development of the credit system, purchases "on credit" with the obligation to return at a certain point in time with interest reimbursement became widespread. Based on this definition, we can introduce another concept that is extremely important for characterizing a market system. consumer set can be represented as a possible combination of goods and services that can be purchased with the amount of money available at a certain level of pricing. At the same time, those benefits that are needed in the first place should be included in the consumer basket. For each individual economic entity, the composition of the consumer basket will be different, since the needs are extremely differentiated not only due to the difference in tastes, but also as a result of excessive differentiation of incomes in the country. Graphically, income can be represented as a budget line, and mathematically using the following formula:  where I is income; X and Y are two different goods; P (X) and P (Y) - their prices; Q (X) and Q (Y) - quantity. If one of the two available goods is not consumed at all, i.e. Q = 0, then the budget line is greatly simplified:  Like the law of market demand, the budget line describes the inverse relationship between consumption volumes and prices. The higher the price level in the country, the less opportunity the consumer has to make a "full-fledged" purchase and, accordingly, to purchase the planned volume of goods and services. It should be noted that Vilfredo Pareto's law of optimal consumption plays an important role in determining the structure of the consumer basket and making economic choices. Income is within certain limits and is an absolute value, while needs call for the acquisition of more than one product. Therefore, the subject always faces a choice, he must decide what good is most important for him and in what quantity it is necessary to acquire it. So the principle here is Pareto efficiency: "One cannot improve one's own well-being without diminishing the well-being of another." In other words, in order to consume, and initially acquire some good in a slightly larger amount, it is necessary to refuse to consume another. This is the only way to determine the optimal combination of benefits that will allow a rational choice to be made. 7. Curves of indifference Any economic entity in the course of its life one way or another at a certain point in time acts as a consumer of goods and services, factors of production and other benefits. Producers of goods and services themselves, in the course of their activities, are forced to purchase the necessary material resources and the "labor force" factor in the market for production factors. The buyer, according to his own preferences, tastes, level of income, makes a demand in the market for goods and services for the products he needs, which is a factor determining the scale of production. Consumption, as is known, has qualitative limitations, the main of which is solvency. Having a certain amount of income, an economic entity is forced to regularly plan the composition of the consumer basket, i.e., choose those goods and services that are most necessary for him today and which he is able to pay based on his capabilities. Thus, indifference curves are used to study the majority of microeconomic phenomena that are directly related to the problem of the rational choice of consumed goods. indifference curve is a line that contains all combinations of goods and services that provide the same utility. In other words, the consumer does not care which ratio to prefer. We will assume that the subject has a strictly regulated amount of income, and most of it for a certain time period is spent on consumption. For simplicity, let's assume that consumption is built on the basis of two goods: A and B. The consumer evaluates any good in terms of utility, so there is always such a combination of these goods, the utility of which will be equally high. From the principle of Pareto efficiency, it follows that by consuming one good in a smaller amount, you have the opportunity to consume another in a larger amount. At the same time, it is absolutely unimportant how the combination will be built, since the most important thing is the maximum satisfaction of existing needs. In other words, the economic subject does not care whether he consumes 3 units of good A and 4 units of good B, or vice versa, as long as they satisfy his needs as fully as possible. The indifference curve is described by inverse proportionality in the consumption of given goods A and B, respectively, it has a negative slope. In other words, when we give preference to one type of good, the second automatically begins to consume less. They are like parts of a single whole. The fact is that the amount of income is strictly limited, and due to the tendency of needs to positive infinity, it is simply impossible to buy everything at once, something will definitely have to be sacrificed at this point in time. It can be concluded that these goods are not substitutes (substitutes) and are most valuable individually. If we talk about substitute goods, then their relationship is described by a simple linear function, which is on the plane of the indifference curve. In general, the indifference curve cannot be presented in a single variant. It depends on the level of consumption, so it can easily "slide" within the plane in which we consider it. Accordingly, this curve shifts upwards when consumer demand grows and, conversely, downwards when it falls. Map of indifference curves consists of several indifference curves superimposed on one plane, each of which shows its own "demand". It is capable of distributing all goods in ascending order of their utility. This allows you to determine the most optimal choice structure that faces each economic entity. 8. Production Capabilities and Pareto Efficiency First economic law (the law of unlimited needs) indicates that the needs are endlessly growing, and the resources and the goods themselves, which are made from them, tend to end. Therefore, sooner or later, an individual faces the problem of economic choice, which is designed to resolve the issue of the rationality of using the available benefits to fully meet needs and at a given level of solvency. In other words, the potential consumer decides how to use his budget in the most rational way in order to get the maximum benefit from it. Production Possibility Curve or Transformation Curve It is represented by a graph on which all possible (alternative) options for organizing production are located with a strictly limited amount of resources. Thus, it is extremely important for the organization to choose the right direction of development, to determine the range and range of manufactured goods. This can be done through the creation of a strategic planning department, which, in accordance with the current market situation and demand structure, will develop development strategies, the essence of which will determine the development path and the nature of production. In addition, the presence of a marketing system will also strengthen the position of the organization in the market, as it will regularly analyze it and bring to it relevant information about changes in the market mechanism. A competent approach to this problem in the future will ensure high profits and success. Let us assume that a certain firm decides on the specialization of production, i.e., what product should be produced so that its marginal productivity is the greatest. There are two alternatives: guns and cars. Of course, everything depends on the magnitude of demand and the economic situation in the country: military production is extremely important and profitable in wartime, while car manufacturing takes place in a peaceful economy. Note that the crisis of the economy is characterized primarily by the incomplete use of resources. At the same time, as a result of limited resources, it is difficult to achieve the maximum scale of production. The production possibilities curve has several levels, each of which is represented by a new kind of combination of goods in their monetary terms. Through technological innovations, the development of scientific and technical progress products, the discovery of qualitatively different ways of extracting natural resources, progress in the economy is quite real, which is marked by a transition to a new, higher level of the transformation curve. In this regard, the concept of opportunity costs is important: these are non-produced goods, that is, those that were discarded as a specialization option at an early stage of production. The Italian economist Vilfredo Pareto (1848-1923) revealed the meaning of the expression "efficient allocation of resources": resources and factors of production are optimally and rationally distributed only when no one can improve his situation without, as a result, it worsens for someone. However, despite all the theoretical advantages of this law, it is nevertheless far from ideal in practice. This is due to the fact that we are not able to predict in advance all possible situations of consumer behavior. 9. Utility functions. Quantitative and ordinal utility Usefulness - this is a necessary condition that a good must have in order for an economic entity to agree to acquire it. In addition, consumer choice is influenced not only by the structure of utilities, but also by the needs, for the satisfaction of which the processes of purchase and sale are carried out in the market. Within the framework of marginalist theory, there are two main approaches to measuring utility: quantitative and ordinalist. Quantitative approach, otherwise cardinal. Representatives of this utility theory are W. Jevans, K. Menger and L. Walras. They suggested that the utility of goods can be measured quantitatively in some absolute units called utils (or utils). Thus, the total utility from the consumption of a set of goods is a function of the utilities of individual goods and goods:  On the one hand, this method, it would seem, allows you to quickly and easily determine the usefulness of any product or its unit. After all, it is extremely convenient to express utility in terms of specific values - through this, one can easily compare utilities across all sets of goods and single out the optimal amount of consumption. However, the quantitative approach has several significant drawbacks that prevent it from being used as a standard and economically correct one. The fact is that it is impossible to rank all things, goods and services in terms of utility. Util is a non-standard unit of measurement, therefore it is impossible to say exactly what it is equal to and how it is set, that is, there is no correlation mechanism itself. In accordance with this, it turns out that an almost indeterminate value can be attributed to each good, quite unreasonably. In other words, there is no instrument in the world that can measure utility. In addition, how can one calculate the total utility of goods if it itself differs across all social groups and at the level of the individual. What may be convenient for one person, which fully satisfies his needs, cannot be applicable to others. The fact is that the needs are of a different nature, differentiated structure and are satisfied by each economic entity in different ways. Ordinal approach, or ordinalist. The main ideologists of this concept are the Italian scientist Vilfredo Pareto, John Richard Hicks, a student of J. M. Keynes, and the Russian economist E. Slutsky. Here utility is a function of a set of two goods and implies their pairwise comparison:  where X and Y are comparable products. Based on this, the main principles of this approach are the following: 1) the choice of the consumer depends only on the quality, quantity and price of goods and services, i.e. the impact of any external effects is completely excluded. This accordingly contradicts the theory that the determining factor in consumption is the amount of income. Thus, we see how opposite the views of the approaches we are considering are; 2) the consumer is able to order all possible combinations of goods; 3) consumer preference is transitive. For example, if the utility of product A is greater than the utility of product B, and B is greater than C, then the buyer, making his choice, will prefer good A to good C. Accordingly, if utility A \uXNUMXd B, aB \uXNUMXd C, then A \uXNUMXd C. This means that the utility of two goods (A and C) coincide, therefore, the consumer does not care which good to choose, because the most important thing is that the need be satisfied; 4) the consumer always prefers a larger set of goods to a smaller one. LECTURE No. 3. Commodity-money characteristics of the economy 1. Organization of subsistence farming Subsistence farming was developed in the pre-capitalist period of economic development. Then, with the development of intermediary and credit services, it was replaced by a commodity economy, which from an economic point of view is the most optimal form of farming. However, it cannot be said with complete certainty that the natural form has completely outlived itself. Even in our time, we can encounter its individual elements: summer cottages (production for oneself) as a way of self-management, payment of wages with food, barter exchange between enterprises of the produced product, etc. So, natural economy represents the simplest organizational form of management, in this case, production is aimed exclusively at meeting personal individual needs. Initially, all resource owners worked, as they say, for themselves: they produced some kind of product, but suffered a need for what was not available to them. So, for example, a person cultivating fields, engaged in agriculture, had to get tools from somewhere, as well as household utensils. Subsequently, this was the reason for the creation of a new form of management based on trade turnover. Thus, the subsistence economy was created, developed and regulated through local customs, norms and traditions and had the following features: 1. closed production system. All production units were economically fragmented, independent of each other and did not intersect or connect in any way. An example would be a primitive community or large patriarchal families. Note that subsistence farming existed for several centuries and formations. 2. The exclusivity of manual labor and the complete lack of specialization. This, of course, does not mean that there was no division of labor at all, it existed, but only within the framework of gender and age characteristics. However, it was precisely the division of the production process into its constituent parts that was not observed, so there was no basis for the development of the economy. 3. One-way economic connection between two processes: the production of material and non-material goods and their consumption. The individual produced goods exclusively for his own consumption, guided by personal preferences and needs. 4. Sustainability of this form of management proved historically, since it captured more than one century of civilization in duration. With the development of the economy, there was a need for additional production - the creation of a full-fledged market within the country and abroad. The following reasons for the collapse of the subsistence economy can be named: 1) efficient production turned out to be impossible without the creation of a strong system of division of labor. One person simply could not do several things at once and was a professional only in a separate one; 2) the accumulation of wealth was only the storage of products of production, which excluded the process of capital accumulation. At that time, the economy was in an embryonic static state, it did not change, did not develop, therefore, the issue of trade formation to create natural-material, and then money circulation, arose sharply; 3) due to the fact that production was of an individual nature, the development of entrepreneurship was not observed, therefore the manufacturer could not receive profit and appropriate payment for his work. Goods were produced exactly in the amount required by the needs, and were not intended for further implementation. Thus, the natural form of management in modern times turned out to be extremely unpromising. With the development of ideas about goods, money and the market, a new era in economic history began - the era of commodity economy. 2. The concept of commodity economy With the development of society, the need arose for overproduction, as well as for the production of a differentiated set of goods and for providing society with them. A person could no longer independently produce for himself all the most necessary things, since he specialized, as a rule, in one kind of activity. At the same time, his needs forced him to somehow find new means of satisfying them. The natural form of management could not resolve this contradiction. Gradually, there was a need for products produced by other individual owners, so an exchange appeared. Now it was easy and unhindered, for example, to pay for the food received with skins, precious metals, if, of course, the producer of primary goods needed them. The first stage of the "new economy" was barter (the exchange of goods for goods). Over time, it became not convenient enough, it turned out to be much easier to exchange for a universal equivalent unit, for which it was then possible to purchase absolutely everything at any time. As a result, money arose, and the exchange took on a monetary form: C - D - C. Money became an intermediary in the conclusion of trade transactions. Commodity economy - this is a form of economic organization in which goods are produced for the market and serve as an object of sale. There are two prerequisites for the emergence of this type of production. 1. Social division of labor marked the beginning of the development of specialization in a particular type of activity and production. For example, hunting, farming, cattle breeding, beekeeping, fishing, etc. With the emergence of the merchant class and its division into guilds, exchange became a profitable and convenient means of satisfying needs. Merchants were directly involved in trade, they acted as its element. They controlled the course of the buying and selling process and, in addition, were engaged in usury: they issued money on bail. 2. Economic isolation of producers was possible only due to the fact that the property became private, so the producers were independent economic calculation. Two stages can be distinguished in the long evolution of the commodity economy. 1. A simple type of organization of production. The result of production entirely belonged only to the manufacturer, it was he who had the right to dispose of it. This is a kind of change of activity. 2. The capitalist type arose in the era of the development of capitalism, the emergence of more or less perfect equipment and technologies, when two classes actually emerged: capitalists (owners of manufactories and factories) and wage workers (people who voluntarily come to work for the capitalist), who entered into an agreement with each other hiring. Features of the commodity economy can be described in the same way as natural economy, only here all the indicators have the opposite meaning. 1. open, rather than a closed system of economic relations. Each household or enterprise has economic ties with other economic entities and is included in the market exchange system. 2. Deep division of labor and its specialization. As soon as capitalism and capitalists arose, technology began to improve, so manual labor began to go out of production, it was replaced by machine labor, more convenient and productive. It became possible to increase the scale of production while reducing working time. All this is an indicator of the growth of labor productivity, which is extremely necessary for the economy for sustainable development. 3. Indirect economic links producers and consumers are that goods are produced by one subject of economic relations and consumed by another. This is how demand appears as an expression of the preferences and desires of consumers and supply, which reflects the ability and desire of the manufacturer to sell a particular product. As a result, each of their subjects is set by diverse goals: the producer seeks to maximize the total profit, and the consumer seeks utility at minimal cost. 3. Product and its properties Product - This is an economic category that can be represented by the result of the production activity of the enterprise and the product sold on the market. In other words, a product is a way to satisfy the needs of economic entities who, according to their preferences and tastes, choose it for consumption. According to the degree and nature of satisfaction, all economic benefits can be divided into three groups. 1. Goods that can replace each other. In other words, if the consumer cannot find the type of product he needs on the market, he is offered to replace it with a similar one, with the same properties, but, perhaps, a different form and value. 2. Products that complement each other. Their consumption is represented by a single process, so the need for them grows or decreases in parallel. 3. Independent products that have no analogues and complements in this market. They combine all the necessary properties and are purchased by an individual or a group separately for current consumption. The commodity as an element of the market mechanism and trade exchange has the main property. This is the use value of a unit of good, which is created directly in the production process. The final cost includes all costs of the organization: the cost of purchasing the necessary material resources, factors of production (labor, capital, entrepreneurship, etc.), as well as income tax and other indirect taxes. In particular, the cost of goods includes value added tax, VAT. Such a formation of the cost of a unit of goods, i.e., taking into account its cost, allows the company to most rationally conduct production and economic activities. The finished product, as a rule, goes directly from production to the market of goods and services, where it becomes an object of the purchasing power of economic entities. Here, the value of the product is transformed into its price, which is extremely subject to fluctuations as a result of the movement of market quantities of demand (D) and supply (S). Thus, fluctuations in the price level around the potential value can be described in three possible ways. 1. If D > S, there is a deficit. Manufacturers cannot provide goods to everyone, they cannot fully satisfy the demand for the products of all economic entities at once. In conditions of scarcity, prices begin to rise, and contrary to the law of diminishing marginal utility, each individual unit of a good has an increasing degree of utility, since there are fewer of them left with each purchase. 2. If D < S, this means that there are significantly fewer purchase and sale transactions on the market than were delivered products. In this case, there is a crisis of overproduction, when finished products cannot be fully sold. This threatens to reduce the real possibilities of the manufacturing sector, since enterprises do not receive revenue for unsold goods, and, therefore, do not have funds for further development. In addition, in the market itself there is fierce competition between sellers for the consumer, which puts a lot of pressure on the manufacturer. 3. Option, when D = S, - the ideal state of the market, characterized by the coincidence of supply and demand. In other words, all the needs and demands of society can be satisfied by producing the necessary goods. This is how the equilibrium price is established, which suits the two main groups of trade turnover: both buyers and producers. 4. The concept of money and its evolution With the development of commodity relations, the idea of their relative simplification simultaneously arose. This was achieved through the universal equivalent - money. The advantage of commodity-money relations is that money, acting as a reflection of the value of all goods, is absolutely liquid and can be put into circulation and exchanged for the desired good at any time. Money is a multifunctional product that reflects the value of other products. By means of money, the processes of calculation and accumulation are greatly simplified. Note that initially barter appeared: T - T, then an "intermediary" of turnover (money) was added to this formula, and it took on a different form: T - D - T. Today, this form no longer seems convenient. The predominance of cash in the economy and the implementation of commodity processes without the use of plastic credit cards indicates a certain backwardness of the state. In Russia today, cash circulation still prevails, but bank cards have already found wide application, since they are the most convenient means of calculating and storing money. The evolution of money has affected several centuries and can be represented by the following stages: 1) commodity money. Each of the peoples of the world imagined a monetary unit in their own way. The ancient peoples of Oceania, for example, attached the greatest value to rare shells that were mined from the bottom of the sea. Cattle breeders used cattle as money, the northern peoples, where the fur trade is developed, used the skins of fur animals, etc. In other words, the object in the production or extraction of which people specialized served as money; 2) silver monometallism characterized by the fact that silver bars and coins were most widely used; 3) bimetallism was primarily marked by the emergence of the possibility of using gold bars in circulation, when two metals were used as an intermediary in trading operations. In other words, along with silver coins, it was also possible to pay with gold bars; 4) era of the gold standard provided gold with the highest demand, as a result of which its value increased sharply. The share of silver in circulation began to decline sharply. Note that gold and silver have become a liquid medium of exchange due to certain qualities: a) persistence - their physical properties ensured a long existence and the ability to handle; b) the high value of a single unit of metal in a small volume; c) economic divisibility - implies the division of the cost by N times when dividing the ingot into N parts; d) gold has become a highly valuable metal, rarely found in nature. Paper money appeared when it became clear that gold and silver were still inconvenient to use: bullion is very bulky and subject to abrasion, which spoiled their attractiveness. Modern money is presented in several versions. 1. Cash easy to handle, have both a coin form and paper. However, such money cannot be an effective way of saving, since everything depends on inflationary expectations and the economic situation in the country. 2. Credit money: bills, checks and various promissory notes are easy to use and can be exchanged at any time for the amount indicated in them. 3. Electronic money have gained mass recognition already at the beginning of the XXI century and are plastic cards: debit cards (access to the money available in the account) and credit cards (providing a loan with a maturity date). Thus, today money has two important properties. First, they are highly liquid and can be exchanged for any other product of labor at any time. The second property is portability as the ability to have the highest cost with the least weight. 5. Monetary aggregates, functions of money Money - this is the main element of commodity-money relations, in which the value of goods and services is expressed in one way or another. Money is the universal equivalent. Thanks to its own liquidity, money can be exchanged for any good at any time. The amount of money in the country is controlled by the state, and in practice - by the Central Bank of the Russian Federation. To measure the money supply, a number of monetary aggregates are used, which are arranged in descending order of their liquidity. Liquidity monetary unit makes it easily exchangeable, gives the properties of the product. Having a certain amount of money in cash or on a plastic card account, an individual easily becomes a subject of commodity-money relations. Thus, money is able to satisfy the needs that arise in the course of the life of an economic entity. money aggregates. The MO unit is cash in circulation and on bank accounts, Ml includes, in addition to cash, those that lie on urgent and savings accounts of commercial banks. In other words, these are deposits that the population can request at any time without interest losses. Monetary aggregate М2 = Ml + + short-term securities, and finally aggregate L = МЗ + + savings bonds of commercial banks. All aggregates together represent the money supply, i.e., a complex of payment and purchasing means that ensure the circulation of goods and services in the economy and are held by the population (in the form of cash balances), organizations and other economic entities. Economists distinguish two concepts of the origin of money. 1. In the process of developing commodity relations (bargaining), it became necessary to evaluate goods, which became possible with the appearance of money. 2. Money is a social contract, which is concluded directly between the government and society. In this regard, money performs a number of important economic functions, through which their most important properties are expressed. 1. Measure of value. Money contains the value of all market goods and performs this function perfectly. This means the following: the buyer always has the right to ask the price even if he does not have a certain amount of money on hand. Thus, by means of money, goods in the market receive an assessment of the properties that determine the magnitude of demand. 2. medium of exchange. As you know, to carry out trade transactions, cash money is needed, which plays the role of an intermediary (goods - money - goods). This is the main difference between commodity-money relations and barter, when one commodity was repeatedly in circulation until it was finally exchanged for the desired product. The advantage of money is that it reduces transaction costs, i.e., the cost of servicing exchange operations, and thus greatly simplifies the process of exchange. 3. Instrument of payment. Currently, a form of sale with a delay, such as a loan, has become widespread. It gives the consumer the opportunity to purchase a particular product, even if at the moment his funds are limited. Thus, consumer demand has acquired a new form of satisfaction. The disadvantage here is only the presence of interest payments at the end of the transaction. 4. Means of accumulation. Money is an asset. Invested in some profitable business (including real estate), they contribute to the real accumulation of wealth. Therefore, it is extremely important to take into account anti-inflationary expectations, which directly determine the magnitude of consumer demand. 5. World money necessary for the implementation of international payments, respectively, their appearance falls on the period of the birth of international trade. 6. Law of monetary circulation Money turnover - this is the movement of cash flows, provided through the existence of supply and demand in the market of money supply. This is the main condition for the effective functioning of the financial, monetary system of the country. Money, both in cash and in non-cash form, is constantly "looking for" the scope of its application, they must be realized, invested in some business. Otherwise, the monetary unit is either "eaten up" by inflation, or as a result of its stagnation, the problem of depreciation arises. For the intensive development of the economy, it is extremely important to decide how much money the economy needs to fully finance all spheres of life. Monetary unit It is an important part of money circulation. In this regard, we define the essence of the emission. The budget deficit is the reason for the additional issue of money. However, the excessive emission of money supply is the first cause of inflation, as a result of which an economic crisis becomes inevitable. Thus, the financial and political situation in the country directly depends on the amount of money in circulation. There are several factors that determine the optimal amount of money supply. 1. Market prices for goods. Any product or service can be expressed in terms of monetary value. The pricing process itself directly affects the amount of money in circulation. If prices change in one market, these changes will gradually affect other types of markets, as a result of which there will be a need for additional production of the money supply or its emission. This suggests that the limited money supply is not at all a factor in stability and price reduction, on the contrary, it becomes the cause of their overestimation. 2. The exchange rate of a foreign currency that occupies a leading position in the financial market. The fact is that prices in the market of goods and services and factors of production are directly dependent on fluctuations in the exchange rate, mainly the reserve, since it is directly related to trading activities. For Russia today the reserve currency is the US dollar. In accordance with this, the Russian economy exists, as it were, at the expense of it, so it is forced to support the dollar: its value should not fall in any case. 3. The number of products produced. If the volume of production begins to increase, while prices are relatively constant, the need for money also increases, which again leads to a quantitative increase in the money supply, since the turnover of trade and the velocity of money increase. 4. The intensity of circulation of the monetary unit characterized by the fact that the money supply is inversely proportional to the number of revolutions that it makes for a certain period of time in a given territorial framework. For developed countries, this coefficient is about 17 turnovers, in Russia - only 7,5, which is almost two times less. Naturally, this testifies to the backwardness of the Russian economy from Western countries. The circulation of money in a country can be measured through the use of a special law. It turns out that the amount of money in circulation directly depends on the scale of production and market pricing, while the velocity of money circulation has the opposite effect. All this, of course, depends on the production conditions, for example, labor productivity, which is an indispensable condition for achieving high performance indicators. This law can be written by the Fisher equation:  where MV is the monetary part obtained by taking into account the amount of money in circulation and the speed of their circulation; PQ - commodity part. If the money part in the economy prevails, inflation occurs, otherwise, a crisis of overproduction occurs, when the money supply on hand does not allow purchasing all the goods and services produced. Fisher's equation is the simplest, which reflects the essence of money circulation. But there is another, more complex one: Karl Marx's law of money circulation.  where M is the value of the money supply in circulation; R unrealistic. is the sum of the prices of unsold goods; R credit - the sum of the prices of goods sold on credit; V is the velocity of money in the economy. Thus, we can say that Marx's law describes the specifics of money circulation in most detail, it specifies the Fisher equation, since the commodity part of PQ is broken down into its component parts. LECTURE No. 4. Market 1. The concept of the market, the conditions for its occurrence The market is a system of economic relations that develop between the seller and the buyer regarding the production and sale of the necessary goods and services that meet the needs of economic entities. The composition of economic relations includes not only commodity turnover, but also money, since the market mechanism is directly related to money circulation. Based on the well-known Fisher exchange formula MV = PQ, we can conclude that the movement of finished products and production factors is provided through cash flows. On the other hand, the market is the place where sellers and buyers discuss their terms and conclude a trade agreement, expressed in the fact that the subject acquires certain goods for a certain amount of money. The subjects of the market are buyers and sellers, which, as a rule, are households represented by individuals and social groups, firms (various organizations and enterprises), as well as the state, which, among other things, acts in the economy as the supreme control body. For example, in the item of expenditures there are government expenditures. These include all social services of a transfer nature, as well as targeted spending on the development of the public sector and the maintenance of public goods. The objects of the market can be called the goods and services themselves, as well as the totality of cash and non-cash funds. Goods and services are not only finished products, but also factors of production such as labor, land, capital and entrepreneurship. All financial means of payment act as money. Thus, the whole market system is built on the democratic way of doing business. In the Russian economy, initially there was a command and control system, which was characterized by automatic regulation of the supply, i.e., all decisions regarding production, exchange and sale were made at the center and then acted locally. In general, there are several reasons that contributed to the formation of a market system and market relations. 1. Division of labor and narrow specialization. It is impossible to engage in the production of several types of products at the same time, in other words, multifaceted specialization is not good for production, since it does not contribute to focusing on a certain type of operation. Specialization itself can be defined through the principle of comparative advantage: each entrepreneur has a strictly defined amount of resources, factors of production, skills and abilities, therefore, when organizing production activities, he must take into account all alternative options for doing business or the cost of lost opportunities. In other words, it is worth specializing in the type of production that will ultimately contribute to obtaining maximum profit at minimum or negligible cost. 2. Economic autonomy of business entities. Most commodity producers are legal entities that independently conduct all economic and commercial activities and bear unlimited liability for all obligations. In addition, the task of the manufacturer is to solve the question: "what, how, for whom to produce and in what quantity?" This implies strict compliance with the conduct of trading activities exclusively according to market laws. All produced goods must certainly have a demand and a clear purpose, in other words, meet all the needs of society. To do this, the enterprise must have a developed information system that will allow you to control all changes and innovations in the market. 3. Free exchange of resources implies the free formation of commodity prices. They are set taking into account fluctuations in supply and demand and look like a deviation of the equilibrium price from its value. Through the establishment of free prices, the manufacturer has the right to determine the specialization and direction of development of his organization or enterprise. 2. Market functions The market is a self-regulating mechanism that provides producers with profit, consumers with satisfaction of needs. In other words, the market in one way or another distributes factor incomes: rent from the land, profits from doing business, wages from the implementation of the labor process and the interest rate, which is the reward for owning capital. Thus, the market affects all aspects of economic life and performs a number of functions for this. The main and most important function of the market system is regulatory. The market provides the ratio of supply and demand, which determine the level of prices for goods and factors of production. If production volumes correspond to consumer demand, the equilibrium price is set: it is acceptable for both parties to the trade and market transaction. In general, if the price rises, production begins to increase momentum, and the volume of output increases. If the price, accordingly, begins to fall, then the return on production decreases, and this is a signal for a decrease in the scale of production activity. Today, of course, the economy is developing not only according to the "invisible hand" principle, but also through state regulation. The second function of the market is stimulating. Under the influence of price dynamics, the achievements of scientific and technological progress are introduced into production, the development of new technologies, which in general makes it possible to reduce the costs of manufacturing goods and services, improve the quality system and expand the range of products. Informational the function is determined through the distribution of information, knowledge and skills among all economic subjects of the market system. Thus, manufacturers receive information about the quantity of products, their quality, form and other characteristics, which are determined in accordance with the structure of consumer demand that has developed at a given time. As a result, the organization becomes more flexible, it easily adapts to any changes in the external environment. In an economy with a developed type of perfect competition, commodity producers create their own consumers, and those, in turn, have the right to choose a product of a certain brand. This is intermediary market function. It harmonizes the interests of the seller and the buyer, allows them to achieve a certain balance in trade transactions. In addition to the above functions, the market evaluates the product produced, its initial resources and the amount of production factors spent, among which the main one, of course, is labor. Thus, the activity of the market is aimed at the efficient and rational use of all production factors. An important feature of the market is that it differentiates all producers in the course of their activities and pushes weak, economically unprofitable enterprises out of the system. If we talk directly about the types of market structures themselves (dividing them according to levels of market power, market share, etc.), then it should be noted that there is a market of perfect competition (all producers in equal conditions), monopoly (unlimited power and inflated prices), monopolistic competition and oligopoly (several producers regulate market mechanisms). There is also non-price competition, which is characterized by the development of a quality system, product advertising, as well as the creation of marketing and strategic planning departments. 3. Market power of the firm, its indices Manufacturers supply various goods and services to the market to meet the needs of the masses. Accordingly, they carry out their activities under the influence of the size and structure of consumer demand and other elements of the market mechanism. At the same time, commodity producers, by setting prices for their products, as well as by conducting extensive advertising campaigns, put pressure on the consumer. The degree of impact directly depends on the market share and power of the firm. Thus, the market power of a firm is its ability to extend control and activity to the market mechanism and its processes (the formation of supply and demand, price levels, etc.) and, as a result, to competitors. Market power determines the scope of the company's activities: how freely it can dispose of the market and what limits its existence is limited. When this indicator is too high, it turns out that the shares of competitors in the total amount are much lower. Consequently, most of the consumers are at the mercy of such a firm. This extreme form often takes the form of monopoly. Only a monopoly firm is able to strictly regulate the process of pricing and output, as well as conduct its own trade policy, even if it is to the detriment of other organizations and consumers themselves. All indicators of market influence, depending on the direction of their calculation, are divided into direct and indirect. Direct indicators make it possible to determine the firm's market share, the level of its market power, the decision-making process and, of course, the type of competition. In other words, the nature of competition is determined here, how many firms occupy a leading position in the market, what is the degree of their development and the circle of consumers of their products. Indirect indicators give a complete picture of the market, systematize all indicators of the market situation in their totality. To analyze and evaluate the organizational impact on the market system and all its subjects, it is necessary to familiarize yourself with the formulas that allow you to quantify the power of the firm. As you know, the highest prices in the market are those set by the monopoly. A monopoly firm has unique resources and can produce an incomparable product that is urgently needed by the whole society, but cannot be purchased anywhere else. But a monopoly aims to maximize the entire mass of profit, not just its amount per unit of output. It should also be noted that monopoly power is determined by an inverse dependence on the elasticity of consumer demand and its sensitivity to market price dynamics. Since the elasticity of demand shows its sensitivity to the cost of goods, the higher this indicator, the lower the firm's ability to influence the market, since then it cannot unreasonably raise prices and abuse its rights. Lerner Index (IL) can be calculated by subtracting marginal cost from the monopoly price when recalculated to the level of non-competitive prices:  where P (m) is the price of the monopoly market; MC is the cost of additionally produced unit of output. At the same time, 0 < IL < 1. If this indicator is closer to 0 in its value, this indicates the predominance of perfect competition in the market, which is most suitable for the successful development of a market economy. The closer this value is to one, the more likely it is that a firm has appeared on the market that wants to dictate its terms - a monopolist. Oligopoly is characterized by a Lerner index of about 0.6-0.8, since there is nothing more than an intermediate state between monopoly and perfect competition. The Lerner coefficient is often difficult to calculate due to marginal cost, so in this case it is much more convenient to use the average cost as the cost per unit of output. In this case:  Herfindahl-Hirschmann Index (IHH) - Another indicator of the degree of market concentration. It can be calculated as the sum of the shares of each firm separately that conduct their production and marketing activities in this market:  where qi is the product produced by one of the firms. IHH is characterized by inequality: 0,01 < IHH < 1. Accordingly, the smaller its value, the stronger the competition and the weaker the market power. Thus, thanks to these indicators, the state can control the process of functioning of firms and, as a result, fight monopolies. 4. Price discrimination in an imperfectly competitive market In the market of imperfect competition, which is characterized by a high degree of market power of one or several firms, the pricing process develops differently than in the market of perfect competition, where they are set on the basis of data on the cost of production, transaction costs, tax rates. Monopoly implies the ownership of a unique resource that cannot be accessed by other producers. In accordance with this, the product obtained from this resource is also unique, so the monopolist sometimes sets unreasonable prices for it, which often exceed production costs by several times. Thus, the consumer pays huge sums just for what the monopolist wants. For example, gas and oil companies in the market are absolute monopolists. In their power are resources that, in principle, are a public good. If we talk about the city, then the sewerage system, the telephone exchange, etc., are also products of monopoly production. Thus, residents pay the price set by the monopolists. It turns out that in practice every economic entity operating in the market faces the problem of price discrimination. In other words, a firm operates on the market, which provides products to various groups and strata of the population, but sells it at prices that are inflated relative to equilibrium prices. In addition, such a discrepancy in prices is not at all a consequence of high costs, but the monopoly firm takes a certain amount for the uniqueness of the manufactured products. In general, price discrimination can be of three types or degrees. 1. First degree price discrimination. The monopolist sells manufactured goods at maximum prices, i.e., at those within which the client is a solvent subject. Therefore, the entire surplus of the consumer, as the difference between the highest price that the subject is willing to pay and that which he actually paid, is entirely in the hands of the producer. In other words, the buyer actually does not have the right to choose and pays not at all the amount that he is ready to pay for consumption, but many times more. 2. Second degree price discrimination represents the differentiation of prices depending on the volume of goods and services sold. For example, discount discounts or wholesale trade are characterized by the fact that for each marginal unit of a good, the consumer pays a decreasing price, which in essence resembles the law of diminishing marginal utility. This policy allows you to activate demand. 3. Third degree price discrimination implies the distribution of buyers into groups depending on their purchasing power. It turns out that the monopolist, in accordance with the differentiation of society, works simultaneously in two markets: one is expensive, the other is cheap. In the expensive market, prices reach their maximum allowable value, since the monopolist is completely sure that the product will find its consumer in any case, and in the second market, prices are somewhat flexible, since they must correspond to the solvency of customers. Thus, any monopolist must be able to regulate the process of price discrimination and, if necessary, competently divide the market into segments depending on the differentiation of income and the elasticity of consumer demand. Only focusing on the demand and capabilities of consumers, the monopolist will be able to consolidate its position in the market and maximize profits. At the same time, too obvious overpricing can cause interference in the market system by the state, whose prerogative is precisely the fight against monopoly. 5. Positive and negative aspects of the existence of a market system Market is a fairly free form of farming in a developed economy. In accordance with this, it has inherent functions through which it regulates the socio-economic life of society and the country as a whole. However, the market, of course, combines not only advantages, since it cannot always cope with its tasks, therefore it also has a number of negative aspects. That is why the state controls the market process and, where the market is unable to cope, intervenes, exercising its influence with the help of fiscal and monetary policy. Advantages of a market economy: 1) the market is the basis for the control and regulation of social production, it forms economic categories that contribute to this, such as supply and demand; 2) the market is a self-regulating system, since price dynamics, market equilibrium fluctuations due to changes in supply and demand, as a rule, occur independently. Even Adam Smith introduced the concept of "invisible hand of the market." This means that the market itself can regulate and control all the processes taking place on it. However, today the principle of "Laissez-faire", or the complete non-interference of the state in the economy, is gradually becoming obsolete; 3) social production is carried out on the basis of the real needs and preferences of economic entities, at the same time, all the resources involved in the production process must be distributed most efficiently among the stages of production. In other words, market processes and their dynamics depend on the structure of consumer needs: they determine the amount of demand and production volumes; 4) the market system stimulates production growth and high-quality technological innovations. All this allows you to really reduce the costs of doing business and save on resources and factors of production, using them in the most rational way. Despite all the undeniable advantages of the existence of the market, it is not an absolutely ideal mechanism, since it cannot solve some economic problems. The disadvantages of the market include the following: 1) the market system cannot prevent the emergence of externalities, i.e., external effects, and is not able to prevent or destroy them. For example, when building a new railway, the problem of expensive and lengthy transportation of passengers and goods is being solved. However, all this threatens during construction with environmental pollution and the creation of an exclusion zone as a result. Thus, to eliminate the harmful effects of negative effects, government regulation is necessary; 2) there are needs that the market cannot satisfy due to their social orientation. The market is engaged in commercial, financial and trade transactions and cannot provide the population with social protection or restore law and order. All this, of course, is the prerogative of the state; 3) the emission of the money supply is carried out exclusively by the state represented by the Central Bank of the country, therefore the market system is not responsible for the amount of money in circulation, it only affects their circulation. Through monetary policy, the Central Bank affects the monetary base, the money supply and the money supply in the economy; 4) the market system itself has a tendency to the emergence of monopoly and cannot prevent its emergence. The development and maintenance of antimonopoly legislation is the exclusive prerogative of the state; 5) the market economy is characterized by the fact that incomes are distributed and redistributed extremely unevenly, which leads to the differentiation of society into low-income and richer segments of the population. Thus, only the state has as its function the maintenance of low-income and poor families; 6) scientific activity develops not as a result of the success of the market mechanism. It must be financed at every stage, which only the state can afford. The above points indicate that as the economy, market and trade relations develop, the problem of state intervention becomes more and more acute: only state bodies can make up for what is inaccessible to the market. At the same time, it is very important to determine the boundaries of state regulation, since excessive control of economic processes can lead to paralysis of the market system and its elements. In this case, it is imperative to find a balance of power in the economy. 6. The need for government regulation Government price controls expressed in the implementation of monitoring the establishment of the level of market prices. By means of this it is possible to determine all the problems of the market system up to the discovery of monopolies: monopoly prices are greatly inflated compared to ordinary production prices. The market itself cannot resist the formation of monopolists, since, in principle, it is not a regulator of the price factor. Equilibrium prices, which are allegedly automatically set by the coincidence of consumer demand with the desire of producers to produce and sell precisely the "demand" product, do not always take into account the interests of all economic entities. As a result, the state assumes responsibility and sets rigid fixed prices, beyond which the market has no right to go. 1. Maximum prices. If prices are raised unjustifiably, that is, regardless of the increase in the cost of production, this can cause discontent among the public masses. The state, trying to meet the needs of consumer subjects, deliberately reduces these prices. It can solve this problem by implementing a contractionary monetary policy by reducing the amount of money in circulation. If the economy is in a deep crisis and prices have been established as a result of an inflationary explosion, then the most optimal way is to use fiscal expansion measures. The state expands the amount of its own spending, which stabilizes the economy and allows you to deal with price fluctuations. 2. Minimum prices. When equilibrium prices are set at an excessively low level, supply in the market begins to decline noticeably. This is due to the fact that manufacturers do not want to sell the product at a price that may not even be able to recoup the costs, not to mention the profit. They will deliberately keep the manufactured product in warehouses until the forced shortage of goods and services leads to higher prices. In conditions of blocking the market mechanism, when it cannot cope with the emergence of a monopoly, the state, as it were, replaces it, creates a new pricing system in order to achieve a balance between supply and demand. Through this, the deficit is eliminated, and the market begins to operate in full force. Thus, it can be said for sure that state intervention is necessary only as a last resort, when the market itself cannot independently eliminate the defects and problems that have arisen in the economy. LECTURE No. 5. Market of imperfect competition, its mechanism 1. Monopoly The market is a fairly complex mechanism based on the interaction of supply and demand, through which a general price level is established. The sale of goods, works, ideas, services in any market takes the form of rivalry, since each manufacturer seeks to capture a larger market share, obtain the best conditions for doing business and its own consumer. Such rivalry in the market is called competition; it is another element of the market mechanism. Competition has a positive effect on the production process, since each company seeks to implement some kind of innovation, to invent something. All this undoubtedly contributes to the technological and production development of business. Thus, the market structure is characterized by the presence or absence of monopoly power. The concept of market power is inextricably linked with the concepts of "monopoly" and "competition". The higher this value, the tougher the competition in the market. The ultimate power, of course, is a monopoly. Monopoly - a firm or other legal entity that performs a commercial or marketing function on the market, occupying the largest market share and dictating its conditions on it. Monopoly is characterized by setting inflated prices for all goods and tight control over the organizational structure and functioning of the market mechanism. Monopoly price is a kind of market price, which has the highest value compared to the prices of other producers, thereby providing the monopolist with excess profits. The monopoly price can take two forms. Monopoly high price set on goods and services that were manufactured and put on the market by a monopoly firm. The monopoly itself acquires the factors of production and other resources necessary for its activity at a monopoly low price. There are two types of monopoly. Absolute monopoly - this is a market situation in which there is actually only one company on the market that provides the society with the necessary products, any manifestation of rivalry is completely excluded. An absolute monopoly has the following features: 1) There is one producer on the market, he independently sets prices for the products that he sells, and fully controls all trading activities and market transactions. 2) If a monopolist with absolute power operates on the market, other firms are out of competition: access to the market is closed to them. 3) Movements of labor and other resources and production factors are structured, their mobility is limited. 4) The products of the monopolist are absolutely unique and have no analogues and, in addition, they have a trademark. 5) With absolute power, the monopolist has every right to regulate the pricing process. As a result, the cost of a unit of production is exactly as much as necessary to make up for the loss of unique resources that were used in production. Natural monopoly represents a market situation when a segment of the market or an economic sector is entirely in the hands of one firm that supplies the market with an absolutely unique and necessary product for society. Natural monopolies are those firms whose power is taken for granted. For example, in the gas or oil industry, the presence of several firms is simply not necessary, since the resource, like the product, is the same, in contrast to other markets where the product is highly differentiated. Such extreme forms of market structure as monopoly or perfect competition are practically never found in practice. Today, when production has reached the peak of its development, such a situation cannot arise that there is only one seller on the market who would sell goods that have no analogues. One way or another, almost any product can have substitutes or lower-quality surrogates. The state fights against monopoly through antimonopoly legislation, which allows maintaining a healthy economic climate in the country, supporting business development and, in general, ensuring high economic growth. 2. Natural monopoly A natural monopoly is characterized by a market situation in which consumer demand can be best satisfied by only one or a small group of firms. Here, an important role is given to the technological features of production and the system of consumer services. In this case, competition does not make practical sense and may even be undesirable. For example, industries such as electric power, telephone, postal and radio-television communications have a small number, and perhaps the only one, enterprise, which is undoubtedly a monopolist. In order to most fully characterize a natural monopoly, it is necessary to consider its main features. 1) firms, natural monopolists, function most efficiently when there is no competition in the market. The fact is that this allows economies of scale in production due to very high costs. An example is the transport industry. Transportation services are the lower, the greater the number of people and goods transported. In other words, the unit cost of a transport service is inversely related to the number of its consumers; 2) market entry barriers for other firms. The costs associated with the implementation of the functioning of a natural monopoly are so high that the activities of firms similar in specialization, in principle, cannot be recouped; 3) a natural monopoly is characterized by low price elasticity of demand. The product supplied to the market by a monopoly firm is unique and has no substitutes or analogues similar in properties. Therefore, consumer demand for it does not change depending on the price dynamics. This product satisfies the most important needs of customers, so they will consume it in any case; 4) the activity of the monopolist firm is built on the network principle. In other words, the parent organization has broad geographical and economic ties with all branches and subsidiaries. Through this, the firm exercises control over the market and the mechanism of its functioning. Natural monopolies come in two varieties. The first type is natural monopoly. It is formed by means of barriers created by nature itself. For example, a geological exploration company discovered a unique source of natural resources and acquired the land on which this field is located. The second type includes techno-economic monopolies. They appear under the influence of any technical or economic factors. At the same time, economies of scale take place, which forces firms to expand their zone of influence and their own size in order to reduce costs per unit of manufactured output. For example, it is simply impossible to imagine that the city had not one, but two or more sewerage networks or several ways of supplying gas and light to each apartment or any other room. If this were the case, such activities would be accompanied by huge costs for competing firms. Thus, a natural monopoly is the most optimal type of monopoly structure. Today, such large companies exercise overall control over the use of resources and are engaged in their distribution. However, the main drawback here is still the system of "floating" prices, since the monopolist sets them independently and sometimes unreasonably. 3. Antimonopoly regulation of the economy The market economy has a number of advantages over other forms of management. However, it functions most effectively only when all market relations and operations are based on legal principles. As you know, there will always be more than one firm in the market that seeks to win the largest market share and monopoly set prices and exercise control. It turns out that the state should in every possible way contribute to the elimination of monopoly and price discrimination in the market. After all, the monopolist inflates prices for finished products, while the prices for primary raw materials are significantly reduced for him. As a result, such a firm receives excess profits, thereby disrupting the process of income distribution in the economy. It turns out that such a firm has all the privileges and rights, unlike firms that cannot compete with it. Acting on the basis of antimonopoly legislation and protecting the interests of all market actors, the government must first of all take into account the following factors by which the very process of formation of competition is determined: 1) price liberalization or their release (i.e., giving freedom to the process of their formation) is a condition for reducing consumer demand. As a result, the supply on the market does not find its economic justification, and a process of large-scale decline in production begins. Such a situation was observed, for example, in Russia in the 90s, when liberalization was the first stage of "shock therapy"; 2) inflation. If there is an inflationary surge, then this is followed by a sharp rise in prices, which causes a deformation in the structure of demand. As a result, this can lead to excessively high costs for firms, and they will begin to reduce output, which in turn causes an economic crisis; 3) liberalization of foreign economic relations, the development of the national economy and the country's place in the world market. This indicator is very important for a market economy: how competitive are domestic products on the world market, and what is the value of imports? All these are factors influencing market mechanisms. Antimonopoly legislation contains a number of measures to combat monopolists and their power. 1. Existing monopolies must be dissolved and deprived of the right to independently set prices, all economic sectors must be cleared of monopoly firms. At the same time, it is important to take measures to prevent the emergence of newly created monopolies. Again, these measures do not apply to natural monopolies, which provide consumers with a unique resource and, in general, are of great national importance. 2. Persecution by the state of those firms that are trying to enter the market and conquer it, deliberately inflating prices and illegally destroying competitors. In other words, any attempt at price discrimination must be stopped. 3. Prohibition of trade branded blocks, as they are a dishonest method of dealing with competitors. 4. Establishing the production of substitute goods, which will allow not only to expand the range of the market, but also to control the process of the emergence of a group of unique goods. 5. The market should develop not only through qualitative and quantitative changes in its indicators, but also through the establishment of international relations and the most efficient distribution of scientific, creative and labor potential. 6. Tax policy (for example, restrictive) is characterized by an increase in the tax rate and a reduction in government spending. This makes it possible to force the monopolist to reduce prices and fix them at a more or less equilibrium level that suits all subjects. It should be noted that the state should not only fight monopolies, it should develop strategies to restore and maintain perfect competition as the most optimal and promising and to develop entrepreneurship. Perfect competition encourages firms to innovate. and mastering the results of scientific and technical progress and various discoveries and developments. In conditions of fierce competition, when the company has a huge number of rivals that potentially claim the right to be called the first, it is most striving for improvement and intensive development. This is how new quality systems of goods and technologies for their production appear, allowing to save time and production factors, which in general gives a real impetus to the economy. 4. Oligopoly Oligopoly is a type of market in which most of the market is controlled by a group of largest firms that produce the product necessary for all economic entities. This is the so-called intermediate form of power between monopoly and perfect competition, which is so common in countries with developed market economies. The only difference is that the oligopolistic firm does not set the price level on its own, but together with other firms with which it competes closely, as a rule, their number is at least three. An important feature of an oligopoly is that its member firms make all decisions jointly. Thus, the decision is made not only on the basis of data on the magnitude of consumer demand and own production costs, but also through a response to these actions of competing firms. As a result, the main principles of building an oligopolistic form of market power can be called the following: 1. Product, produced in an oligopolistic market can have both a homogeneous form and a differentiated one. If the product is homogeneous, this means that the consumer does not care which company to buy it from. If consumer demand is divided and the buyer chooses the product of a particular manufacturer, the product is called differentiated. 2. Non-price competition. Producers influence the magnitude of demand not through pricing dynamics, but by improving product quality, service level and many other consumer characteristics. So, for example, a very effective means of competition is the development of advertising campaigns, promotions, etc. 3. The number of manufacturers is limited. An oligopoly includes at least three and no more than a dozen firms, which is determined by analyzing the magnitude of production costs. 4. Other firms that want to enter this market face a barrier. Oligopolists, i.e., firms that occupy a leading position in the market, often combine their efforts and develop methods for destroying newly emerging competing firms, especially those that turn out to be the strongest rivals. 5. Interdependence of market participants. As already mentioned, the actions of the company should be carried out in accordance with the reaction of competitors to them. This is the basic condition for oligopolistic competition. In other words, all its participants are interconnected and interdependent. If any one firm produces too little output, then its prices will exceed the optimal market price, because costs are inversely proportional to output. Otherwise, the cost of a unit of goods decreases, which causes dissatisfaction with other market participants. Indeed, in order to maintain competitiveness, they will have to adjust to the new price level, restructuring their production and development strategy. If they want to maximize profits, oligopolists can unite in a cartel. Thus, they jointly determine the nomenclature and assortment of products, set prices for them. In this case, the total volume of products sold is small, which causes an increase in prices. However, despite all the advantages of cartel associations, they, as a rule, are still short-lived. 1. Each oligopolistic firm has its own production secrets, therefore, it has a certain non-fixed cost. This is a major barrier to reaching an agreement, since it is difficult to negotiate a price: what is beneficial for one firm may be unacceptable for another. All firms operate according to different technologies and have their own production developments, in accordance with which the manufactured products differ both in quantity and in cost, so they can each time adjust to each other. 2. The oligopolist always strives to maximize only his own individual profit and does not care about the profitability of his competitors, which often causes violations of the terms of contracts. 5. Monopolistic competition Monopolistic competition occurs when there are several sellers on the market who produce and sell a differentiated product. At the same time, there is always the possibility of the emergence of new competing firms. Through such factors, the price elasticity of consumer demand is significantly reduced, making it less dependent on the dynamics of market prices, which are set differently by all firms. In this case, the buyer has a large selection of goods and services, not only in terms of quality, but also in terms of cost. Any firm, having mastered new technologies and reduced costs, can lower the price to attract buyers. At the same time, if a consumer prefers a product of a certain brand, he will buy it in any case, regardless of its price. This makes it possible to increase the price without risking damage to production or losing your customer-consumer. A market with monopolistic competition is usually characterized by the presence of the following principles: 1. Product differentiation. Producers produce and sell essentially the same product on the market, which has a specific purpose. But such products may differ precisely in production, technological or quality characteristics. For example, several well-known firms compete in the sausage market: Mikoyan, Dubki, Family Sausages, etc. The above-mentioned firms produce a product of the same name in an assortment, but use different technologies, primary raw materials, spices and seasonings. As a result, the product acquires a specific taste. Due to this, the products of one of their firms are an imperfect substitute for products sold by others. As a consequence, consumer demand depends primarily on the tastes, preferences and desires of the consumer, and not on the unit cost of production. In other words, the buyer always pays any price if the product fully satisfies his needs. Thus, it turns out that the manufacturer can even raise prices, but at the same time retain his buyer. 2. In a monopolistic competition market, price control is significantly limited. At the same time, firms have the right to set prices for their products within acceptable limits and without taking into account the interests of competitors, unlike firms that operate in the market of oligopolistic competition. In other words, all organizations are independent from each other and are not bound by any obligations. If one firm decides to stimulate demand and increase sales by offering discounts, discounts, etc., competitors may not worry about their profits. The fact is that a discount is not a guarantee that the consumer will prefer this particular product, since a good product, as a rule, is sold at a set price, and discounted products suit far from all subjects in terms of their quality characteristics. 3. In the market of monopolistic competition, there are no special obstacles or blocks both at the entrance and at the exit. It turns out that almost any firm that decides to enter this market has every opportunity to do so. Of course, monopolistic competition cannot be compared with perfect competition, since from the very beginning the company faces serious competitors that have been operating in this market, maybe for more than a year, so the risk for newcomers is high. The product of a new company cannot compete with products that have already gained considerable popularity in consumer circles and undoubtedly have consumer advantages. 4. The role of non-price type of competition is great. Firms are willing to spend huge amounts of money on the development of advertising slogans, promotions and campaigns (advertising), as well as finance the work of departments that make the organization more flexible in relation to changes in the market environment (marketing department, strategic planning, etc.). LECTURE No. 6. Production theory 1. The concept of a production function, the scale of production Any company that conducts production and economic activities, an important task is to exercise full control over the production process, as well as over the amount of resources that are needed to create a certain type of product. A firm is said to be most efficient only when it can achieve the highest output at the lowest possible input and input costs. In this way, production function gives a mathematical expression of the relationship between the factors of production and the amount of resources spent in the production process with the scale of production and the range of goods and services produced. This indicator allows you to determine the largest volume of production of a particular product in the presence of a certain, strictly limited amount of resources. Similarly, we can say that the production function serves as a defining moment for the production process, since it shows the minimum amount of resources necessary for its implementation:  where Q is the total output of goods of a certain range in accordance with the nomenclature of production; f is the corresponding cost of resources that the firm must incur in order to produce the benefits needed by society. For the organization of the production process, an indispensable condition is the interaction of all factors of production and resources, which ensures its integrity and continuity. Among such factors are land, capital (material, embodied in buildings, structures and funds of the organization, and financial in the form of investment), entrepreneurial resource and, most importantly, labor. It is the labor activity of the employees of the organization that is considered the determining condition for the productivity and intensity of production operations. The most important production factors are labor (the totality of workers, labor efforts) and capital (cash, fixed assets, etc.). Thus, the production function can be represented as a function of the dependence of production results on the corresponding resource costs:  In order for this function to be of full practical importance, it is necessary to determine the role of economies of scale and determine possible options for its return. The firm always operates on a certain scale, and if desired, it can either increase or decrease it, depending on what course was taken for the development of production. Thus, returns to scale of production are characterized by the ratio of the scale of production or resource frame within which the manufacture of finished products is carried out, with the immediate final data that can be achieved as a result of such a policy. This indicator can have three different forms, depending on the proportion in which the costs and results of production are. 1. Constant returns to scale is characteristic of such production, when the firm, with an increase in the number of factors of production used, simultaneously achieves higher performance. In other words, a certain proportion is observed, which allows you to expand the offer on the market without increasing costs. If we assume that Q is the initial volume of production, then:  where n is the proportional increase factor. 2. Increasing returns to scale can be noted in the case when the results grow at a rate disproportionate to the costs. In other words, by increasing the costs of production factors and material resources by several times, the firm produces a larger volume of goods and services (by more than several times) compared to the original one, i.e., Q1 > nQ. The practical basis for such a case can be the technological development of the organization, when the equipment allows you to save resources and labor costs. The largest firms can create special departments for advertising, human resources, strategic planning departments, etc. 3. Diminishing returns to scale arises when the growth of production volumes, its final result, increases at a lower rate than the resources involved: i.e. Ql < nQ. It turns out that the company incurs additional costs, which may be due both to the underdevelopment of technologies and imperfect equipment, and to the irrational and inefficient use of production factors and other resources. 2. The main factors of production of the modern economy The production process is a process of processing initial material resources and factors of production on the way to the creation of finished products, works, services. In accordance with this, it is necessary to have such structures as labor activity, investment attractiveness, etc. Factors of production are of four types. 1. Labor is the most important economic category, its costs directly determine the efficiency of the existing organization of production. Through labor activity, the employee influences the object of labor, which allows achieving the planned results of activity. The intensity and quality of the labor process is determined by such important indicators as labor intensity, capital productivity, material intensity and the amount of time spent. On the basis of such data, one can judge labor productivity and identify the problems that the organization faces in production. The very quantity of the labor force determines such important macroeconomic concepts as employment and unemployment, they characterize the economic situation in the country. The labor force is represented by all people who are somehow involved in production or other activities in accordance with the specialization of the organization. As a result of labor, the income of the staff is formed - wages. Thus, we can say that labor is a combination of human abilities. The quality of the manufactured products and, as a result, the demand for it depends on its quality. This is especially important when the firm is non-price competitive in a perfectly competitive market. 2. Capital is in fact the second (after labor) condition for the success of the production process. Here factor income is the interest rate at which the capital can be rented out. It is impossible to unambiguously define this production factor, therefore, in most cases, capital means the following: 1) human capital, in other words, all knowledge, professional skills and abilities, professional experience that an employee of the enterprise may have. Labor mobility can be both inter-company, within one country, and international in nature, and can also be both voluntary and forced; 2) material capital embodied in buildings, equipment, raw materials and other production assets that directly or indirectly contribute to the implementation of the production process; 3) information capital most important at the present time in conditions of extreme uncertainty and the dynamics of the external environment. Through market information, the organization receives data on changes in demand characteristics, which allows you to adjust production in time and restore balance. 3. Lands today - the most unique resource, its supply is limited. If we consider the earth from the point of view of geographical science, then it is nothing but a place, a territory rich in minerals and natural resources. Thus, the usefulness of land itself is assessed solely by its ability for biological reproduction and suitability for agricultural operations, etc. 4. Entrepreneurial Ability - a very important factor for business development. An entrepreneur must have certain skills, practical and theoretical knowledge in order to establish production and organize commercial activities. Today, new factors of production, such as information, education, science, etc., are becoming increasingly important, which makes it possible to talk about economic progress in general. 3. Substitutability of resources The practical significance of the production function is that it shows the possible and most probabilistically optimal combinations of production factors and material resources that can be used in the course of the organization's economic activity. As a rule, two main factors of production are taken as a basis, which are labor and capital. Thus, the most rational values of the use of these resources are determined, thanks to which the organization can actually save on production and increase its efficiency. A commercial firm, as you know, always strives to maximize profits, so the combination with minimal costs is considered the most optimal for it. The considered theory has a practical justification through the construction of a certain line, called isoquant. The isoquant is the locus of points characterizing the resource equilibrium. This curve shows the different cost ratios of the two factors of production that lead to the same output. Each isoquant characterizes a certain value of production efficiency. If you impose an isoquant on a plane, then it will resemble a consumer demand curve: it is also convex with respect to the center of the coordinate system and characterizes the inverse relationship between the axes under consideration, in this case K (capital) and Ztrud). If, for example, we take all possible isoquants, selected as a result of the process of combining factors of production, and superimpose them on one plane, we get a map of isoquants. Isoquants have the following properties: 1) all isoquants are parallel to each other, they never intersect and each of them is independent, their place on the plane determines the amount of output, which can be expressed by the following relationship: the farther the isoquant is located from the origin, the greater the scale of production and its results ; 2) an isoquant is a graph that has a negative slope, which explains the negative dependence of the value of one factor on another. In accordance with the Pareto efficiency rule, in order to produce a specific constant value of goods and services with the dynamics of combination options for production factors, it is necessary to reduce the consumption of one factor, which will allow using a larger amount of another. In other words, according to the Pareto-optimality principle, we can draw the main conclusion, which says: it is impossible to use the largest amount of one factor of production (for example, labor) in the production process without reducing the consumption of another (in this case, capital). The angle of inclination of isoquants makes it possible to determine the probability of substituting one resource for another. For example, a firm produces a certain amount of output, spending five units of capital and seven units of labor on it. At the bottom of the isoquant, the need for labor begins to decline. As a result, in order to maintain the scale of production at the initial and optimal level, the firm must introduce an even greater amount of capital resources into the production process, which follows from the Pareto efficiency principle; 3) graphically, the isoquants become flatter downwards, as the ratio of labor and capital costs changes: the use of one factor decreases and, due to this, the second is used in a slightly larger amount. If we take into account the fact that the amount of capital consumed is located along the abscissa (the horizontal axis of the plane), and labor is located along the ordinate, then when moving down, labor costs increase so much as to replace each unnecessary unit of capital. 4. Returns to scale The production function allows you to determine the various ratios of the two most important production factors for production: labor and capital. Through this, the organization has the opportunity to judge not only its own potential, but also has data that allow it to plan the production process. If the firm wants to change the initial combination of resources, then, accordingly, it must understand what changes this will cause in the volume of finished goods. Production scale represents the amount of goods and services produced at a certain cost of production factors. The scale of production in a broad sense determines the level of activity of the organization and the direction of its development and can be mathematically expressed by compiling a production function that shows the ratio of all factors and resources used in production. In other words, this determines the maximum volume of products that can be made from a strictly limited amount of raw materials. The scale of production can come to a dynamic state when more (or, conversely, less) material resources are involved in production. Depending on the essence of these changes, the magnitude of the production itself and its results are determined. As already mentioned, if production is based on the use of the factor of labor and capital, the production function takes the form: Q \uXNUMXd (L; K). In order to show the relationship between the dynamics of the output of goods, works, services and changes in the amount of material resources used for these purposes, the concept is used return on scale of production. The return is a certain result to which the firm can come, in different ways carrying out its economic activities. Accordingly, economists identify three possible situations. 1. Constant returns to scale characterized by a simultaneous and proportional change in the factors of production involved in the turnover, and production volumes. That is, a firm that decides to expand production (maybe this is due to increases in the structure of demand) and increases its scale, say, twice, respectively, produces twice the volume of goods, works, services, and its production function in In this case, it is written as follows: 2Q = (2L; 2K). It turns out that in order to get a larger volume of output, it is necessary to proportionally increase the consumption of factors of production, and how many times it changes, the result of economic activity will increase so much. At the same time, marginal costs or marginal costs that arise with the production of each additional unit of output do not change and constitute a specific value. 2. Increasing returns to scale. This is perhaps the most ideal situation for a firm that seeks to make maximum revenue while not spending too much resources. This situation can arise mainly in a highly specialized enterprise, which uses the most advanced technologies. When deciding to expand the scale of production, the company also seeks to expand those areas of activity that qualitatively provide favorable conditions for creating a product or promoting it to the market. For example, you can hire a product design, advertising or human resources specialist, a marketing specialist, or a strategic planner. In addition, a large enterprise uses modern and expensive fixed production assets (machinery and equipment), which are characterized by the highest productivity, which as a result leads to the production growth of the organization. 3. Decreasing returns to scale. This situation can arise when the total costs of the firm are too high, for example, an increase in the tax rate, accounting costs, etc. In addition, in order to increase production, it is necessary to attract additional units of labor, which is associated with additional labor costs, and transfers . If the organization is already suffering losses, such measures significantly reduce the efficiency of its production. Currently, the concept of return on a factor of production has received wide application. In other words, this indicator is characterized by the dynamics of output volumes with a corresponding change in any factor or resource. As follows from the law of diminishing marginal productivity, the more units of a factor involved in the economic turnover, the lower the marginal productivity of each additional unit and the output of finished products. 5. The concept of depreciation of fixed production assets Any firm or organization in the course of its activities not only has a useful result in the form of profit, but also bears a certain share of the costs, i.e., the costs necessary to carry out activities in accordance with specialization. The largest part of all expenses of a firm or enterprise is the cost of factors of production (labor, capital, land, entrepreneurship, information, etc.), raw materials and materials (main and auxiliary), as well as the acquisition and use of fixed production assets. Fixed assets of the enterprise (OPF) represented by material capital, which is embodied in buildings, various structures (bridges, tunnels), machinery and equipment, and other productive and useful means of labor. Fixed assets have long service lives, as a rule, they are calculated for several years, and if these are buildings and construction structures, then for decades. This type of resource is not consumed in one production cycle, but serves for a long time and, as a result, is subject to wear (breakage, obsolescence, etc.). revolving funds is a type of capital that is contained in raw materials (tangible capital), cash (financial capital), labor force (labor capital). In other words, these are resources that are the subject of labor, they contribute to the implementation of the production process, create favorable conditions for the manufacture of goods and services by putting them into circulation. For example, materials and raw materials are the primary source of finished products, lubricating oils are a necessary product for the continuous operation of equipment. In general, revolving funds are used and completely spent in one production cycle, respectively, they transfer their value to the manufactured product entirely and immediately. Export - this is the process of loss of initial utility and value by the main production assets. Depending on the degree of impact and the reason for the unsuitability of fixed assets, two types of depreciation are distinguished OPF. 1. Physical deterioration can be represented as a loss of initial useful properties by those fixed production assets that are intensively used in the production process, depending on the rationality of such use. In other words, during long-term or irrational use, fixed assets tend to wear out, that is, they can no longer be used in the production process and must be replaced. Physical depreciation can also be represented as a process of deterioration in the technical and economic characteristics of fixed assets, which occurs under the influence of the labor process, natural forces (for example, metal corrosion) or as a result of their non-use. Physical deterioration of the first degree directly associated with the pace and volume of production and is calculated as variable costs. The regular use of OPF in the production process makes them of little use over time. This type of wear is an inevitable phenomenon, sooner or later the company is forced to purchase new equipment due to the unsuitability of the former. Physical deterioration of the second degree determines the degree of destruction of those production assets that for some reason were not put into production (i.e., due to idle equipment) or were used extremely irrationally. It turns out that this type of wear characterizes the essence of the production process, shows the degree of its efficiency, rationality and is in no way connected with the duration of the terms of use. These are the so-called fixed costs of the firm, which have a negative return. 2. Obsolescence - is defined as a decrease in the cost of the BPF that is not associated with the end of the service life. This situation may arise for the following reasons: 1) due to the emergence of modern productive and economical machine tools and machines, for example, in the process of mastering the products of scientific and technical progress. With the advent of new technologies, the old means of labor lose their usefulness and go out of circulation, they simply cannot compete with them. If we talk about the results, then, on the one hand, this leads to an increase in the efficiency of production as a whole, and on the other hand, it causes an increase in costs, which is associated with the decommissioning of the old equipment before the end of its service life; 2) price reduction in the market of factors of production. For example, if there is a drop in consumer demand in the real estate market, this causes a decrease in the relative price of housing. In this case, it turns out to be extremely unprofitable for construction organizations and developers to carry out construction and invest huge capital in this process. At the same time, equipment, in this case cranes, lose their useful properties. Thus, obsolescence, as well as physical depreciation of the second degree, should be attributed to fixed costs, since it also does not depend on the volume of output. 6. Depreciation at the enterprise As mentioned earlier, the main production assets in the process of their participation in the production process eventually lose their original useful properties. This happens for a number of reasons, but in any case, it indicates that it is necessary to replace the old equipment with a new, technologically more advanced one. So that the costs once incurred for the purchase of fixed assets do not turn out to be sunk, the initial cost of the equipment is gradually paid off through depreciation. Depreciation - this is a process of constant transfer of value by the main production assets to a newly manufactured product. The money thus raised is used to build capital for future purchases. Depreciation, on the one hand, characterizes the amount of depreciation, regardless of its type, and on the other hand, determines the amount of cash deductions to cover this depreciation or the amount of the depreciation fund. There are many methods for calculating depreciation, but each company, in accordance with the law, chooses its own, based on data on profitability and production characteristics. The straight-line method, the simplest, is a uniform transfer of the cost of a capital asset to the entire complex of costs throughout the entire life of the asset. Annual depreciation is determined by the formula:  where fб - book value of fixed assets; Тcl - their total service life. This method is used to calculate depreciation for buildings, structures, transmission devices, non-production equipment (laboratory measuring instruments, etc.). Despite the convenience and simplicity of calculations, the linear method is not always convenient to use. For example, equipment may not be in circulation for its entire service life, and therefore it may be downtime. Therefore, it is impossible to evenly write off its cost with uneven use. The formation of a depreciation fund is a voluntary decision of the enterprises themselves, however, the state still regulates this process by independently setting depreciation rates. This is due to the fact that the amount of income tax directly depends on them, which is very important for the state budget (any tax is state income). In principle, the depreciation itself turns out to be almost impossible to reliably calculate, therefore, a company or enterprise, having overestimated the depreciation rate in the documents, accordingly, receives a profit that is disproportionately lower than its costs. In this way, the entrepreneur is trying to evade the tax burden. In accordance with this, the state is clearly interested in establishing the limits of depreciation, beyond which no organization can go. This will regulate the system of tax payments and limit the arbitrariness of "private traders". The depreciation rate can be derived from the previous formula:  Understated norms slow down the process of replacing the means of production, while overestimated ones, on the contrary, are accompanied by an increase in productivity and labor efficiency, the regularity of technological developments and innovations and, as a result, an increase in costs. Thus, any firm sooner or later faces the problem of establishing the most optimal depreciation rate. LECTURE No. 7. The labor market and its characteristics 1. The concept of labor and labor force Labor is the most important quality characteristic of any production process. The quality of the products produced and the demand for them depend on the quality of labor. This is especially important when the firm is non-price competitive. Work force is defined as a specific product that directly serves as the primary source of production of goods and services, since it contributes to the best organization of business activities. The number of labor force is determined by such concepts as employment and unemployment, and it is they that characterize the economic situation in the country. Work force - these are people involved in production, on the one hand, and the totality of human abilities, on the other. The quality of the commodity "labor force" shows the degree of efficiency of the market economy, how competitive it is in this respect. On the one hand, the labor force is a quantitative characteristic of the labor potential of a firm or enterprise, that is, the number of people of a certain age and level of education and qualifications. On the other hand, the labor force is represented by a complex of all the abilities and skills of the worker, which he uses to carry out his activities. It turns out that in order to belong to a certain field or type of activity, a person must at least have experience, professionalism and certain theoretical knowledge. The labor force is an element of the labor market, where it becomes an object of demand from entrepreneurs, firms, the state, who want to carry out additional hiring of workers, and the supply that comes from households, individuals, intermediary firms and other economic entities. The labor exchange, which solves the problems of employment and employment, is one of the varieties of the labor market. It contributes to a more rational and efficient distribution of the labor force across sectors of the economy, since it does this solely on the basis of the labor characteristics of the workers themselves. The following conditions for the emergence of the commodity "labor power" can be distinguished: 1) an employee or any economically active entity must have legal freedom, the right to dispose of their knowledge, skills and abilities, as well as to use the available opportunities; 2) the subject of labor must himself be deprived of those products, means of labor or factors that he can obtain as a result of the sale of his own labor. The labor force has the following qualities. 1. An employee carrying out labor efforts + knowledge, experience, qualifications, education = income. In other words, the labor force together with the labor owner is an indivisible whole and as a result brings him a factor income in the form of wages. 2. If the work of an employee is not realized for a long time, then its effectiveness decreases over time. Employment ability is the skill of conducting any activity. Over time, theoretical principles can be forgotten, education also loses its power, and experience disappears. In order for these characteristics not to be lost, but to be multiplied, the employee must regularly use them, including replenishing knowledge through practical achievements. Thus, in any country, an important problem is to increase the employment of labor resources. To this end, the state, as the highest authority, invests, subsidizes and encourages labor activity. 2. Labor market: its features and main types Labor market is a system of economic relations that arises on a contractual basis between an entrepreneur who wants to increase the staff of employees and an employee who is looking for work and is ready to start it. The main elements of the labor market are the age-old economic categories of supply and demand for a product called "labor power". In addition, this includes both the type of competition itself and the cost of remuneration for a unit of labor (salary + bonuses and allowances), which are formed on the basis of the employee's qualification category. When a person is looking for a job, he turns to the labor market for information. Through this, he finds out which vacancies and specialties need to be replenished, what is the salary for performing a certain job, correlates the received data with his own capabilities and desires, and makes his choice. Accordingly, the labor force is an object of the labor market, which can be characterized as follows: 1) the person himself is not an object of sale, as it was in the era of slavery. The individual and his freedom are legally protected, therefore, only what a person can offer the employer is subject to sale, namely: diligence, efficiency, experience, qualifications, creativity, etc. In addition, the employment transaction is carried out exclusively on a voluntary contractual basis, so that both parties are satisfied; 2) the working abilities of a person cannot be separated from him, therefore they are the main source of income or wages. For a certain amount of work performed in accordance with the terms of the contract, the employee receives a salary, salary. If the labor activity had high quality characteristics or results, there is a bonus system in the form of additional earnings-reward, which further stimulates the individual to achieve the goal; 3) simple labor or its non-use for any time inevitably leads to the loss of useful characteristics. For example, an employee who has a higher education, sufficiently high qualifications and work experience, but who has not worked in his specialty for a long time, loses his professional skills and his qualitative characteristics. Therefore, when he returns to his former work, he begins to adapt in a new way to its conditions and requirements. Demand in the labor market is presented by those organizations, firms, the state, and sometimes the "foreign" sector, which need to replenish the staff of employees and are ready to hire a certain number of workers for a certain fee. The supply is provided by the fact that individuals, intermediary firms, households are willing to sell their labor skills and receive for this, in their opinion, a fair amount of money. It is not necessary that demand always coincides with supply, but if such a situation arises, an equilibrium sets in, that is, a situation where the desire of employers to attract new employees to activities is fully compensated by the need of people to find a job. As a result, the equilibrium nominal wage is formed. However, for the workers themselves, it is the real value of it that is most important, since prices are extremely dynamic and the cost of the consumer basket changes regularly. The dependence of labor demand on the minimum wage can be expressed as a feedback, i.e. the more the nominal wage grows, the smaller the number of workers the entrepreneur decides to provide a job. The law of diminishing marginal productivity works. In other words, the greater the amount of the labor force involved in production or another type of activity, the less becomes the utility or productivity of each additional unit of labor involved. For the organization, the most rational solution is the issue of the number and structure of employees, in accordance with which its expansion will be carried out until the result of the activity of a single employee fully meets the needs of the company. The supply curve on the market is presented differently, there is an inverse relationship between the amount of labor and its payment. Initially, a substitution effect occurs, i.e., as the wage rate rises, the number of people who want to find a job and use their labor abilities grows, since the majority of workers are still motivated by high earnings. However, once income reaches a certain level, the demand for labor begins to decline because firms cannot afford to increase fixed costs. Labor ceases to be a priority and is replaced by leisure, therefore, there is an income effect. Thus, we can distinguish the following factors that qualitatively affect the size and structure of the proposal. 1. Total population of this territorial unit to some extent reflects the structure of the economically active labor force, namely: employment and unemployment. The higher this indicator, the higher the likelihood that the proposal will be large and differentiated by direction and type of activity. 2. Share of working-age population is directly a determining indicator in calculating the total volume of labor resources that can fully or maximally satisfy the needs of employers. 3. Working hours and working conditions affect the selection of the employee. He automatically tries to find a place where all the necessary conditions would be created for him. 4. Labor mobility determined by the fact that the labor force can move freely within the labor market. Mobility also implies the luring of personnel from one organization to another with the provision of working conditions and remuneration, which is defined by the general concept of "staff drain". The labor market is a necessary part of a market economy and, in the broad sense of the word, an aggregate market that describes the magnitude of aggregate demand (organizations or the state that decides to hire additional employees) and aggregate supply (who want to find a job and immediately start it). If we consider the market in a narrower concept in a static state, then it is a place for making current transactions between employers and in accordance with the number of vacancies available at the moment. The current labor market can be divided into two parts, or two types. open market characterized by the fact that the proposal covers those economic entities that themselves or through intermediaries are looking for work, i.e., need retraining or reorientation. Demand in this case is represented by all vacancies and vacancies. Hidden labor market in addition to open economic entities, it also includes those employees who are currently engaged in production, economic or other activities, but at any time can be relieved of their duties without prejudice to the organization. In other words, in the future these are potential unemployed people who will subsequently be included in the lists of the open market. It is important to note that each individual country, in accordance with its national, economic and technological characteristics, forms its own labor market. There are countries that are focused on both the internal and external labor markets, i.e. they practice attracting foreigners who have a sphere of economic interests in the country's territory. At the same time, today it is typical for Russia that highly qualified specialists prefer to move to a country with a more developed market economy to participate in the production of its GDP (gross domestic product) on more favorable working conditions and wages. Therefore, an important task of the labor market at any level (international, federal, regional or local) is to create attractive jobs so that there is not only a demand for labor, but that it is satisfied by the desire of economic entities to carry out one or another type of labor activity. 3. State policy in the labor market The labor market, like any other, develops based on the dynamics of supply and demand. A person always has a need for the implementation of labor activity: he strives to satisfy his primary biological desires and find his place in the system of economic relations. Often a person is driven by the need for self-realization, recognition and respect, in this case he sets professional growth as his goal. Thus, all economic entities that, for a variety of reasons, seek to find a job to meet their own needs, make up the amount of labor supply. They sell their skills, abilities, knowledge, experience and other professional abilities and receive a salary for this, which includes not only a salary at the tariff rate, but also a system of bonuses and other additional payments. Demand in the labor market is provided by the needs of organizations, the state and other persons in the acquisition of additional labor units represented by workers. State policy is a set of measures that have the most direct impact on the socio-economic structure and condition of society as a whole and each individual. This influence can be either active or passive. Active public policy is nothing more than a set of legal, economic and labor norms, through which the regulation of labor relations between the employer and employees takes place. This type of policy makes it possible to increase the competitiveness of an economic entity in the struggle for the best jobs in the market through the creation of a system of vocational training, retraining, retraining and advanced training. The high dynamism of the external environment requires constant adjustment of labor relations. An employee, in accordance with the new prevailing conditions and market requirements, must improve his professional capabilities and labor skills. The passive policy is based on the assumption that every able-bodied person must earn his livelihood on his own without anyone's help. In this case, the state is assigned only the role of an intermediary between workers and employers, it is called upon to ensure an appropriate level of employment in the country so that demand matches the supply as much as possible. Thus, it is possible to identify the main goals pursued by the state, pursuing one or another type of policy in the labor market. 1. The involvement of the unemployed in the labor process should take a small amount of time. As soon as a job becomes available, the market receives a signal about a change in the structure of demand, which in itself stimulates workers to offer their services. This is possible due to the existence of a state labor exchange in the market, which controls this process and automatically directs the individual to available vacancies. 2. The state must ensure the equality of all subjects, everyone who is looking for a job must get it. If the market does not have the necessary jobs or the need for a certain specialty, the state can create additional jobs on its own in order to maximize the level of employment and reduce the number of unemployed. Today, the state labor policy is aimed at solving the pressing problems of the country's economic and social life. The prerogative of the state is the social support of the population. The regulation of the employment rate not only contributes to the most efficient distribution of labor in the economy, but also to an increase in the general standard of living by providing income opportunities to those who aspire to this. In addition, the implementation of labor market policies contributes to its better legal support and flexibility by regulating the balance of supply and demand, employment and unemployment. Thus, the market gets the ability to most quickly respond to any changes in the external environment or one of the elements of the market mechanism. One of the most effective methods of pursuing a policy that stimulates the supply of labor is a taxation system, the rate of which directly affects the level of an individual's income and his desire to carry out socially useful work. 4. Employment: its principles and types Employment is a very important economic category. It shows the degree of distribution of the labor force in the economy and the standard of living on average in the country. This indicator can be studied from the point of view of two approaches: theoretical and practical. Theoretical employment is a set of work and labor costs that an employee performs in order to satisfy personal and social needs and receive wages for this. Practical employment, in turn, characterizes the ratio in terms of the size of the able-bodied population and the general level of employment, which makes it possible in general to assess the use of the labor potential of society and analyze the current situation in the labor market. Employed persons include persons of both sexes aged 16 years and older who were currently performing work for hire for remuneration, temporarily absent from work due to illness, vacation, business trip or working in a family enterprise. The main principles of formation and provision of a certain level of employment are as follows. 1. Voluntary labor. Each able-bodied subject, who has all the necessary labor qualities, has the right to freely dispose of his capabilities and abilities for a particular type of activity. In addition, he can independently choose exactly the place of work that suits him completely or is most suitable for work experience, skill level and education. Each person can act in such a way as to realize himself in life, to show his skills, ability or creativity. It often happens that a person is unaware of his potential and works "in the wrong place", therefore he receives absolutely no satisfaction from his work. An economic subject, when applying for a certain position, must first of all be guided by his preferences, desires and abilities. The more you enjoy the job, the higher your productivity and satisfaction will be. 2. State responsibility for creating conditions for the realization of the rights of citizens to carry out labor activities. Labor legislation primarily aims to provide guarantees of labor rights and freedoms of the subject, ensure the most favorable conditions for the labor process, as well as protect the interests of both workers and employers themselves. Thus, the state should in every possible way promote and stimulate the individual to acquire a profession and career growth. The practical essence of the assessment of the working-age population requires the division of employment into three main types: 1) full employment can be described as a state of the economy when the level of involvement of the entire working-age population in production and other areas of activity is maximum. On the one hand, this is good, since it excludes the presence of the unemployed, and on the other hand, it damages no less important aspects of human life: health, raising children, etc. The state of full employment of resources, including labor, was described by supporters of the classical school. They believed that such a situation is possible only in the long run, when prices are extremely flexible, and nominal wages, without taking into account real purchasing power and the cost of the consumer basket, are fixed. However, workers themselves react to changes only in real wages, taking into account price dynamics. And since it is constant in the long-term relevant period, workers reduce the supply of labor. This causes changes in demand and contributes to the restoration of the correspondence between wages and the general level of prices, which balances supply and demand and stabilizes the situation in the labor market; 2) effective employment represents a part of full employment, which provides a decent income, the health of the employee, his professional career growth, etc., i.e., contributes to the improvement of the general standard of living and the growth of social welfare; 3) socially useful employment is represented by the number of able-bodied persons engaged in socially useful activities, in military service or studying at the correspondence department of a higher educational institution or engaged in household work. 5. The concept of unemployment, its types The concept of unemployment is the most important characteristic of the labor market, since it allows us to analyze the dynamics and distribution of the labor factor, as well as to trace changes in the balance between the demand for labor and the supply of labor services. Unemployment is an economic category that is a constituent element of the country's economically active population and determines the total number of able-bodied persons who, for whatever reason, could not find an application for their labor abilities. The unemployed are considered to be those people who want to work, but do not yet belong to those employed in production or another field of activity. The unemployed also include citizens who are currently on training in the direction of employment services, students and pensioners who are actively looking for work and are ready to start it at any time. However, the unemployed do not include dependents and those citizens who absolutely do not want to work. Thus, they cause great damage to the labor potential of the country, and therefore cannot be included in the labor force. Unemployment and its rate are calculated both for an individual country and for a region, region, city, i.e., any locality. Unemployment data is calculated by separate categories: age, gender, marital status, level of education and professional affiliation. In order to determine the degree of influence of unemployment on the economic and economic life of the country, an indicator such as the unemployment rate is used. Unemployment rate is defined as the ratio of the total number of unemployed in a given territory in a certain time period to the absolute number of the economically active population. Each country, in accordance with its national and other characteristics, has its own structure and characteristics of unemployment, but in general it can arise due to the manifestation of certain factors: 1) fluctuations in the demand and supply of labor: the number of people who want to work exceeds the number of vacancies, then the labor market cannot restore balance on its own. The result is unemployment, which reflects an imbalance in the formation and distribution of labor resources; 2) business cycles, such as the seasonal cycle. As you know, the field work of the agricultural sector of the economy occurs mainly in summer and autumn. Accordingly, employment reaches its maximum value. During the rest of the year, seasonal workers are forced to look for other uses for their labor abilities, which is extremely difficult to do, since the market can be fully staffed; 3) technological innovations require new knowledge and skills from workers, which they can acquire only as a result of a special training course; 4) dishonest methods of competition, i.e. imperfect competition, as well as low mobility of labor resources; 5) the desire of enterprises wishing to minimize production costs, get rid of excess labor and reduce the staff. There are several main types of unemployment: 1) frictional (natural, voluntary). It is characterized by the fact that subjects who were previously engaged in any activity, due to dissatisfaction with its conditions, are not currently included in the labor force. For example, they may change jobs; 2) structural. It can be caused by fundamental upheavals in the economy, any of its structural changes, for example, the emergence of new branches of specialization, when the former ones lose their weight in the production of GDP. As a result, employees of such enterprises actually find themselves without work. Changes may relate to technological developments, when the old organization of production activities is replaced by new, more advanced and efficient ones. In this case, the staff turns out to be unprepared (both theoretically and practically) for changes and additional time has to be spent on retraining or looking for a new job; 3) cyclic. It takes place in a crisis economy, when it is impossible to provide all the economically active population with jobs. Such a situation may arise, for example, in connection with inflation, macroeconomic instability or a drop in production volumes; 4) hidden. There are cases when an individual is listed in the workbook as part of the workforce of a particular organization or enterprise, but does not actually work, does not fulfill his official duties and does not receive a salary. Hidden unemployment is dangerous because people simply registered in the organization do not participate at all in the production of goods and services and the creation of GDP, thereby undermining the economy. 6. Salary: essence, principles of formation, regulation Wages - this is the factor income of the product "labor power", it determines the effectiveness of the labor expended and often acts as a motivator for the worker to achieve a higher result. Salary actually constitutes the material basis of human existence. The amount of wages or earnings (salary + bonuses + social benefits and material assistance) depends directly on some factors: 1) qualification degree and quality of education personnel plays an important role in the calculation of salaries (a constant part of wages) and the choice of a certain tariff rate; 2) worker experience. It is determined by the length of service of an employee in a particular workplace. Experience is an integral part of the category, as well as education (higher, secondary, specialized secondary, etc.). These indicators are directly dependent; 3) length of the working day. Now the optimal working time during which socially useful work can be carried out is eight hours. Organizations or businesses that practice a 12-hour work day take this into account when calculating payroll. In this regard, well-paid work is related to the rotational mode of service and business trips; 4) demographic characteristics of the worker are the determining factor in hiring. The most demanded are young, creative, able to take responsibility and initiative into their own hands; 5) national and cultural characteristics. Although racial and other forms of discrimination are prohibited, some organizations set strict limits within which planned recruitment is carried out; 6) geographical and territorial factor. Regions with a cold climate and unstable weather and natural conditions (for example, the north, taiga, etc.) are not as attractive in terms of work as the central parts of the country. Therefore, here the average wage is generally higher, as if it compensates for all the existing inconveniences; 7) the development of the labor market and the degree of overall economic development of the country. The higher the supply in the labor market, the lower the unit of labor is paid, and the higher the demand, i.e. the more organizations need additional hiring of labor, the higher the wage level is set. Depending on the method of calculating wages, there are two main forms of it. 1. Time wage is accrued for a certain period of time worked, regardless of the quantitative and qualitative indicators of labor. The amount of remuneration depends on the principles and requirements that the employee must follow in the process of carrying out his labor activity.  where TS - the value of the tariff rate; t is the number of hours worked by one worker. In this way, the earnings of personnel are calculated, of all categories of workers, except for workers who, during the working time set in a month, were directly at their workplaces. The time-based form of wages is convenient for those enterprises that specialize in a differentiated system of work; an important task is to solve the problems of the quality of the results of labor activity, and not quantity. At the same time, with this form, it is necessary to exercise strict control over the amount of hours worked, which is necessary for determining the wages of personnel. 2. When piecework wages are calculated in accordance with the volume of work performed. This method of determining the amount of wages is convenient for enterprises focused on mass production, for which the determining factor is solely the quantity of output. An important problem of such production is that in pursuit of quantity, the organization gradually begins to lose the quality of production. If this scheme is still applied, then for efficiency, it should have the following characteristics: a clear definition of the necessary quantitative indicators of labor results, the availability of opportunities for unforeseen expansion of production, as well as the implementation of strict control over the production and quality of goods and services. Piecework wages are determined directly by tariff rates and salaries in accordance with labor contracts and labor standards. There are two types of wages: 1. Nominal wages is the amount of money a worker receives for his or her work. It is presented in monetary terms and does not reflect real purchasing power, since it does not take into account inflation rates and the possibility of acquiring a certain set of goods. Accordingly, it cannot be used to judge the profitability of a citizen and the welfare of the country as a whole. For these purposes, real wages are calculated. 2. Real wage - this is a commodity characteristic of wages, that is, it includes a set of benefits that a worker can purchase for the nominal wages he receives at a given price level at a certain point in time. It is directly dependent on nominal wages and inversely on the prices of goods and services. The dynamics of nominal and real wages do not always coincide, since in the short term the nominal value is practically unchanged, and the real value is extremely changeable due to the volatility of prices. The case when prices rise at a faster pace than wages indicates that their nominal value lags behind and does not correspond to the real one. If we talk about a long period of time, then the relationship is reversed: the nominal value is dynamic, and the real value is more rigid. Wages within the country must be constantly reformed. It must meet at least the minimum needs of the worker and correspond to the price level established at a given time. Such actions of the state will help preserve the economic well-being of the population and raise its interest in work. 7. Tariff system Wages are a necessary condition for providing for an employee and his family, as well as a factor stimulating higher production results. It is important that the wage system cannot be built on the principle of complete equality, because each employee has his own labor qualities and individual results. According to this, the worker should receive as wages exactly the amount of money that really corresponds to the labor efforts expended, the conditions for organizing labor activity and the labor result. In the conditions of a modern market economy, privately owned enterprises themselves solve all the problems of the structure and organization of production, economic and financial activities, systems of rationing and wages. So, for example, it is generally accepted to use a special tariff system, which, through a set of graduated tariffs, allows you to set the amount of wages and its structure in relation to a particular employee. In this way, wage system is a whole complex of interrelated rules and norms, which together ensure the implementation of differentiation, calculation and regulation of wages for each individual group and category of workers. In addition, it is necessary to take into account the entire degree of complexity of the organization and the course of the labor process, as well as such important labor characteristics of the employee as the level of education, industrial qualification, experience, length of service. This system of estimating labor costs under different economic conditions makes it possible to ensure the unity of the labor measure, payment for a unit of labor efforts, uniformity of wages for absolutely the same value of the result of labor. This method of tariffication of wages contributes to the creation of differentiation of the main part of wages, which is the salary, based on data characterizing the structure, quality and result of labor activity. From an economic and financial point of view, the tariff system is a set of interrelated elements that guarantees the performance of all the functions of the system as a whole. 1. Tariff grid - a complex of qualification categories existing at a given enterprise or within a specific organization, each of which has its own tariff coefficient. By means of these indicators, wage rates are determined, which, in general, makes it possible to identify the function of the direct dependence of the amount of wages on the qualification level of the employee. 2. In order to determine the optimal level of remuneration per unit of time spent (hour, day, month) at an enterprise (or in a firm), tariff rates and salaries in their monetary terms. Each rate is associated with a certain category of labor qualifications, which allows for strict compliance and control in the system of wage organization. When determining tariff rates and salaries and forming at the enterprise, the remuneration system should take into account the following: 1) wages must necessarily be differentiated depending on the qualification category of the employee, the conditions of his activity, as well as the complexity and effectiveness of labor efforts; 2) the staff should be interested (financially or not) in the implementation of a particular type of work, therefore, for managers and managers, it is extremely important to solve the problem of motivation. In other words, the organization always strives for the maximum reproduction of the labor force; 3) the enterprise must create all the necessary conditions for the use of progressive systems of remuneration, i.e., it must grow in parallel with the increase in the degree of complexity or effectiveness of the labor process. It is important to uphold the principle of "equal work - equal pay"; 4) employees with high labor abilities, creative potential, initiative should stand out in terms of wages. 3. Tariff guides consist of lists of jobs and professions, specialties that take place in a given enterprise. Despite the importance and advantages of the existence of the tariff system of remuneration, it has a number of significant drawbacks. For example, the tariff rate and its value take into account only constant factors, such as planned wages for the implementation of the planned scope of work. However, it does not take into account the degree of intensity and efficiency of the labor process and does not cause additional incentives for employees to show initiative and creativity. This problem can be solved only by creating an additional system of allowances and bonuses for employees. So there was a need to create a tariff-free system, which, in addition to salary, takes into account various kinds of incentives for high-quality and productive work. LECTURE No. 8. Market of capital and land resources 1. The concept of capital. capital market Capital is a valuable resource, a factor of production that determines the course of a production process or other activity. In addition, capital brings its owner a factor income in the form of an interest rate. It has various areas of application: it is both the financial basis of transactions and material goods designed to provide a person with a decent life (various forms of real estate and luxury goods). Capital is a multi-valued concept, and therefore it can take various forms: 1) human capital represents all the theoretical knowledge that in practice can be transformed into skill and professional experience. This indicator characterizes the stability in the development of an organization or a country as a whole. The higher this forced mobility of resources, the lower the stability of labor resources in the economy. Leakage of personnel may be associated with unfavorable working conditions or an unworthy level of pay, as a result of which the employee does not receive satisfaction from his activities and is looking for another job. For some countries, as a rule, for developing, the international "brain drain" is characteristic. They cannot pay highly for the services of scientists, technologists, etc., as a result of which they are forced to participate in the production of the GDP of other countries that are economically more developed; 2) material capital embodied in the buildings, equipment and raw materials needed for production. In other words, these are all production assets, regardless of whether they participate in production or economic activity or only create conditions for it; 3) information capital is gaining more and more importance. It contains valuable data relating to all spheres of life of an economic entity, as well as relations regarding the production, distribution, exchange and sale of goods and services; 4) money capital represents all cash and non-cash forms of money through which an organization or the state pays for its obligations, and also finances its activities. Today, electronic money is becoming increasingly important: plastic bank credit cards, deposit accounts, etc.; 5) securities in the form of shares, debentures, checks and bonds, which allow you to acquire capital on credit, secured by property. Having a certain number of shares in hand, an employee of the organization actually becomes its co-owner. Accordingly, the supply of capital and its demand are reflected in the market of capital resources, where they are circulated. The demand for capital depends on its productivity and is characterized by an inverse, negative dependence on its value, that is, people show an increasing demand for capital, provided that it is issued at a lower interest rate. The lower the real interest rate of the bank, the higher will be the demand for money (tangible assets that the population wants to keep on hand in the form of cash balances) and the more likely that these assets will be invested in the purchase of bonds. Thus, the demand for bonds is inversely related to the balance of supply and demand in the money market. 2. Nominal and real interest rates Interest rate - This is an economic category that shows the real profitability of an asset. It is a determining factor in decision-making, since the entrepreneur is interested in obtaining maximum revenue from his activities at minimum cost. At the same time, each economic entity individually, depending on its type of activity, reacts differently to the dynamics of the interest rate. Owners of capital, for example, work exclusively at high interest rates, while borrowers are willing to lease capital only at low interest rates. This suggests that it is extremely difficult to find equilibrium in the capital goods market. The interest rate on loans and deposits is set by the Central Bank of the country. Based on its value, the real rate is formed, which reflects the real purchasing power. The real interest rate is also determined on the basis of data on inflation rates, in accordance with this it can be calculated using the following formula:  where i is the nominal interest rate; π - inflation rate. Accordingly, the nominal interest rate is:  Such a system of equalities is possible when the dynamics of inflation is relatively small, i.e., the country has low inflation rates. If the economic situation is unstable and inflation is gaining momentum, in this case the real interest rate can be calculated as follows:  The higher the inflation rate in the current period, the higher the real interest rate should be, that is, there is a strict direct relationship between these values. The interest rate plays an important role in the economic choice of subjects. It guides them to make the most rational decision. For example, a person has the ability to purchase bonds. Knowing what their yield and the value of the real interest rate, he can determine the current rate of bonds, which is inversely related to the interest rate. Today, when a large-scale process of mortgage lending has begun in Russia, the interest rate is of great practical importance. In fact, it determines the amount of cash overpayment as a result of receiving credit services. At the same time, it acts as a reward for commercial banks, which today refuse a certain amount of money to make current loans in order to receive future profits. There is an opinion that taking a mortgage loan for several years is very profitable. The rate of inflation fluctuates regularly and in most cases increases. As a result, part of the debt is simply "eaten up" by the inflationary wave, and the borrower pays less in the end. A loan agreement is drawn up once, and it contains a specific interest rate. Therefore, regardless of the economic situation in the country and the general level of prices, debt amounts will be accrued according to the same scheme, which, in case of macroeconomic instability, may be beneficial for the client, and additional costs for the bank. 3. Discounting and making investment decisions The interest rate is a determining factor not only in the money market and the securities market, in particular bonds, it also plays an important role in making investment decisions. Through this, the investor can determine the return on investment, that is, the amount of money that he will receive when implementing the project or program in which the capital was invested. As you know, an economic entity making long-term capital investments currently denies itself the consumption of those resources that are used for financing in order to obtain an even larger amount. In this regard, the profit received from the implementation of any activity must cover not only the so-called damage from underutilization, but also bring real profit and justify itself. Only in this case investment activity is regarded as effective. In order for economic activity to be successful and the results to be high, an entrepreneur must always focus on the dynamics of the market interest rate. For example, when making long-term investments, the investor first of all pays attention to their profitability, that is, how rational the decision is from the point of view of economic efficiency. If the interest rate is slightly higher than the planned yield, then the project is considered unprofitable. Thus, one of the important steps in making an investment decision is the analysis of alternative options for investing capital. In total, there are three main types of investment: investments in productive assets, stocks and housing construction. Investments in fixed assets of the organization (the so-called material capital) grow with a corresponding decrease in the interest rate. This is because the marginal cost (i.e., the cost per unit of capital) is reduced, and as a result, capital ownership becomes more profitable. Inventory investment also responds to the interest rate because it represents the opportunity cost of holding inventory. A firm that has stocks of finished goods and other products of production in warehouses refuses the percentage that it could receive with their current consumption. Accordingly, the higher the interest rate is today, the more expensive it becomes to hold inventory. This induces the firm to cut them, and as a result, the flow of investment stops. Investments in housing construction are also inversely related to the interest rate. If bank interest starts to decline, more people decide to take out a loan or start building an apartment, in other words, the aggregate demand in the housing market starts to grow. This causes an increase in the general price level, which becomes more profitable for the developer (meaning the organization that organizes or commissions the construction), and the scale of investment expands. Investment is a multi-stage process, in some cases it can be carried out at a time. Also, the profit from capital investment, or the profitability of the project, is not an absolutely clear value: it is divided into several parts, each of which the owner of the factor receives after a certain period of time. Thus, the concept of discounting is considered important. This indicator estimates the future value of capital goods based on the current value, taking into account economic expectations and interest rate dynamics. In other words, it is necessary to correlate what we spend today and what we can get in the future. If future revenue cannot cover current costs, the project is considered inefficient and cannot be implemented. Thus, when making a decision, it is very important to calculate these two indicators. Assume that a credit institution is faced with a choice: to issue a loan to a legal entity at 15% per annum for quarterly compound interest or at 18% for semi-annual compound interest. It is difficult to give an unambiguous and correct answer right away, but by mathematical calculations it turns out that the transaction at 18% per annum will be the most profitable for the bank as a result. Otherwise, the bank will incur losses associated with either understating the interest rate or overstating it, which may repel the debtor. The discount formula is as follows:  where FV is the future value of the investment; PV - today's value; g - interest rate; * - number of years. Accordingly, the most rational decision is the one in which the future value of the investment is the greatest. 4. Factor "land", natural resources market, limited supply of land resources Land itself is a unique and rare resource due to its limited nature. In the broad sense of the word, land is nothing but the area of the territory within which there are deposits of minerals. In general, the value of land lies in the fact that it acts as an object of agricultural activity, provides the country with agricultural products. In accordance with this, the usefulness of the land is determined by its fertility, i.e., the ability to bear as many fruits as possible and the ability to biological reproduction, i.e. land under certain conditions is a renewable resource. In this regard, more and more areas are put into circulation, swamps are drained and deserts are irrigated. This significantly expands the potential of total national production, gross domestic product. Thus, two main areas of land use can be distinguished. 1. Intensive use Getting the most out of the smallest piece of land. Without expanding the area of cultivated land, it is possible to actually improve the structure of its productivity through the application of new fertilization technologies, better processing equipment, and, of course, the provision of time for rest. For example, if arable land has been cultivated continuously for three years, then in order to restore their usefulness and fertility, it is necessary to leave these areas without cultivation for at least a year. Such a system as a whole will save land resources and extend their life. 2. extensive use - the introduction of new areas into circulation. This method is the least effective, since the expansion of agricultural production is carried out without the introduction of new technologies, mastering the achievements of scientific and technical progress, etc. Finally, a moment may come when there will be no free land resources, and the country will need additional products. Thus, any production is considered the most efficient only if it is carried out through the intensive development and improvement of the objects of labor and production assets. In a market economy, land is the most important resource and factor of production, which can be an object of sale and purchase. Transactions of the same name can be carried out in the land market, where supply and demand depend on several factors. The magnitude of demand is determined in accordance with the law of diminishing marginal productivity: extensive use of land is the least efficient, since it is associated with the introduction of additional units of land into circulation. At the same time, the more units of land are in cultivation, the less the productivity and utility of each subsequent one. This explains the inefficiency of the extensive method of land use. The demand for a land resource in this case is determined by the following conditions: 1) the presence of an indicator of demand for the product that the land gives when it is cultivated. This is mainly characteristic of agriculture: the question is decided how much land should be cultivated and how much final product is needed in order to satisfy the needs of the subjects and the country as a whole; 2) incomes of the population, which determine the purchasing power of an individual to purchase certain goods and services, in this case, agricultural products; 3) the growth of the population and its density in a certain area. In this case, the demand for land grows inertly. It's not just about getting the most out of land as a factor of production. The concept of "land" is limited to a purely territorial framework, that is, it is necessary as a place for construction operations, etc.; 4) the quality of the land plot, its fertility. Chernozem is estimated several times more expensive than clay or gray forest soils, since the most important property of the earth is its usefulness; 5) the location of cultivated land: the closer to the center or to the zone of mild climate they are located, the greater the value they can be estimated. Because land is a scarce resource in both quantity and quality, its supply is inelastic. That is, it does not react to prices and is determined solely by the remaining stock of land resources. Land as a whole is not only an object of possession, but also of use, therefore it makes sense to consider such concepts as "rent" and "rent". A lease gives an individual the right to use the land and what is located on it, for example, various buildings. This is a qualitatively new form of commodity relations: an agreement is drawn up under which both parties undertake to fulfill a number of conditions. Rent is a factor income regularly received by the land owner. Rents are of several types: differential rent of the first degree depends entirely on the natural usefulness and fertility of the soil; second-degree differential makes it possible to assess the degree of human impact on the land resource in the process of processing; absolute rent is characterized by the sole use of a piece of land. LECTURE No. 9. Perfect competition market 1. The equilibrium of the firm in the short run In the market of perfect competition in one industry, there are many firms that have the same specialization, but different directions of development, scale of production and cost. If the price of goods and services begins to rise, this encourages the entry of new firms into the market that wish to carry out their production and marketing activities here, and also strengthens the position of existing ones that occupy a large market share. With a decrease in the cost of products sold on the market for goods and services, weak and small firms, due to excessively high costs, cannot compete and disappear from the market. Given the magnitude of marginal cost, i.e., the amount of costs for the manufacture of an additional unit of output, three possible characteristics of a competitive firm can be distinguished. 1. The organization earns zero profit. In other words, after the sale of finished products, it receives such an amount of income that it is only enough to cover the minimum costs. This means that the production itself is inefficient, perhaps outdated equipment and technologies are used, and the quality system is poorly developed. As a result, this does not allow saving on resources and production factors, and labor and material intensity indicators are very high. In this case, the firm is uncompetitive. 2. The firm receives excess profit or quasi-rent. This is possible in the case when the average cost of production is less than the established market price, i.e., the cost of production tends to decrease. As a rule, this is due to the progressive development of the achievements of scientific and technical progress and the development of departments in the organization that are aimed at developing long-term strategies and market development. 3. The company's revenue does not allow it to cover even minimal costs, the cost of production is much higher than the market price. At the same time, an organization cannot raise prices just like that, since perfect competition implies that the education system belongs to any production. Thus, the company is on the verge of bankruptcy, it goes bankrupt and leaves the market. If we talk in general about the point of optimal activity of the company, we can conclude that average costs, in principle, do not allow us to characterize production, since the entrepreneur is interested in the growth of total profit, and not its average. The equilibrium condition of the firm in the short run implies the coincidence of the marginal cost and the marginal revenue that can be obtained from the sale on the market of each subsequent unit of goods and services produced. Any organization tries to organize production in such a way that this equality is achieved. It should also be noted that the perfectly competitive market itself has one feature: in it, marginal revenue always equals price. Accordingly, three types of market situation can be considered. 1. The cost of a unit of production is approximately at the same level as the average cost. In this case, the total income of the company from conducting production and economic activities coincides with the total costs, which characterizes the receipt by the entrepreneur of a normal profit. 2. The total profit that can be received at the end of the production cycle and the sale of products on the market exceeds the gross costs that went to production, marketing, advertising, etc. Due to this, the company has the opportunity to receive quasi-profit or its maximum value 3. The cost of the firm to produce one unit of output is much higher than the market price. This indicates that the firm is incurring losses. Perhaps the reason lies in the irrational use of production factors, material resources, or technologically obsolete equipment. In any case, such production is considered unprofitable and respecialization or restructuring is required. 2. Equilibrium of the firm in the long run The long-term period and the processes taking place in it were described in the works of representatives of the classical economic school. It is characterized by the state of full employment of all resources and factors of production. In addition, the equilibrium gross domestic product is equal to the potential. The long-term period has a long time period, and in the conditions of extreme instability of the economy and the dynamism of the external environment, various structural changes occur on the market. Firstly, this is due to the fact that the number of actors (firms, enterprises, individuals, etc.) increases, and secondly, all costs become variable and depend on the volume of output and the scale of production. Consequently, the equilibrium of the firm in this case simply cannot be constant; it changes regularly, adjusting to the dynamics of the elements of the market mechanism. When planning activities for a long period of time, the organization cannot rely only on variable costs (changes in the composition and number of workers, the use of fixed assets that are directly involved in the production process or create favorable conditions for its implementation). If fixed costs are considered always unchanged, this can lead to a violation of the equilibrium combination of production factors and material resources. To maximize gross profit, the organization must control and regulate the process of formation of average costs. In other words, the cost of production, as one of the most important indicators of the quality and efficiency of production, must steadily tend to zero, i.e., if possible, be minimal. Therefore, in the long run, it changes its size in proportion to changes in production volumes. Short-term average cost curves superimposed on one plane make it possible to analyze the long-term curve. From a mathematical point of view, it has the form of a parabola, that is, it resembles a horseshoe in shape, and passes, as it were, tangentially with respect to all primary graphs. The left side of the parabola, when it declines along the slope, characterizes increasing returns on factors of production, which also indicates a decrease in average costs. The right side, on the contrary, is described by an increase in the cost per unit of output, as the return on factors decreases. This suggests that the firm can determine for itself the optimal value of average costs. By expanding or contracting production, it enters a new average cost curve, while at the same time moving relative to the long run curve. Only through the conduct of such a policy, the company can really achieve a financial condition when its average costs will exceed the price level and make a profit. Now consider the position of the firm, when the number of competitors in the market increases, this situation can be described in three cases. 1. If the market price of the product is significantly higher than the average cost, then the company makes a high profit. In this case, as many other firms as possible will try to enter this industry, seeking to maximize profits and gain more market power. Due to the growth in the number of organizations engaged in a homogeneous type of activity within the same market, competition is getting tougher, which leads to a real increase in labor productivity. As soon as the supply reaches the level of consumer demand and outstrips it, the price automatically begins to decline according to the law of diminishing marginal utility from the production of each excess unit of output, which leads to the disappearance of quasi-rent. 2. When the price is below AC, the firm exits the market because it can no longer finance its own activities. As a result, competition is weakening, and there is a potential chance for more than successful development. 3. Long-run equilibrium is achieved when the average cost equals the price of the product, as well as the marginal cost and, as a consequence, the long-run average cost. Here, the equality of marginal and average costs indicates that production is based on saving resources, which can only be achieved with a change in technology. Thus, the firm finds itself in completely different conditions in the long-term and short-term periods, and therefore behaves alternatively. The most important thing is to keep the cost structure in mind and strive to obtain the most reliable information about the mechanism and changes in the market system. 3. Consumer Surplus and Producer Surplus Marginal utility is the value of each successive unit of consumption. According to the law of diminishing marginal utility, the last unit of output is the least important to the consumer. Through a practical analysis of this theory, we can define the concept consumer surplus. An economic entity, acquiring all the goods and services it needs, pays the same price for each of them (if, of course, the goods are homogeneous in structure and use). As a result, it turns out that the buyer receives exactly the same benefit from the consumption of all commodity items in the consumer basket, with the exception of the very last one. Suppose that an economic entity decides to purchase a certain amount of goods. He is willing to pay $200 for the first unit, $150 for the second, and only $100 for the third. At the same time, based on the above, it turns out that the general level of market prices for this type of product is set directly at the level of $100. The good has its own utility, in this example, they are $200, $150, and $100, for a total of $450. However, the consumer is only willing to pay $300 for all three units, according to their market value. Thus, there is a discrepancy between the value of the total utility (in monetary terms) of the consumer basket and its real value in accordance with consumer preferences. It turns out that consumer surplus is the very difference that formed between the amount of money actually spent on the purchase and the amount that he was actually ready to pay. In this case, this indicator is 150. Similarly producer surplus is represented by the difference between the marginal cost of the organization in the process of its functioning and the implementation of one production cycle and its value in the market of goods and services. Any firm, planning and organizing the production process, must certainly take into account the structure and magnitude of the average costs that are necessary to manufacture one unit of product. For the condition of profit maximization to be feasible, this type of cost must be at a level much lower than the proceeds from the sale of the same unit. This suggests that each firm individually, based on data on the quality, intensity and other features of production, sets a strictly defined value within which it is willing and ready to produce an additional unit of goods and supply it to the market. The main determining factor here is the dynamics of the market price, at which the product on the market finds its consumer. Thus, the price of the good must be slightly higher than the marginal cost. Only in this case the firm can talk about the efficiency of development and organization of production. Consumer and producer surplus find their practical application when it is necessary to analyze the state policy aimed at regulating market pricing. This avoids the establishment of a monopoly. However, if the state, represented by the Ministry of Finance, sets the price of a particular product below the equilibrium price, this can cause an excessive demand: it will begin to grow. At the same time, firms do not want to sell their products at such a price, it simply will not pay back the costs incurred, as a result, the scale of production will begin to decline and the supply on the market will decrease, which will cause a shortage of goods. Producers lose profits and incur losses, their potential surplus is lost as a result of a decrease in the price of products and an overall reduction in the scale of production. Consumers purchase the product at a lower price than they actually expected, so consumer surplus grows and the marketer satisfies his need completely without overspending. Accordingly, consumer surplus is lost by those buyers who for some reason cannot purchase this type of product or service, for example, due to the limited supply of it. Thus, the losses of producers exceed the surplus of consumers, which indicates their direct dependence. 4. Production costs. Types of costs Costs of the organization or its costs represent the amount of expenses that are simply necessary to ensure its functioning and the implementation of production and marketing activities. Costs of economic activity are an inevitable phenomenon, absolutely every company faces them. But at the same time, they are different for each individual and depend on the economic literacy of the management and financial departments (accounting, marketing, etc.), which plan the volume of activities and the amount of costs. The classification of costs can be compiled by means of the following criteria. 1. Firstly, costs play a different role in the formation of the cost of products, works, services, they are not uniform for each individual type of product or its range. Basic costs have a direct connection with the technological and production process, through which a certain volume of goods and services for public and other consumption is produced. For example, these include the costs of procurement of raw materials, materials, fuel, payment of wages (salary + bonuses) to employees of the organization. Overheads associated with the provision of the production process and its organization, the creation of favorable working conditions. These are the so-called workshop and general factory expenses. 2. According to the degree of homogeneity, the costs are divided into simple, i.e. homogeneous, and complex. Simple are carried out in accordance with the specialization of the company, the direction of the enterprise and include all costs for the purchase and supply of the necessary factors of production to the warehouses of the enterprise and directly to production units, as well as to pay for the "labor force" factor. Complex costs - expenses of all production units and departments of the organization in their totality, for example, expenses of workshops, departments for the implementation of activities in accordance with the production purpose. 3. According to the time of occurrence, all costs of the organization can be identified as current, which are carried out directly in the present period, that is, at the point in time when the production process or the implementation of other activities actually takes place. This type of cost is the direct basis for further work planning. Future costs are those costs that will be incurred by the organization in the future. For convenience, economic models of activity are compiled: based on the grouping of previously obtained data (i.e., analysis of all previous expenses), they present a forecast, thanks to which the organization can assume the structure of future expenses and make certain decisions. To make a decision about the organization of production, costs and distribution of resources and factors of production, it is necessary to take into account all the potential opportunities, especially those that, from the point of view of benefits and profits, seem to be the most acceptable. In addition, it is necessary to take into account the possibility of a more rational or alternative use of resources, which in general can help the company in planning its financial activities. All costs can be classified in this way. 1. Accounting costs - these are all expenses of the company in the current period for the acquisition of raw materials, as well as fixed production assets and factors of production, among which one of the main places is occupied by labor. 2. Internal costs from an economic point of view, this is the amount of income that could be obtained as a result of more economical and rational consumption in the production process of all the necessary material resources and factors of production. 3. economic costs = accounting + internal. 4. Return costs - these are the expenses of the company, which sooner or later it returns back. As a rule, this happens at the end of one production cycle, or as a result of the exit of the company from the market and curtailment of activities. For example, the costs associated with the production itself: raw materials, factorial, etc. As a result of the sale of goods and services, these costs will be fully covered (of course, if the production was properly built). 5. sunk costs - these are one-time costs for the creation of a company or enterprise, its registration, insurance, etc. This type of cost cannot be used alternatively. If we take the volume of output directly as the basis for the analysis, then for the short-term period we can distinguish two groups of costs: 1) fixed costs, that have nothing to do with the production of goods and services. For example, rent, electricity and gas company fees plus workers' salaries are regular monthly costs; 2) variable costs are determined directly by the scale of production, i.e., the quantity of products that was manufactured in a certain period of time. Initially, these costs are associated with the cost of acquiring raw materials, production factors and other means of labor. The larger the scale of production, the more resources and factors of production are needed to carry out the production process. Fixed and variable costs in their totality are represented gross, i.e., they also include the consumption of fixed capital - depreciation. If we take the costs of the firm for the production of one unit of output, on average we can calculate average costs. limit they determine the cost of each additionally produced unit of output according to the law of diminishing returns. LECTURE No. 10. Theory of organization 1. The concept of the company, its functions The company - it is a completely independent, legally based, economic entity, the purpose of which is the implementation of commercial and industrial activities to create socially necessary goods and services. Any company has a separate, wholly owned property. A firm from other economic entities operating in the market is distinguished by the presence of the following features. Firstly, it is an economically isolated, independent economic unit that is capable of making decisions related to its functioning independently of other economic entities. Secondly, a legal firm is always legally registered and in this regard is relatively independent, i.e. it has its own budget, charter and business plan, in accordance with which it develops. Thirdly, the firm is a manufacturing intermediary. To carry out the production cycle for the production of tangible and intangible goods, it purchases the necessary resources on the market for factors of production, which, upon reaching the stage of readiness, are sold to the market for goods and services. Fourth, the financial goal of the firm is to make a profit and minimize costs. However, today there are firms that do not work for profit, they have slightly different tasks and methods of competition, for example, increasing sales and increasing their own market share, as well as maximum control over pricing and consumer demand. Any firm seeks monopoly power, unless antitrust laws prevent it. Each organization in the conditions of instability of the labor market sets as its task the preservation of the staff, which can be done by improving the remuneration system, as well as by developing a motivation system, this generally creates additional incentives for employees to carry out the most productive activities. The uncertainty of the external environment today makes the management of the organization think about the issue of survival in the event of a crisis. For these purposes, strategic planning departments are being created, which develop long-term development strategies and appropriate programs for their implementation. In order to create its consumer, the company must master the production of qualitatively new products so that they can win the favor and trust of the buyer. This can be achieved by introducing the achievements of science and technology in production, which saves time and eliminates additional costs. The firm, in accordance with its purpose in a market economy, performs a number of important functions. 1. production function involves the production of goods and services that provide a market offer. Production must be based on data on the structure of demand, otherwise the firm runs the risk of being completely without profit with uncovered costs. 2. commercial function involves logistics (building relationships with resource suppliers and investors), sales of finished products, as well as marketing and advertising to successfully promote products on the market and increase its competitiveness. Self-financing, self-sufficiency and autonomy are the main characteristics of a strong firm that is able to gain a large market share and have a significant impact on the pricing and distribution of income. 3. Financial function lies in attracting long-term investments and obtaining loans, which will undoubtedly allow the company to implement innovations and focus on further development. This may include settlements carried out both within the company and with partners: issuing securities, paying taxes, as well as making a profit, managing risks and creating an insurance system. 4. counting function involves drawing up a business plan, balance sheets and estimates, conducting an inventory, costing, preparing reports and submitting them to state statistics and taxes. 5. Administrative function is a control function. It includes four components: the organization itself to create a structure flexible to changes in the external environment, motivation as a process of stimulating employees to achieve qualitatively higher results, planning, including setting goals and ways to achieve them, and control over the activities of the company as a whole. 6. legal function is carried out through compliance with legally fixed laws, norms and standards, as well as through the implementation of measures to protect the factors of production and the environment from the point of view of the ethics of the organization. 2. The concept of the enterprise Company - this is an independent economic entity created by an entrepreneur or a group of entrepreneurs and intended for the implementation of production activities, that is, designed to meet the needs of society in goods and services. The purpose of the enterprise is to make a profit, gain a large market share and meet the needs of different levels of all economic entities. The enterprise is a narrower concept of the company, since it, together with many others that are different in specialization and direction of activity, ensures the effective functioning of the company by fulfilling its orders. In other words, one firm may include a whole group of enterprises in which it conducts business. The main features of the enterprise can be considered as follows. 1. Organizational unity - the creation of an effective mechanism of activity that allows you to competently make all decisions related to the production and distribution of manufactured goods and, in general, function within the framework of an unstable market economy. In addition, it is extremely important to have organized and highly qualified employees at the enterprise, which are a necessary condition for the successful development and promotion of the enterprise on the market. 2. The totality of all resources and factors of production necessary for the production of finished products. These are the so-called primary raw materials of marketable products: 1) natural resources, which, in the process of processing, turn into finished goods. In other words, they are represented by the working capital of the enterprise under the general name of raw materials and materials; 2) material resources, primarily capital. It can be both own and borrowed, taken at a certain interest rate. Any funding, be it targeted public or private investment, contributes to the high-quality and comprehensive development of the enterprise, allows you to solve all the problems that arise due to financial insufficiency. One of the main characteristics of an enterprise on the market should be its investment attractiveness; 3) labor resources are the most important factor of production in the enterprise. It is the personnel labor potential that determines the intensity of labor activity. The number of personnel, its composition, the movement of the labor force, the level of education, work experience, qualifications - all this together characterizes the labor complex of the enterprise; 4) Entrepreneurial resource or ability to entrepreneurship The head of the enterprise must have certain skills, experience and personal abilities to manage the enterprise, make important decisions and conduct entrepreneurial activities in general. 3. Separate property. It is extremely important to have economic independence: the enterprise itself determines what to produce, where and in what quantities. However, along with independence, an enterprise should not forget about economic responsibility: it can be represented both by concern for the human worker or the environment, which determines the degree of ethics of the organization, and the obligations of the enterprise to investors, consumers to repay loans and borrowings, make deliveries, etc. . 4. Own balance sheet, business plan, as well as a bank account. In the implementation of all market transactions, the company acts solely on its own behalf. In accordance with the above, the main tasks of the enterprise are: 1) stable profit, which makes it possible to further develop and transform, implement innovations in production in the form of replacing used technologies and production assets, as well as attract additional labor and expand the scale of activities in general; 2) a guarantee of high quality and sufficient quantity of manufactured products, works, services. The offer in the market of goods and services should always correspond as much as possible to the magnitude of demand, they should be in equilibrium; 3) creation of an effective and progressive system of remuneration. Workers should be provided with timely and decent wages in accordance with the amount of work that needed to be done. Initiative, above-plan performance of tasks should be encouraged through a system of allowances and bonuses, as well as providing staff with opportunities for professional growth. All this qualitatively stimulates the employee, motivates him to achieve the best result, which, in the end, is for the benefit of the enterprise; 4) responsibility for the state of the environment - the desire to reduce the level of harmful effects on it; 5) a strict control system, which helps prevent supply disruptions, the release of defective products and failures in the production itself as a whole. 3. Internal and external environment of the organization Any organization has two sides: internal, which characterizes its state, mechanism and structure, and external, under the influence of which the first develops. Such a detailed analysis of the organization allows you to determine its capabilities for the current period and prevent all sorts of failures in the future. Internal environment organization is represented by a whole complex of built-in elements that determine its organizational and financial system, as well as the ability and degree of integration of the organization into the external environment. The internal environment can be considered both in a static state, highlighting the composition of elements and culture, and in dynamics, studying the processes occurring under the influence of a number of factors that mainly influence from the outside. The elements of the internal environment include the operational and tactical goals and objectives of the organization, the aspirations of the employees themselves and the technologies used in production, financial and information resources, as well as organizational culture, i.e. a set of norms, traditions of doing business, behavior of employees and management. In addition, the concept of "culture" includes the presence of a system of organizational working conditions, and the image and style of the company, which determine the direction of its activities. A special place in the internal environment is occupied by people - the creative potential of the organization. Their abilities, level of education and qualifications, work experience, way of thinking, motivation and dedication determine the final result of the organization's work. As you know, the main factor of production and resource in the organization is labor itself. Thus, personnel and relationships, characterized by horizontal and vertical communications, generally determine the social subsystem of the organization. Production and technical subsystem It is represented by fixed production assets (machinery, equipment), various types of raw materials and factors of production, auxiliary materials, such as tools. The main component of the production subsystem is electricity: it ensures the operation of the equipment and serves as the only source of lighting. Light is one of the necessary conditions for the successful completion of work. The elements characterizing this subsystem are: 1) Used technologies. Their influence is of great practical importance for all activities of the organization. In order to develop effectively, the company needs to constantly, depending on the pace of the dynamics of scientific and technical progress, master the latest achievements of science and technology, introduce new control and planning systems in production, etc.; 2) Labor productivity and its efficiency are determined by the amount of labor costs per unit of time for the production of a unit of product or service, as well as the conditions in which this production is carried out. The higher this indicator, the better the organization functions and develops more intensively; 3) Production costs - the total costs of the enterprise for the purchase of the necessary resources and equipment (ex. investments in fixed assets), storage of stocks (investments in inventories), for the remuneration of employees (salary + bonuses). In addition, the costs also include tax deductions, rental payments and payment for the services of marketing, advertising and other intermediary organizations; 4) Product quality - a set of properties that make it suitable for consumption in accordance with its intended purpose. This indicator directly depends on the quality of the feedstock, the methods of its processing and the qualifications of workers. The quality of the goods is a factor in the competitiveness of the organization in the market. Financial subsystem of the internal environment is the movement and use of cash in an organization. Thus, creating investment opportunities, maintaining profitability require certain costs. An important component of the financial subsystem is the marketing one, which got its name as a result of working with the market and its elements. Thus, its activities are aimed at establishing links between the organization and the external environment. External environment - a set of elements, conditions, factors and forces that affect the organization from the outside, thereby changing its behavior. The external environment is of great practical importance. In a market economy, it is extremely dynamic, unpredictable and requires close attention. The study of the external environment and its changes allows the organization to rebuild its internal structure, adjusting it to changing conditions. Only in this way can an organization maintain its competitiveness in the market. In this regard, it is extremely important for her to have an information resource that contributes to the perception of changes and directs the company to achieve high results. If consumer preferences begin to change, this has a strong impact on the size and structure of market demand. In accordance with this, the firm, in order to retain its consumer, must reorient production in the direction of changing its needs. By itself, the external environment can be both direct and indirect impact. The direct impact environment includes elements that directly define an organization's capabilities. This is the most dynamic component of the external environment. 1. Consumers i.e. potential buyers and clients. The scheme of their influence on production was presented above. In general, it should be said that by establishing new requirements for manufactured products, economic entities regulate the structure of supply. This is due to the fact that an organization interested in its development is ready to accept any conditions of consumers, as long as they correspond to its capabilities. 2. Competitors also have a considerable impact on the activities of the company, they "spur" the development of production and its improvement. Perhaps nothing else is able to reorient activities and establish production so quickly as the fear of losing market share. Competitors may be firms that sell a similar product in the same markets or their sectors. Rivalry is, as a rule, for market power, the consumer and for his "ruble". Historically, there has been an opinion that a competitor is only a rival that must be fought without fail. However, the market economy has proved the incorrectness of this hypothesis. In conditions of extreme uncertainty of the external environment, it is cooperation with competitors that allows you to adapt to it and achieve your goal. 3. Suppliers act as owners of material and natural resources that are necessary for the organization's business activities. Therefore, they can, like a monopolist, unjustifiably raise prices for resources, thereby creating resource dependence. And for any company it is important that not a single supply is disrupted, that resources are delivered on time in sufficient quantities and at low costs. 4. Labor market supplies the organization with the commodity "workforce". A change in equilibrium, mainly in the supply of labor, can deprive the organization of the opportunity to replenish the staff. At the same time, through regular study of the labor market, for example, through the activities of the marketing department or cooperation with exchanges, the organization is able to determine exactly the contingent of workers who have all the necessary labor qualities (education, qualifications, age, etc.) to work in this firm. 4. Uncertainty of the external environment The market economy, along with all the advantages, has a number of negative aspects. During the existence of the planned command-administrative system, the supply and distribution of manufactured products was carried out exclusively under the control of the state. Such a rigid system did not take into account the real needs of society, but it was clearly structured. The complete opposite of it was the market system of economic relations. It works based on the analysis of consumer preferences, but is characterized by the fact that no one knows and cannot predict how, for example, market elements will change tomorrow, what market prices will be, etc. Therefore, the external environment, represented by a combination of market institutions and factors, is very unpredictable and dynamic . The uncertainty of the external environment lies in the fact that not all economic entities can have access to valuable information of the market system. As a rule, such data are mainly available to giant firms that have huge funds to create an information system and carry out work on market research and analysis. For small firms that strongly feel any changes in the cost structure, this practice is practically inaccessible, they receive information from second hands and, of course, do not have time to respond to market changes in time. In addition, the information must be reliable and as accurate as possible, which is quite rare today. For example, advertising as a factor influencing the manufacturer on the structure of consumer demand gradually begins to lose its effectiveness, since the principle of its existence does not correspond to the basic principle - truthfulness. As a result, the firm loses contact with consumers, which leads to the destruction of communication with the market. Thus, the external environment is dangerous because the opportunity to integrate into it and act with it as a whole is practically absent. However, the firm can really afford to develop a system for adapting to the external environment, thanks to which it will be able to establish contact with it and receive information about any changes in it. 1. Creation of an information system is the primary task of an organization operating in an unstable market environment. This can significantly reduce the uncertainty at the input and output of the organization and maximize the degree of its protection against unforeseen circumstances. Today, almost all organizations have their own sources of information. In addition, this is facilitated by the creation of a marketing system on the spot, which, based on market data, builds a plan for the sale of finished products on the market. It should be noted that the information system contributes not only to the adaptation of the organization to the external environment, but also allows you to influence it. For example, if an organization has developed new mechanisms of activity, decided to create a qualitatively new product or offer a new type of service on the market, it must certainly inform the consumer about this. This, of course, is possible through cooperation with an advertising company, and most importantly, the promotion should include all the necessary features of the proposed product or service and look real and reliable. 2. Predicting possible changes can be implemented through the creation of a strategic planning department. As a result, an organization can independently or through the involvement of independent analysts develop a strategy for achieving its goals that are consistent with its external environment. This makes it possible to significantly reduce the degree of risk in general. 3. Mergers and acquisitions of organizations, the creation of strategic alliances. This tactic allows organizations to strengthen their position in the market, become more flexible, adaptive, stable, especially if two strong and large firms are connected. On the other hand, this is a way out for those organizations that are not able to withstand the onslaught and aggression of the external environment. A good, proven way is to team up with competitors. This contributes to the expansion of the zone of influence and stability, which causes a decrease in the uncertainty of the external environment. In addition, this is convenient in the case when one organization is strong in one, the second is capable of solving other problems, respectively, together they constitute a huge tactical force. 4. The creation of a flexible organizational structure implies the organicity of building an internal structure. In other words, the firm begins to function as a living organism, it reacts to any manifestations of the dynamics of the external environment and tries to develop "immunity". Such an organization has an informal type of culture, in other words, it is not bound by any norms, traditions, which mechanical structures adhere to. As a result, the company has the opportunity for a minimum period of time to reorient itself, change the direction of development, and finally, if the economy requires it, radically change its specialization. In addition, the advantage of flexible structures is that they easily master the developments and achievements of scientific and technological progress, introduce new technologies, develop new markets, create qualitatively new types of services, and themselves can conduct research in the field of development prospects. As already mentioned, personnel, labor resources are the basis of a successful organization. If, in addition, a friendly trusting relationship has developed between employees and management, this can greatly help the organization in making decisions and implementing certain actions. This also determines the flexibility of the organization, its ability to act as a whole. In general, speaking about the types of organizational structures, it should be noted that in conditions of a high degree of uncertainty in the external environment, the most effective is the "baseball team" (advertising agencies, film production, software production, etc.). "Stars" work here - capable, talented, enterprising and creative individuals, workers capable of generating ideas. At the same time, such organizations are characterized by an aggressive internal structure due to high competition within the work team, but each employee has the opportunity to stand out and, as a result, get a higher position. 5. Differentiation of business units in the economy Private property and entrepreneurship as such were developed in Russia as a result of the reforms of the early 90s. XX century. Since then, enterprises and organizations began to develop effectively, grow in quantity and quality. Today, firms are the main economic entities that somehow provide society and the state with all the necessary goods and services. There are several classifications of firms, but the main one is the division of organizations by size, profit share, market, scale of activity, degree of trust and market power. Each firm is unique and unrepeatable, but they all have the same common features. The classification makes it possible to single out large (corporations, concerns, etc.), medium and small (individual private enterprise) firms. This means that they differ not only in the number of employees and size of assets, but also in gross output and the corresponding amount of revenue. There is an opinion that small firms, due to their insufficient capitalization and organizational weakness, cannot compete with larger, stronger and more successful organizations. In this regard, the prerogative of the state becomes the exercise of control over market dynamics, structure and competition, providing assistance and financial support to weak firms, as well as curbing the monopoly of strong ones. State assistance can be expressed, for example, in targeted financing, when funds from the state budget are transferred to the accounts of an enterprise and then distributed to its needs. In addition, the practice of providing subsidies and tax incentives is considered very effective, thanks to which the company has the opportunity to invest in its development and improvement. The large firm itself is the most stable in business. It will not leave the market as a result of an imbalance in supply and demand, a sharp deviation of the price level from the equilibrium value, fluctuations in interest and tax rates and exchange rates. As a rule, such a firm is organizationally developed, has a huge number of branches, sometimes even in other countries and operates in various industries, and in case of unforeseen circumstances, has a certain amount of inventory and cash reserves. In accordance with the foregoing, it is possible to list the main advantages that a large organization has in comparison with medium and very small ones. 1. A large firm, as a rule, has a lower average cost per unit of manufactured product or service. 2. Large firms have every opportunity, mainly financial, to implement fundamental changes, introduce newer mechanisms and technological developments into production or circulation, and even change specialization if the current economic situation requires it. They can even invite independent experts and developers of new technologies, pay for research and development, can afford long payback periods without compromising profits and market share, and maintain specialized departments such as marketing, strategic planning, innovation, etc. Accordingly, in an uncertain market environment, such organizations are more likely to survive. In this case, it turns out that with an increase in the pace of scientific and technological progress, the share of small firms will begin to decline, since they are sometimes not even able to cover the costs of doing business, not to mention making a profit and financing further development. All this significantly weakens competition in the market. At the same time, large firms have their own problems. As the size and scope of activities expands, the costs of control begin to rise. The organization itself is already characterized by a decrease in the degree of manageability and speed of response to market changes, especially if the organization has a rigid regulated mechanical structure. This can lead to the fact that, due to the lack of horizontal communication links, it will not be able to respond in time to changes in the external environment. As for small firms, they are more flexible and react to even the slightest economic changes, it is much easier for them to reorient themselves, and even in this case the costs will be insignificant. In addition, it is small organizations in the labor market today that make up the demand, that is, they contribute to solving the problem of employment in the country. For smaller organizations, an M&A program may be an option, allowing them to combine their efforts and settle into the market faster. 6. Profit: functions and main types Profit represents the result of the production and commercial activities of the company, the main factor stimulating entrepreneurship. It is formed by deducting from the total income of the organization for a certain period of time that part of the funds that can cover the costs of production and economic activities. In other words, it is net income. Profit can also be seen as the engine of production, as it finances innovation and introduces new technologies. In principle, profit is a fickle phenomenon, since competition is strong in a market economy and the general economic situation is unstable. As a result, profit conditions change regularly and may be driven by the dynamics of competition, pricing, consumer preferences and other market processes. Profit is an economic category, the essence of which can be manifested only through its functions. 1. Regulatory. Profit allows you to regulate cash flows in the organization, it distributes all funds in various areas of development and funds, among which the main ones are: an accumulation fund that creates reserves for future use, a consumption fund necessary to meet the current needs of the company, as well as a currency fund development of production, a fund of material incentives, etc. 2. Stimulating. Making a profit gives the organization the opportunity to change, innovate and implement the latest achievements of scientific and technological progress. If the company is sufficiently provided with financial resources, this means that it is stimulated to develop, expand the scope of activities. 3. Controlling - is nothing more than a characteristic of the economic effect of the enterprise. Profit allows you to observe and analyze the internal processes in the organization, since it characterizes the structure of consumption and savings, the amount of costs and potential opportunities for the future. 4. Profit - a source of financing for the expansion of the scale of production. Firms that make a profit have the opportunity to carry out the reproduction process, that is, to conduct continuous production activities. They have an investment reserve and can put it back into production, not only to expand its scale, but also to improve the enterprise. As already mentioned, profit is calculated as a result of reducing the amount of gross revenue by the amount of costs or expenses. In accordance with this, depending on what costs are taken for a minus, one or another type of profit is determined. The costs of raw materials, equipment, all production assets, factors of production, wages, etc. are called implicit, or accounting costs, which are repeated at regular intervals. Based on this, accounting profit is presented as the gross income of the company - fixed costs that in no way depend on production indicators. For the implementation of competent control and assessment of the financial situation in the organization, accounting works. If, in the opinion of this department, the organization regularly makes a profit, this does not mean at all that the profit here is a positive value. In other words, it may turn out to be less than zero, which is evidence of an irrational and inefficient investment of capital and the use of all factors of production. In this case, the firm did not take into account alternative possibilities and chose the kind of activity that brought it much less profit than others could bring. It can be unequivocally said that economic profit is formed by subtracting from current costs the costs of lost opportunities, i.e. those that could be if the company had a different specialization. Thus, it is an important business task to identify alternative opportunities and costs. If in a particular industry the profit exceeds the average value, this indicates that there is a high demand for this product, that is, it absolutely meets the needs and desires of consumers. The result is the desire of each manufacturer to move to this particular market segment, as it becomes more attractive and is characterized by a high return on investment of capital and labor. By tightening competition and expanding the supply of this type of service, demand begins to decline, and profits fall. Economists also highlight normal profit. Obtaining a normal profit is the most favorable situation for the company; in its meaning, it is something between accounting and economic. LECTURE No. 11. Uncertainty in the economy 1. Essence of risks and their types, insurance The modern economy is based primarily on market principles. It is built on the interaction of demand and supply of goods and services, factors of production and other material resources. At the same time, the market economy is so unpredictable that it is extremely difficult to engage in production activities, since it is impossible to predict with sufficient accuracy how all economic entities will behave tomorrow. In addition, the pricing process itself, which is the determining factor in the implementation of economic choice, is extremely dynamic, like the entire external environment. As a result of this uncertainty, the concept of risk arose. Risk in economics is defined as the fear of a future decision to carry out any activity even in conditions of extreme dynamism of the external environment. The manufacturer always seeks to sell the product at a higher price, and the buyer instinctively chooses the product at a lower price. As a result, the risk of imbalance in the market inevitably arises, which can lead to the instability of the entire economic system. As for the producers of certain goods and services, they are always looking for the most profitable sectors of economic activity for investing capital and other resources. Otherwise, there is a great danger of losing market share and power. Thus, the modern economy is characterized by many risky situations that can arise at any time. For the consumer, this is the fear of not finding the product that can satisfy his needs to the maximum extent, or the lack of financial resources to purchase it. The manufacturer runs the risk of producing products that do not meet consumer demand, which will invariably lead to losses. Depending on the field of activity where the risk may arise, and on the degree of its influence, experts identify several types of economic risks. 1. By the nature of the activity: 1) production risk, which is determined by the scale of production and the volume of output. Any organization aims to acquire a source of information that would provide it with all the necessary data on any market changes. Production must be based not only on the dependence on the magnitude and structure of consumer preferences, but also on the general level of prices. After all, the most important thing is that the cost price should not be higher than the established selling price of a unit of production. At the same time, if production costs are too high, the firm will not be able to set its commodity price, since it is strictly regulated by the higher authorities. If a company does not have the opportunity for timely respecialization, expansion or reduction of production (depending on the dynamics of consumer demand), it loses its position and competitiveness in the market, loses its consumer and can no longer influence the dynamics of market mechanisms and processes; 2) commercial risk. The firm may fear that the resources necessary for production may not be delivered to the enterprise on time, resulting in downtime of working time and fixed production assets. Therefore, in order to monitor compliance with contracts and agreements with suppliers, contractors and other business entities, organizations began to create a system of logistics; 3) financial risk appeared as a result of the development of trade, economic, credit, mortgage relations with banks, mortgage corporations and other financial institutions. For example, such risks include the risk of losing part of the profits on the stock market, stock exchange, etc. Suffice it to mention how it collapsed in the 90s. the financial pyramid of MMM and how unstable today such structures as network marketing and various organizations that call on society to invest a large amount of money in order to receive several times more in the future. 2. If we divide the risks by the source of danger, we get: 1) natural risks are caused by failures in the activities of the company as a result of unforeseen natural disasters, and not through the fault of management or other persons in the market system; 2) political risks or those associated with political instability, change of the ruling system, revolutions, change of power, various political conflicts. They subsequently put pressure on the economy in one way or another and can lead it into a state of crisis; 3) economic risk associated with the dynamics of the exchange rate in the financial market and the bond rate in the stock market, and is also determined by the dynamics of the interest rate, unjustified growth in inflation, etc. Risks can be reduced by attracting qualified specialists who can predict future changes in a particular economic indicator. The risk cannot be completely prevented, but any economic entity can reduce its destructive impact through property insurance, business, etc., regardless of the performance, and the organization will always have a chance of recovery, even if it finds itself in a deep crisis. Thus, insurance makes it possible to compensate for damage in case of unforeseen circumstances of various nature. The essence of this concept is manifested through its economic functions. 1. Creation of an insurance fund, which is formed by deductions made by individuals and legal entities who wish to insure themselves and their property against economic, political and natural uncertainty. The insurance fund includes a set of cash reserves, which in case of unforeseen circumstances can be used by each participant in insurance operations, i.e. the insured person. 2. Compensation for damage implies the following: the insurance company financially supports its clients in the event of a risk. Thus, the insurance company and the person who needs its service draw up a bilateral contract, according to which the insurance company undertakes to pay the insured persons an amount commensurate with their contributions. 3. Loss minimization. Insurance companies, paying insurance compensation to subjects, thereby save them from bankruptcy and recognition as insolvent. 4. Control function is that the insurance fund and its funds are used in the most rational way. In addition, the insurance company exercises general control over the conduct of insurance operations, the processes of contribution and distribution of funds between depositors. 2. Inflation and its types The command-administrative economy was characterized by a fairly stable supply of goods, the prices for them were dictated exclusively by the state, therefore they were also relatively stable. In a market economy, with its uncertain external environment and risk appetite, prices are relatively free. First, they depend on the equality of supply and demand in the market of goods and services, financial services, factors of production, etc., and under the influence of state policy aimed at preventing monopoly. Secondly, the level of pricing is formed by the ratio of the marginal income of organizations and their marginal costs. A change in the price level, their deviation from the equilibrium value is the first sign of a crisis brewing in the economy or the presence of any economic problems. When prices begin to rise steadily, the domestic currency quotes fall against the reserve currency in the country (the US dollar is the reserve currency for Russia today). Inflation can be caused by an excessive increase in the money supply, an increase in the money supply, which characterizes the presence of open inflation. Inflation very often becomes the root cause of the deficit in the market of goods and services, and it is created artificially. Enterprises deliberately do not supply finished products to the market. This so-called hidden inflation. Such a situation can arise primarily in a centralized economy, when all decisions regarding the production, exchange, sale, distribution of finished products, factors of production and material resources are taken at the center, and goods are supplied to the market without taking into account the interests and needs of consumers. In connection with the dynamics of pricing and its differences in different industries and sectors of the economy, there is unbalanced inflation. It is determined primarily by the fact that the price per unit of production of different production and destination is not uniform. If we consider inflation from the point of view of the pace of development, we can distinguish the following types: 1) moderate inflation is about 10% per annum. This is a slight change in the general price level, so there are no particular disruptions in the economy and the monetary system. In this regard, the real interest rate is calculated using the standard formula:  where i is the nominal interest rate; π - inflation rate; 2) inflation, which has a growth rate of about 10-100%, is called galloping, it is rapidly developing. As a result, it is very difficult to make market transactions, since prices change very quickly, so they are calculated taking into account the expected level of inflation at a certain point in time. The national currency is rapidly depreciating, and the economy is no longer able to meet the needs of society and the state. Production is "frozen" because the factors of production that enterprises stock up for production activities also rapidly change their value; 3) hyperinflation - This is a type of inflation, which is characterized by growth rates exceeding 100%. This is the most dangerous moment for the entire economy. You should know that inflation does not always occur when the price level rises. After all, for example, there are seasonal fluctuations in supply and demand, so it is impossible to unequivocally judge the emergence of a crisis by the dynamics of these indicators, as well as by the rise in prices due to an increase in the minimum rate of nominal wages. This suggests that in order to determine the real rate of inflation, it is necessary to completely exclude indicators of non-inflationary fluctuations. 3. Sources of inflation, its consequences In the long run, when the economy is in a state of full employment of all the resources and factors of production available in the country, only prices are subject to change, since the volume of production cannot expand without the involvement of additional means of production. Thus, it can be assumed that the increase in social production and GDP occurs through inflation, which is associated with an increase in effective demand. According to the well-known principle "the expenses of some subjects in the economy always become the incomes of others", it turns out that any economy can increase incomes in some sectors only by redistributing them from other sectors. At the same time, the value of effective demand will not change in any way. Then there is the fact that the dynamism of solvency can arise only as a result of the expansion of the supply of money supply, i.e., the emission of funds. The right to issue money entirely belongs to the state represented by the Central Bank, this is its monopoly function, which it sometimes abuses. As a result, the state receives a certain income from this process, which is called seigniorage. The emission can be caused primarily by the need of the state to cover the public debt, which is formed from the amount of accumulated budget deficits over a certain period of time. However, this practice, as is well known, leads to a violation of the market balance of supply and demand due to an increase in aggregate demand, which occurs for the following reasons. 1. Because of the budget deficit. In other words, the excess of state budget expenditures over its revenues can be compensated by monetization or the issuance of government bonds. The first method is considered the simplest, but in most cases it causes inflationary fluctuations in the economy. 2. Inflation can also be increased by expanding the state sector of the economy. In this case, real wages begin to rise only in order to attract the largest number of workers, and not due to an increase in labor productivity. It turns out that the nominal income of subjects is growing, and the scale of production is unchanged. 3. The military-industrial complex produces specific goods for individual and government orders. These products are not in demand among consumers, since they are not part of their consumer basket. At the same time, the military-industrial complex itself purchases all the necessary resources and factors of production for its own production, acting on the market of capital, labor, goods and services. Thus, there is a kind of pressure on prices, as a result of which they begin to rise. This is due to the fact that the amount of money paid for military orders automatically increases the amount of money supply, since they are not supported by its commodity part. In other words, demand-pull inflation develops gradually, as the value of the money supply in circulation grows first, and then aggregate demand. In parallel with the growth of aggregate demand under the influence of inflation, there is a tendency to reduce supply and reduce the scale of production. The fact is that the marginal cost of producing an additional unit of output begins to increase, and this happens for a number of reasons: 1) in the market of imperfect competition, there is always a discrepancy between the marginal productivity of production factors and their assessment. This is due to the fact that the monopoly, which owns all resources, abuses its market power and allows itself to greatly inflate their value compared to the actual marginal return. Thus, the monopoly firm restrains production, creates an artificial shortage of goods and services, which allows raising the price of finished products already on the market of intermediate and final production. As a result, the economy tends to overprice in comparison with what it should actually be at a given degree of technological development. Distorted price signals penetrate into all areas and lead to inertial overpricing and, as a result, to inflation; 2) the structure of imports distorts the volumes of national consumption. As a result of the fact that consumers increase the share of imported products in the structure of their own consumption, a kind of dependence of the aggregate demand of our country on the pricing process and inflationary expectations of exporting countries is formed. If in any country the population prefers imported goods, then in the event of a sharp rise in price, transaction costs for delivery begin to grow, which ultimately leads to an increase in prices in the national market; 3) the restrictive fiscal and monetary policy of the state causes the emergence of cost-push inflation. So, for example, with delayed administrative decisions, the developed tools of economic influence are already applied to a new, changed situation, due to the fact that during the analysis of current processes, the dynamic market system has changed. Of course, one can imagine that the government is trying to stimulate the activity of producers without unwinding inflation and at the same time finance the budget deficit. Then it is important not to worsen credit conditions: not to raise interest rates. But in this case the budget will not be able to be financed. If we go for a change in the tax rate, this will conflict with the first goal. In this case, there is only one alternative for the government: to choose the goal, the solution of which is most important in the short term. Nevertheless, any of the above policies leads to higher demand or cost inflation. Note that demand-pull inflation differs from cost-push inflation by the source of impact. The first one depends on the issuing activity of the Central Bank of the Russian Federation, while the second one is determined by the dynamics of pricing. In this case, you can establish a logical relationship between them. An increase in production costs leads to a drop in the supply, which in turn contributes to an increase in prices, and emission causes an increase in effective demand and its inflation. The concept of inflation is directly related to the inflationary expectations of economic entities. If inflation is a real category, then its expectations are presented in the form of an attempt to predict its mechanism and moment of onset. In accordance with this, the formation of market prices takes place. Entrepreneurs, carrying out production activities, take into account inflationary expectations and include them in the cost of marketable products intended for sale. This is a kind of insurance of possible revenue from the risk of inflation. A long-term continuous rise in prices contributes to the emergence of stable inflationary expectations, inflation becomes inertial, self-sustaining. The inflationary spiral is gaining momentum, consumers, acting on the principle of rational preference, begin to buy goods in bulk, fearing an even higher price increase. Manufacturers in response to this increase the cost of goods and services, credit institutions increase the interest rate on the services provided. Inflation makes a new round, which leads to the folding of new and more complex inflationary expectations. Thus, summing up the consideration and analysis of the process of inflation in a market economy, we can single out its main socio-economic consequences. 1. Inflation significantly distorts relative prices. As a result, the distribution of income and resources in the economy is distorted, and each unit of labor is rewarded with a decreasing share of the national income. 2. In conditions of inflation, the return of credit debts is carried out in a reduced version compared to the initial value. Over a certain period of time, inflation "eats up" part of the debt, since the interest rate under the contract remains unchanged in any case, which is extremely beneficial for the borrower. 3. Inflation causes a disproportion in the distribution of national income between the public and private sectors in favor of the former, and also deprives recipients of transfer payments of income. The national income is redistributed accordingly to the participants in production and grows in proportion to the price growth index. Income in the form of pensions, benefits, etc. is not related to price dynamics, so its purchasing power decreases faster. 4. Taxes and their types Taxes are a necessary condition for the sufficiency of the state budget. If the cost of maintaining budgetary organizations, social payments are government spending, then taxes are income to the state treasury. Taxes - these are regular deductions from the income of all economic entities, which are individuals, households and firms. A necessary condition for the taxation process is the process of determining the tax rate, i.e. its size per unit of taxable object. Taxes, as a rule, are associated with the production, economic or commercial activities of entities. In accordance with this, excise taxes, income taxes, and real estate taxes, etc. are allocated. Taxes are withdrawn on the basis of Art. 57 of the Constitution of the Russian Federation and are classified as follows. 1. Direct taxes are subject to payment by those economic entities that are the owners of any taxable property (movable or immovable property). For example, income tax, income tax of commercial and industrial organizations, property tax, as well as inheritance tax. The concept of the shadow economy is closely related to income tax. Very often, entrepreneurs, in order to avoid paying tax, hide the income of the organization. This allows them to spend most of the proceeds on the further development and needs of the company. The share of shadow production can be calculated using the indicator of the total consumption of all economic entities. Indirect tax pays the final consumer of goods and services that are subject to taxation. Thus, this tax is included in advance in the cost of products sold on the market, thereby determining the retail sales price. The burden of the tax ultimately falls on the consumer, and the producer saves himself from unnecessary costs. Customs duties, value added tax (VAT), sales tax are all examples of indirect taxes. Value added tax is a withdrawal of part of the newly created value, the difference between the amount of tax received by the enterprise through the sale of goods and services, and the amount of tax that he was forced to pay for the purchase of the necessary raw materials and materials. 2. progressive taxes directly related to the size of the object of taxation. In other words, the tax rate increases in proportion to the increase in this indicator. For example, the higher the income, the greater the amount of tax in relative terms must be paid by its owner. If the average wage is about 25 thousand rubles, then the marginal tax rate is the generally accepted 13%. When wages or other sources of income begin to grow, the economic entity, in addition to 13%, pays an additional percentage of the amount of excess profit, which is obtained as a result of deducting the previous 25 thousand rubles from the current income. Tax collection in this way allows for a more efficient distribution and redistribution of income in the economy, but again there is a risk of not taking into account all income due to the presence of a shadow business. regressive tax is the most optimal value for absolutely all economic entities, from the income of which deductions are regularly made to the state treasury. It turns out that people with high incomes pay less than they should, and those with low incomes, on the contrary, pay most of their own budget. This applies, as a rule, to indirect taxes, such as VAT. This is due to the fact that a product sold on the market has the same value regardless of the purchasing power of the consumer and the fact to which segment of the population he belongs. As a result, buyers spend the available cash in different percentages. Proportional tax consists of monetary deductions, which are made exclusively equally from all taxable objects that differ in price indicators. This, for example, includes all taxes on property of both individuals and legal entities. Thus, taxes are a kind of regulator of economic activity and other processes in the economy. Depending on what kind of taxation system is developed, the state can pursue either a restrictive, restrictive policy, or, conversely, stimulate economic growth. 5. Tax policy, principles and functions of taxation Taxation - one of the main sources of income for the state budget. This function can be implemented only through a targeted tax policy, which, depending on the general economic situation in the country, contributes either to an increase in the tax rate or to its reduction. Incentive policy It turns out to be effective when the state budget is negative, in other words, there is a budget deficit. In this case, in order to overcome the economic downturn, to create opportunities for the growth of production volumes to the potential value (when all resources in the economy are occupied), it is necessary to increase the tax rate. The marginal tax rate can be represented as:  where T is the amount of tax deductions for a certain period of time; Y - the volume of national production, respectively, the amount of taxes can be calculated as the product of the tax rate on GDP. Restraining tax policy relevant during a period of intensive growth in business activity to reduce excessive rates of supply of goods and services, factors of production in the market, as well as to limit the cyclical rise. In this case, it turns out that the money supply in the economy is growing, and this can cause inflation. Therefore, the most rational solution is to increase the tax rate so that the "extra" part of the money is removed from circulation. In this case, real incomes (net of taxes) of economic entities are significantly reduced, consumer demand is reduced, and the structure of consumption is generally leveled off. Today, 28 types of taxes are applied in Russia, and such differentiation by no means simplifies the process of their withdrawal, on the contrary, it becomes extremely laborious. In addition, the size of all taxes in the economy, if taken as a percentage, is unevenly distributed: the largest part of them falls on value added tax and income tax. Thus, an important task of the taxation system is to create a fair and efficient tax collection process. In accordance with this, the main principles of taxation can be distinguished. 1. Benefits principle. All economic entities, regardless of their economic status (legal entities or individuals), are required to pay taxes regularly, just as the state is obliged to provide them with subsidies and pay transfer payments. In addition, the amount of the tax withdrawn should be proportional to the structure of utilities and preferences of the subjects and the benefits that they receive from the relevant objects of taxation. For example, the tax on gasoline, diesel fuel should be taken only directly from motorists, since the funds from it are used to maintain roads and highways in good condition. On the other hand, why is this tax levied only on car owners, because good roads are a public good, but it turns out that individuals or a group of people pay for it. In addition, it is simply unrealistic to measure the extent to which a good is used and the utility it brings. If we follow this principle of taxation, then similarly, the unemployment benefit that the state pays should be returned to it in the form of a tax (the same benefit) from the unemployed themselves. 2. The principle of solvency. The tax must be charged in accordance with the level of income that an economic entity has, otherwise it simply will not be considered solvent. In other words, according to the principle of equal tax rates, the more affluent segments of the population must pay to the state treasury exactly as much money as their income exceeds the average per capita. Here it is necessary to take into account the law of marginal utility of each additional unit of income and, in accordance with this, set such an amount of the tax burden that it is the same amount (as a percentage of income) for all subjects of economic relations. However, it is almost impossible to achieve this in practice, since the problem of reducing the economic activity of high-income owners or expanding the boundaries of the shadow business, which completely distorts the results of market activity, may actually arise. Functions of taxation concluded as follows: 1. Fiscal. Taxes are regularly paid to the state budget. In other words, taxes increase government revenue and allow for its superiority over spending, i.e., contribute to the establishment of a budget surplus. In addition, the same money finances the entire economy as a whole, since they are subsequently spent on providing its sectors and spheres. 2. Regulatory. Allows the state to exercise comprehensive control over the development of the economy, market, production, etc. By changing the tax rate, the state, represented by the tax authorities, can both stimulate economic growth and limit it if necessary. Thus, the role of the tax structure in the economy is great. Through taxes, the state regulates property rights, limits the progressive economic growth of the largest enterprises and protects the market from manifestations of monopoly. 6. Investments and their types An important feature of any economy is its investment attractiveness, in other words, the ability to attract long-term investments to ensure sustainable economic growth. No economy can be supported solely by its own resources. One way or another, foreign investors have to be attracted under guarantees of return and payment for the invested capital. If we talk about the economy of the regional or local level, that is, about the activities of economic entities, then we can see that investments also play an important role here. Firstly, when an organization plans to implement any innovations or consolidate the existing structure, it needs additional funding, so that part of the money that is not available in the budget must be attracted from outside. Secondly, investments act as an effective stimulator of economic activity. The fact is that by investing in any business, the investor automatically becomes a person interested in its profitability. Even from the very beginning, when making a decision on long-term investments, the subject analyzes all alternative options for their implementation and chooses the one or those that best meet his interests and are the most profitable. In this way, investments - this is the financing of economic activity and its relations, aimed at achieving a high result. As a factor in the development of entrepreneurship and the economy as a whole, investments contribute to the improvement of the level of social welfare and the national income of the country. Investments provide production with additional opportunities and prospects, which has become especially important with the development of a market economy and the emergence of private property. For example, the construction of residential buildings, enterprises, the development of technology, production, commerce, the market needs a serious material basis. Depending on what the investments are aimed at and in what area of economic relations, they are of three types. Investments in production assets enterprises are presented in the form of the acquisition of new equipment, the introduction of new technologies, etc. Investment in inventory are designed to create warehouses at enterprises for the accumulation of factors of production, material resources, as well as finished products for the implementation of a continuous production process or in case of unforeseen circumstances (changes in the structure of market demand). Investments in housing construction provide an opportunity for the purchase of houses or apartments by those persons who are going to live in them or rent them out. Investments are formed depending on the structure of individual incomes. Any income in its simplest form can be represented as the sum of consumption and savings. It is the latter component that is the main source of investment. Formation of investment abilities and climate occurs under the influence of the following factors. 1. The rate of expected return on the proposed investment. An economic entity that makes a decision about investing its own funds in any production or area behaves in a rational way. In other words, he correlates all possible losses and results and considers all alternative possibilities exclusively from this point of view. Obeying the principle of maximizing utility and profit, he wants to receive a reward for this or that action. However, here, of course, it is important to take into account the degree of risk. The economy and its environment are unpredictable, and therefore it is impossible to unambiguously calculate the results of the planned activities. 2. The value of the real interest rate. Investments directly depend on this indicator, since it initially contains the inflation rate at a particular point in time. Investments in fixed assets are inversely related to the interest rate: when it decreases, the costs per unit of capital are systematically reduced, which activates investors. As for the construction of residential premises, the lower the interest rate, the greater the demand in the housing market. At the same time, prices begin to rise and supply expands through additional capital investment in construction. The same effect is caused by an increase in the interest rate when an investor is about to invest in stocks. By doing so, the economic entity actually waives the percentage that it could receive from the current consumption of stored goods. 3. The level of taxation. Long-term investments, as a rule, directly depend on the tax rate. The higher it is, the smaller part can be released for savings and, accordingly, investment. This suggests that when making investment decisions, one should always pay attention first of all to the tax climate in the country and its regions. 4. Changes in production technologies force a company that is aimed at effective development to finance innovation and the introduction of new equipment, technology, etc. 5. Economic expectations subjects are associated primarily with the analysis of potential opportunities and profits from the adoption of a particular decision. They are adaptive and rational. 6. Inflation rate is laid directly into the structure of the interest rate, which allows you to prevent the occurrence of a risky situation in advance and plan the investment process. Thus, investment is an important factor in ensuring economic growth. They provide a real opportunity for economic entities to expand the area of activity where they are directly involved, and on the other hand, contribute to their activation. Author: Tyurina A.D.
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