What questions are called the main questions of economics? Main issues of economics. Lesson: Basic Economic Issues

1. Main economic issues

Each society, faced with the problem of limited available resources with an unlimited growth of needs, makes its own choice and answers the three main questions of economics in its own way.

What to produce? How to determine priorities in meeting needs, which goods and in what quantity should be produced?

How to produce? How to use available resources most effectively, what resources to attract, how to organize production?

For whom to produce? How to distribute produced goods, who will receive them and on the basis of what principles?

Depending on how society answers the main questions of the economy, certain types of economic systems emerge: traditional, market, centralized.

An economic system is a way of organizing the joint activities of people in society. The concept of an economic system includes such decision-making mechanisms as the legal system, forms of ownership, moral norms, habits, customs accepted in a given society.

2. Types of economic systems

In a traditional economic system, the three main questions of economics (what to produce? how to produce? for whom to produce?) are resolved in accordance with established traditions. Examples of observed traditions in the economy are: customary farming methods, norms of consumption of certain products, religious prohibitions on the production and consumption of specific goods, etc. Sales and purchase relations are poorly developed, agriculture predominates.

Most of the history of human development took place within the framework of the traditional economic system.

O Remember from the course of general history what forms of social

development corresponds to the traditional economic system.

The main incentive for economic activity under the traditional system is the desire to survive. The advantages of this system are predictability and stability. Serious disadvantages include a low standard of living, lack of progress and economic growth.

A centralized system, which is also called a planned, administrative, command system, is characterized by the fact that state ownership is the main form of ownership. Three main issues are decided by central government agencies. These decisions are reflected in state plans and take the form of directives (orders), which are binding on all enterprises. Centralized regulation is carried out not only in the sphere of production of goods, but also in the sphere of their distribution. Such an economic system was implemented in the Soviet Union and, partly, in the countries of the socialist community. The centralized solution of the main economic issues in the USSR made it possible to achieve success in the natural sciences, space exploration, ensure the country's defense capability, create powerful social protection systems, etc.

However, the command-administrative economic system of the USSR turned out to be unable to ensure the development of personal initiative. One of the principles of a command economy is the principle of equal distribution. If an enterprise managed to make a large profit, then almost all of it was confiscated and transferred to the state budget.

Workers received almost the same wages; incentives for highly qualified, creative work were insignificant and had not so much a material as a moral basis. All this gave rise to the enterprise’s disinterest in improving production technology, increasing productivity, and the lack of personal interest of people in the results of their work. Gradually, the USSR began to lag behind the leading powers of the world community in the most important socio-economic indicators. The suppression of economic independence of economic entities led to a deterioration in the quality of economic growth and its slowdown. There was a need for radical reform of the economic system.

Market system. In a market system, the role of government is limited. The main subjects of market relations are economically independent participants in economic activity: citizens and firms. Their interaction takes place on the market. A market is any form of contact between sellers and buyers on the basis of which purchase and sale transactions are made. There are many types of markets; they are classified according to the economic purpose of the objects, by geographical location, and by industry.

Markets are in constant interaction, forming a single complex system.

The basis of the market mechanism is individual freedom in making and implementing economic decisions. Freedom of choice in a market economy is enjoyed by entrepreneurs, resource owners and consumers.

Enterprises have the right to purchase factors of production at their own discretion, produce those goods and services that they consider necessary, and choose the method of their production; In this case, decisions are made at your own expense, at your own risk.

Resource owners can use resources at their own discretion. This also applies to the owners of labor resources; they can engage in any type of work that they are capable of.

Consumers can buy the goods and services they want within the limits of their income. In a market economy, the consumer occupies a special position; it is he who decides what the economy should produce; If the consumer does not want to buy goods and services, then the firms will go bankrupt.

The main form of ownership of factors of production is private. Private property assigns to a person the rights to own, use and dispose of economic goods or resources.

Remember from your social studies course what property is.

The main issues of the economy in a competitive environment are resolved on the basis of a system of free prices under the influence of market information.

The question “what to produce?” decided by firms taking into account consumer demand.

The question “how to produce?” is decided by firms taking into account the profitability motive, i.e. firms choose the most efficient method of production.

The question “for whom to produce?” is decided in accordance with the solvency of buyers.

The main incentive for enterprises to operate in a market system is profit. The advantages of a market economy are more efficient use of resources, system mobility, its ability to adapt to changes, and the introduction of new technologies. But the market system has a number of shortcomings, so-called market “failures,” which we will consider below.

In real life, all countries have a mixed economic system, which combines the characteristics of other systems: traditional, centralized and market. Depending on their predominance, a mixed economy of traditional, centralized or market type is distinguished.

3. Mixed economic system

In a market economy, problems arise that the market system cannot solve. Such cases of market failure are: inflation, unemployment, the emergence of monopolies, cyclical economic development, uneven distribution of income of citizens.

In a market system, the need to produce public goods also arises. Public goods are economic benefits, the use of which by some members of society does not exclude the possibility of their simultaneous use by other members of society. These include, for example, national defense, fire protection, emergency response (earthquakes, floods), state television and radio broadcasting, etc. Public goods differ from private goods, which have a private seller and a private buyer, in such properties as non-competitiveness, non-excludability and non-profitability. Non-competitiveness means that goods and services can be

used by many people at the same time; at the same time, the amount of goods available to others does not decrease (for example: lighthouse, fireworks). Non-excludability is the impossibility of excluding those who do not pay for them from using these services, the so-called “rabbit effect”, for example national defense or street lighting. Hence the non-profitability of public goods, the unattractiveness of their production for commercial firms (for example: firefighters, emergency rescue services.

Moreover, the market is unable to solve the problem of externalities. Externalities are positive or negative impacts on those who do not participate in the production or consumption of a given good.

Examples of a positive external effect: a free bus to the supermarket - for local residents, a good road to a rich mansion - for everyone who will use this section of the road.

Examples of a negative external effect: environmental pollution by an enterprise, smoking in public places, etc.

Both positive and negative external influences reduce the efficiency of resource use, since in both cases the price of the product is underestimated. At the same time, the quantity of goods sold is artificially low in the case of a positive external effect and unjustifiably inflated in the case of a negative external effect. In the topic of market equilibrium, we will return to this issue and analyze specific situations with externalities.

The presence of market failures necessitates government intervention and the formation of a mixed economic system. In mixed

system, private and public organizations jointly exercise economic control.

Currently, Russia has a mixed market economy.

Three main questions of economics:

What to produce?

How to produce?

For whom to produce?

Depending on how society answers the main questions, a certain type of economic system is formed: traditional, command or market.

The presence of market failures necessitates government intervention and the formation of a mixed system.

Basic Concepts

Economic system Main issues of economics Traditional system Centralized system Market system Market

Private property Mixed system Market failures.

Public goods

External effects

Questions and tasks

1. What is an economic system?

2. Name the three main issues of economics. Why does every society have to deal with these issues?

3. How are the main issues resolved in the traditional system?

4. Which form of ownership is the main one in a centralized system, and which is the main one in a market system?

5. What forces firms to produce quality goods in a market economy? Explain why.

6. Give examples of market failures.

7. What characterizes the modern economy in Russia as an economy of a mixed market type?

8. What are public goods and services? Why don't companies produce them?

9. “Either power or the ruble - there has not been and is no other choice in the economy since the ages, from Adam to the present day.” How do you understand this statement by N. Shmelev?

When solving the problem of choice in a world of limited resources, economic entities must always solve three main, fundamental questions of the economic organization of production:

1. in produce- what goods should be produced, in what quantity. In fact, this means allocating resources, determining the structure of the economy, and choosing priorities for economic development.

2. in How to produce- with the help of what resources and what technologies economic benefits will be produced.

3. For whom to produce- whoever becomes a consumer of the goods produced will be provided with sales and thereby reimbursement of the resources spent on production.

These basic issues of organizing production constantly face both each individual manufacturer (firm) and the economy as a whole. They are continuously reproduced at both the micro and macro levels.

The named fundamental issues of economics are common (universal) for all economic systems, but in each of them they are solved differently. Each system has its own specific mechanism for coordinating and managing the economic activities of business entities.

How does the process of coordination occur in different economic systems?

Types of economic systems

Economic systems are a set of interconnected economic elements that form a certain integrity, the economic structure of society; the unity of relations arising regarding the production, distribution, exchange and consumption of economic goods.

Economic systems differ in the way they address the main issues: what to produce? how to produce? for whom to produce?, and also according to the principle of who bears transaction costs. Historically, the following economic systems can be distinguished in their “pure” form: traditional, market, command. But in the modern world there is mixed economic system, which combines the features of traditional, market, team.

Traditional economics

Methods and techniques of production, exchange, and income distribution are based here on time-honored customs and traditions. Heredity and castes dictate the economic roles of individuals, and socioeconomic stagnation is clearly visible. Technical progress and the introduction of innovations are sharply limited, because they contradict traditions and threaten the stability of the social order. Economic activities are secondary to religious and cultural values.

Market economy(market economy) is characterized as a system based on private property, freedom of choice and competition, it is based on personal interests, and limits the role of government.

In the process of historical development of human society, prerequisites are created for strengthening economic freedom - the ability of an individual to realize his interests and abilities through active activity in the production, distribution, exchange and consumption of economic goods.

Objective and subjective prerequisites for this arise after the elimination of all forms of personal dependence. The development of a market economy played an important role in this. A market economy guarantees, first of all, consumer freedom, which is expressed in freedom of consumer choice in the market for goods and services. Voluntary, non-coercive exchange becomes a necessary condition for consumer sovereignty. Everyone independently distributes their resources in accordance with their interests and, if desired, can independently organize the process of production of goods and services on a scale that allows their abilities and available capital. This means that there is freedom of enterprise. The individual himself determines what, how and for whom to produce, where, how, to whom, how much and at what price to sell the produced products, how and on what to spend the income received. Therefore, economic freedom presupposes and is based on economic responsibility.

Personal interest is the main motive and the main driving force of the economy. For consumers this interest is maximizing utility, for producers it is maximizing profit. Freedom of choice becomes the basis of competition.

The basis of a market economy is private own. It is a guarantee of compliance with voluntarily signed contracts and non-interference by third parties. V Economic freedom- the foundation and integral part of the freedoms of civil society. It acts primarily as a necessary means of achieving political freedom; in turn, political freedom is a guarantor of economic freedom.

Classic market economics is based on the limited role of government intervention in the economy. The government is necessary only as a body that determines the rules of the market game and monitors the implementation of these rules.

As opposed to market command economy(command economy) is described as a system dominated by public (state) ownership of the means of production, collective economic decision-making, and centralized management of the economy through state planning.

A characteristic feature of a command economy is the monopoly of production, which ultimately slows down scientific and technological progress. State regulation of prices, monopolism of production, and inhibition of technical progress naturally give rise to an economy of scarcity. The paradox is that the deficit occurs in conditions of general employment and almost full production capacity. Hypercentralism naturally contributes to the swelling of the bureaucratic apparatus. The basis of its growth was the monopolization of the role of the state in the hierarchical division of labor. The administrative-command system is a unique, ideologized form of bureaucracy. It is characterized by the merging of legislative and executive, military and civil, administrative and judicial powers, and the merging of the party and state apparatus.

Mixed economy(mixed economy). A mixed economy means a type of society that synthesizes elements of the first two systems, that is, the market mechanism is complemented by the active activities of the state.

The government plays an active role in the economy, promoting its economic stability and growth, providing it with some goods and services that are insufficiently produced or not produced at all by the market system, distributing resources and income.

Transition economy as a system. The transition from one economic system to another gives rise to a special, transitional state of the economy. This state of the economy can exist in one or several countries and even on a global scale. The transition from one economic system to another has never been an instantaneous leap. This is a very long process, which in the past was measured in centuries, and more recently in decades. For example, the transition from a traditional system to a market economy of free competition took place in Western Europe at the end of the 18th - first half of the 19th century. In Ukraine, such a transitional state of the economy was typical for the period 1861 - 1913.

At the end of the 20th century, a massive transition of several dozen countries from an administrative-command to a market economy began. Therefore, at this stage, we consider the economy to be transitional, where relations based on administrative-command principles will be replaced by market mechanisms.

A transition economy has some specific features. The starting point is the crisis and subsequent transformation of economic relations of the previous system, as well as the emergence of new relations inherent in the system that is being born. Old and new relationships interact within the transition system.

In a transitional system, special transitional economic forms arise and function, which indicate the direction of movement towards a new system. These include privatized enterprises in modern Ukraine, which embody the transition from state ownership to private ownership.

A transition economy is also characterized by the intensive development of new forms in parallel with the decline and gradual disappearance of old economic relations. Thus, the rapid expansion of the private sector during the transition from an administrative-command to a market economy was accompanied by the transformation of state-owned enterprises into firms operating according to the rules of a market economy.

Transition processes in eastern and western countries occur differently. Firstly, the decisive role of the state in the economy remains, with the relatively weak positions of private owners and strong equalizing tendencies. Secondly, with the weakening of the regulatory functions of the state, private enterprise initiative prevails, while at the same time social stratification sharply increases. Ukraine is located at the junction of Western and Eastern types of civilization, which largely determines the nature of the market economy being formed in it.

At first, the prevailing view was that the transition from an administrative command economy to a market economy would take years. But now it becomes clear that this process will last for decades. Therefore, it is necessary to pay attention to the patterns and specifics of the transition economy.

The need for a transition from an administrative-command economy to a market economy is due to the growing incapacity of the non-commodity economy as extensive factors of economic growth are exhausted. The administrative-command system has two significant drawbacks. The first is its inflexibility, slow adaptation to change. The second drawback is extremely low productivity due to the total suppression of economic initiative.

How do costs and profits compare?

Remember: What is profitable to produce and for whom? Who can be called a rational producer? Where are the limits of economic freedom?

Should production be regulated? The limited economic resources on the planet give rise to the need for humans to solve the problem of their rational use and distribution. From the previous paragraph, you learned that everyone who makes economic decisions constantly has to make economic choices: households, firms, the state. Any society, regardless of the level of wealth, must be able to determine what goods, how and for whom to produce. These three questions of economic organization are decisive for. development of society. Let's take a closer look at them.

What to produce? Which of the possible goods and services must be produced at this time? An individual can provide himself with necessary goods in various ways: produce them himself, exchange them for other goods, receive them as a gift. Society as a whole cannot increase production all goods and services at the same time. He has to make a rather difficult choice: what he would like to receive immediately, what he can wait to get, or refuse something altogether. Firms and individual entrepreneurs constantly make decisions about what goods and services should be produced using the resources available at their disposal and offered to the consumer.

So, the essence of the problem is that resources are limited and the economy cannot provide unlimited production of goods and services. Therefore, decisions must be made about which goods and services should be produced and which should be abandoned. (Give examples of such decisions by economic participants.)

How to produce? The solution to this issue is related to the choice of economic resources, technology, location of the enterprise, organization of production, etc.

There are various options for producing goods. From the many options, it is important to choose the most effective one. Thus, there are always several ways to build roads, make cars, and develop new mineral deposits. One method requires large financial costs, another - technical, the third - significant use of labor resources, etc. Which option for combining the resources necessary for production is optimal? When resolving this issue, the economic efficiency of the project is taken into account first of all.

Economic efficiency means obtaining a given volume of output with the least expenditure of limited resources. More products produced from a given amount of input means more efficiency, and vice versa. From the 7th grade social studies course, you know the connections between the amount of production resources and the quantity and quality of the product produced. Let us recall that the manufacturer, solving the input-output problem, strives to find the best ways to combine resources and organize its production. Thus, the following methods help the manufacturer to effectively use resources and reduce costs: the introduction of technical innovations and new technologies, the economical and careful use of resources, improving worker skills, and the use of division of labor.

Thus, society as a whole and individual producers must decide: by whom, from what resources and with the help of what technology should goods be produced, how should production be organized?

For whom is the product produced? Who will be able to purchase goods and services and how are they distributed among members of society?

Since no society is able to provide everyone with, for example, their own cottage or car, they have to put up with the fact that someone lives in an apartment building or uses public transport. Society is forced to orient producers towards a specific consumer of economic goods. Manufacturer takes into account the needs for goods and services of various population groups with different incomes and decides for whom to produce: for the rich (luxury goods), for the mass consumer or for the poor (cheap goods).

A watch manufacturer can produce wristwatches in a simple metal case or in gold, ordinary mechanical alarm clocks or complex electronic ones. His choice will depend, in particular, on deciding who will use the products produced. Thus, through choice, the problem of distribution of economic benefits is solved.

All of these basic economic issues are based on choice and are decided by economic participants in close interrelation.

Economic system and its functions. We have already touched on the question of how people make choices when resources are limited. In order for the economy of any country to work normally, it is necessary to find a way to coordinate these choices of millions of people.

The variety of ways to coordinate economic life and make decisions on major economic issues depends on the dominant form of ownership in society (who has access to economic resources), methods of making economic decisions on the organization of production and distribution of goods (spontaneously with the help of orders, commands), as well as methods people's notes on economic activities (incentives and motives for participating in activities).

In the most general form, we should name three ways for society to solve the main economic issues: according to long-established customs (tradition); by issuing instructions and orders “from top to bottom” (by command methods); using the market. Let's look at them in more detail below.

The development of society has shown the possibility of the existence of several options for organizing economic life. They are called economic systems.

An economic system is a set of organizational methods for coordinating the economic activities of people to solve the questions: what, how and for whom to produce?

Economists distinguish the following main types of economic systems: traditional, centralized (command), market. Each of them is looking for its own approaches to solving major economic issues and ways to distribute limited resources. However, such a distinction between economic systems is quite superficial. In real life, it is difficult to find a state with a purely defined type of economic system. Economic systems operating in the world use various combinations of the above methods of organizing economic life.

Types of economic systems. The economic activities of people carried out in a particular economic system have their own characteristics. Let's consider them using the example of the main types of economy.

Traditional economics- an economic system in which customs and traditions determine the practice of using limited resources. It is based on the widespread use of manual labor, backward technology, communal farming, natural exchange. Basic economic issues are resolved in accordance with customs and traditions (do everything as before).

Inhabitants of the African jungle or the islands of the southern moraines, Canadian Eskimos conduct economic affairs based on age-old traditions passed on from generation to generation. Economic resources in a traditional economy are most often collectively owned by a tribe or community. Decisions about the use of community resources are made collectively.

The range of economic goods produced is not diverse. The same is typical for certain types of activity (mainly work in agriculture, crafts). Technologies and production methods in the traditional economy have not changed for centuries, which hinders the development of the economy and the growth of production efficiency. Such an economic system, despite its stable, predictable nature, is capable of satisfying only the minimal, vital needs of people.

Currently, the traditional economic system has been preserved in its pure form among some tribes of Central Africa, South and Southeast Asia. Some elements of such an economy can be found in a number of underdeveloped and developing countries. For example, some states in India maintain semi-subsistence farming.

(Think about whether in modern Russian society there are any aspects of economic life regulated by traditions and customs.)

Market economy- a way of organizing economic life based on a variety of forms of ownership, entrepreneurship and competition, and free pricing. In this economic system, deciding what to produce, how and for whom is the result of the interaction of sellers and buyers in the market. In an economic sense, a market is a set of economic relations manifested in the sphere of exchange, as well as the conditions thanks to which sellers and buyers find each other and can make transactions.

In a market economy, the main resources of production and its results are in the hands of private individuals. People operating in this economy are free from the power of customs and orders “from above.” Everyone independently makes economic decisions in accordance with their own interests and needs. The consumer makes a purchase decision based on the desire to receive greater benefits from consuming the product. A manufacturer, deciding to produce a particular product, expects to make a profit. Therefore, the question “what to produce?” in a market economy there is one answer: only those goods that can bring profit will be produced, and those goods whose production entails losses will not be produced. At the same time, the manufacturer strives to choose a production technology that will provide him with the greatest profit. In a market economy, production is carried out only by those firms that are willing and able to apply new production technology. The use of new technologies ensures increased economic efficiency as a result of reduced production costs. Thus, the market economic system favors technological progress.

If each participant in the economy acts in his own interests, then how is the problem of fair distribution of goods solved? The purchase by consumers of a manufactured product depends on the amount of their monetary income and prices for goods and services. The higher the consumer's income, the more of the product he will be able to purchase. The lower the price of a product, the more quantity it is consumed, and vice versa. It is the prices, freely formed in the process of purchase and sale, that provide the answer to the questions: what, how and for whom to produce? You will learn in detail about how the market operates and how prices contribute to the efficient distribution and use of economic resources in subsequent lessons.

Opinions. Economists have serious debates about the effectiveness of a market economy: on the one hand, it promotes the rational distribution of resources and personal freedom, but on the other, it is not efficient enough. The so-called “market failures” include unemployment and excessive inequality in income. economic instability, etc.

Command economy an economic system in which the main economic decisions are made by the state, which acts as the organizer of the economic activities of society. It is characterized by state ownership of the means of production, centralized planning of production, distribution and consumption of material goods.

All economic and natural resources are owned by the state. Therefore, what, how and for whom to produce, the state plans from a single center on the basis of orders (directives), laws, and planned targets. The state controls and regulates the production and distribution of basic goods. Such an economic system existed in the USSR and other socialist countries. The unified economic center tried to take into account all needs - from public to individual, to provide for all emerging problems associated with their satisfaction (Think, is it possible to draw up an ideal plan for the development of the economy of the entire country. What could interfere with this?)

The result of such planning was often a shortage of some goods (your parents still remember the numerous queues) or an excess of others, delays due to complex administrative procedures in the introduction of new technologies into production and new equipment into the everyday life of the population.

Producers, removed from independent economic decisions, turned into executors of other people's orders. They were not interested in the results of their activities, since a significant part of the income was transferred to the state. This caused a decrease in labor productivity and, in general, the efficiency of social production. As a consequence, there is a low level of satisfaction of people's needs for goods and services. This is one of the reasons for the collapse of the command economy in our country and the narrowing of the number of countries in the world that maintain this type of economy. Currently, command economies operate in Cuba, North Korea, and some countries in Southeast and Central Asia.

The modern economy of most countries is mixed. It is based on the market, but at the same time various forms of government regulation are used, private property and state property interact. A mixed economy is a modern economy in which both the market and the state play an active role.

Document. Russian scientist-economist, doctor of economic science E. N. Lobacheva characterizes the type of economy under consideration as follows:

“In modern conditions, the most common economic system should obviously be recognized as a mixed economy. It is characterized by: a developed market, economic freedom, and therefore diverse entrepreneurial activities of wide sections of the working population and an active regulatory role of the state... This makes it possible to realize the possibilities of a market economy to increase production efficiency, and through state regulation to orient the country towards the rational and more complete use of limited resources , application of safe technologies and preservation of the environment. A fairly long period of functioning of reasonable models of a mixed economy shows that a state-regulated market economy is capable of ensuring the economic, scientific and technical development of the country and providing fairly high social guarantees to its citizens.”

The balance between the economic roles of the state and the market in managing the economy varies significantly in modern developed countries. Thus, in the USA, about 4/5 of the total volume of products produced in the country is provided by the market system. Japan's economy is characterized by government planning and coordination of economic activities between the government and the private sector.

So, the economic system contributes to solving the problem of efficient use of limited resources. The main task of the economic system is to bring into line the unlimited needs and limited capabilities of members of society by solving the questions: what, how and for whom to produce?

check yourself

1. How to resolve the contradiction between limited resources and growing needs of people?

2. What is economic efficiency?

3. What are the differences in the ways economic choices are coordinated in different economic systems?

4. What are the features of the functioning of the main economic systems?

In the classroom and at home

1. Read the text below with missing words.

In a market economy, production resources and its result - the product - belong not to the community, as in -, and not to the state, as in -, but to private

persons. Therefore, the problem of incentives for production in a market economy does not arise. Each manufacturer chooses the most profitable product for itself and produces it in order to get the result -. He also chooses, if possible, the most efficient one - production, in which the ratio of results to costs is the greatest. The market economy is based on entrepreneurship and private -. Historical experience has shown the advantage of a market economy over others -.

Select from the list below what needs to be inserted and write it down in your notebook (Words are given in the nominative case; there are more words in the list than you need to select): 1) command economy; 2) traditional economy; structure; 4) profit; 5) trade; 6) technology; 7) revenue; 8) economic system.

2. Using knowledge of the history of Russia, determine the signs of which economic systems characterize the economy of the era of Peter I. Give the necessary examples.

3. Fill out the table in your notebook.

Enter the listed characteristics of a particular economic system in the appropriate column of the table: dominance of natural economy; economic independence of producers; control over the distribution of benefits by the state; predominance of state ownership; “simple labor” as the basis of the economy; equal rights for all forms of ownership: adoption of state plans, mandatory or productive; production of products primarily for own consumption; government support for a stable price level; closed economy; centralized redistribution of economic resources; customary use of productive resources.

Detailed solution Paragraph § 18 on social studies for 8th grade students, authors Bogolyubov L. N., Gorodetskaya N. I., Ivanova L. F. 2016

Question 1. What role does exchange play in economic life? What is the difference between subsistence and commercial farming? What role does production play in the life of society? How do costs and profits compare?

Exchange in economics is the movement of goods from one owner to another.

One form of voluntary exchange is trade. In order for each party to consider the exchange fair and equal, such an exchange requires the comparison of things that are different in type, quality, form and purpose. This requires a single basis, a measure of equivalence, which is the value of goods.

Exchange can take place either directly for other goods or services, according to the “goods-to-goods” scheme (barter), or with the participation of money according to the “goods-money-to-goods” scheme (purchase and sale).

Subsistence farming is a primitive type of farming in which production is aimed only at satisfying one’s own needs (not for sale). Everything necessary is produced within the business unit, and there is no need for the market.

The main features of a natural economy are the underdevelopment of the social division of labor and isolation from the outside world; self-sufficiency in means of production and labor, the ability to satisfy all or almost all needs using one’s own resources.

A commodity economy is a form of economic organization when goods are produced by individual isolated producers, and exchange (trade) is required to satisfy needs.

Main features of commercial farming:

Products are manufactured for the purpose of sale

Social division of labor and specialization in the production of goods

Commodity-money relations are universal in nature

The connection between production and consumption is mediated by the market.

Production is a means to an end of the economy. And the purpose of the economy is to satisfy human needs. In the production process, both material and economic goods (food, clothing, furniture, books, etc.) and services (showing films, repairing shoes, computers, etc.) are created.

Costs are the amount of resources used in the process of economic activity for a certain time period.

Profit is the positive difference between total income (which includes revenue from the sale of goods and services, fines and compensation received, interest income, etc.) and the costs of production or acquisition, storage, transportation, and sales of these goods and services. Profit = Income − Costs (in monetary terms).

Question 2. What is profitable to produce and for whom? Who can be called a rational producer? Where are the limits of economic freedom?

A rational producer is a firm that compares the costs and benefits of different behavior options and chooses the one that brings the maximum net benefit.

The boundaries of economic freedom are determined by laws. There is a list of prohibited items, such as drugs. There is an obligation to pay taxes, an obligation to obtain a license in order to trade certain goods, such as weapons.

In modern conditions, the most widespread economic system should obviously be recognized as a mixed economy. It is characterized by: a developed market, economic freedom, and therefore diverse entrepreneurial activities of broad sections of the working population and an active regulatory role of the state. This makes it possible to realize the possibilities of a market economy to increase production efficiency, and through government regulation to orient the country toward the rational and more complete use of limited resources, the use of safe technologies and the preservation of the environment. A fairly long period of operation of various mixed economy models shows that a state-regulated market economy is capable of ensuring the economic, scientific and technical development of the country and providing fairly high social guarantees to its citizens.

Question 4. How to resolve the contradiction between limited resources and growing needs of people?

An individual can provide himself with necessary goods in various ways: produce them himself, exchange them for other goods, receive them as a gift. Society as a whole cannot increase the production of all goods and services at the same time. He has to make a rather difficult choice: what he would like to receive immediately, what he can wait to get, what he needs to refuse altogether. Firms and individual entrepreneurs constantly make decisions about what goods and services should be produced using the resources at their disposal and offered to consumers.

So, the essence of the problem is that resources are limited and the economy cannot provide unlimited production of goods and services. Therefore, decisions must be made about which goods and services should be produced and which should be abandoned.

Question 5. What is economic efficiency?

Economic efficiency means correlating the results obtained with the costs incurred. More products produced from a given amount of resources expended means greater efficiency and vice versa. The manufacturer, solving the input-output problem, strives to find the best ways to combine resources and organize its production.

Thus, society as a whole and individual producers must decide: by whom, from what resources and with the help of what technology goods should be produced, and how production should be organized.

Question 6. What are the differences in the ways of coordinating economic choices in different economic systems?

The variety of ways to coordinate economic life and make decisions on major economic issues depends on the dominant form of ownership in society (who has access to economic resources), methods of making economic decisions on the organization of production and distribution of goods (spontaneously or with the help of orders, commands), as well as methods of attracting people to economic activities (incentives and motives for participation in activities).

In the most general terms, we can name three ways for society to solve the main economic issues: according to long-established customs (tradition); by issuing orders and commands “from top to bottom” (by command methods); using the market.

The development of society has shown the possibility of the existence of several options for organizing economic life. They are called economic systems. An economic system is a set of organizational methods for coordinating the economic activities of people to solve the questions: what, how and for whom to produce?

Question 7. What are the features of the functioning of the main economic systems?

Traditional economy is an economic system in which customs and traditions determine the practice of using limited resources. It is based on the widespread use of manual labor, backward technology, communal farming, and natural exchange. Basic economic issues are resolved in accordance with customs and traditions (doing everything as before).

Economic resources in a traditional economy are most often collectively owned by a tribe or community. Decisions about the use of community resources are made collectively. The range of economic goods produced is not diverse. The same is typical for certain types of activity (mainly work in agriculture, crafts). Technologies and production methods in the traditional economy have not changed for centuries, which hinders the development of the economy and the growth of production efficiency. Such an economic system, despite its stable, predictable nature, is capable of satisfying only the minimal, vital needs of people.

Market economy is a way of organizing economic life, based on a variety of forms of ownership, entrepreneurship and competition, and free pricing. In market conditions, enterprises compete for the best conditions and results of their activities. This is where competition comes into play, which you will learn more about in the following paragraphs.

In a market economic system, resolving issues of what, how and for whom to produce is the result of the interaction of sellers and buyers in the market. In the economic sense, the market is a set of economic relations manifested in the spheres of production, distribution, exchange and consumption. In a market economy, the main factors of production and its results are in the hands of predominantly private individuals. In our and other countries, owners can also be the state, municipalities, and public organizations. People operating in this economy are free from the power of customs and orders “from above.” Everyone independently makes economic decisions in accordance with their own interests and needs. The consumer makes a purchase decision based on the desire to receive greater benefits from consuming the product. A manufacturer, deciding to produce a particular product, expects to make a profit. Therefore, the question “what to produce?” in a market economy there is one answer: only those goods that can bring profit will be produced, and those goods whose production entails losses will not be produced. At the same time, the manufacturer strives to choose a production technology that will provide him with the greatest profit.

In a market economy, production is carried out only by those firms that are willing and able to apply new production technology. The use of new technologies ensures increased economic efficiency as a result of reduced production costs. Thus, the market economic system favors technological progress.

A command economy is an economic system in which the main economic decisions are made by the state, which acts as the organizer of the economic activities of society. It is characterized by state ownership of the means of production, centralized planning of production, distribution and consumption of material goods.

All economic and natural resources are owned by the state. Therefore, what, how and for whom to produce, the state plans from a single center on the basis of orders (directives), laws, and planned targets. The state controls and regulates the production and distribution of basic goods. Such an economic system existed in the USSR and other socialist countries. The unified economic center tried to take into account all needs - from public to individual, and to provide for all emerging problems associated with their satisfaction.

The results of such planning were often a shortage of some goods (your parents still remember the numerous queues) or an excess of others, delays due to complex administrative procedures in the introduction of new technologies into production and new equipment into the everyday life of the population.

The modern economy of most countries is mixed. It is based on the market, but at the same time various forms of government regulation are used, private property and state property interact. A mixed economy is a modern economy in which both the market and the state play an active role.

Question 8. Read the text below in which the words are missing.

In a market economy, the resources of production and its result 5) trade - the product - belong not to the community, as in 2) a traditional economy, and not to the state, as in 1) a command economy - but to private individuals.

Each manufacturer chooses the most profitable product for itself and produces it in order to ultimately receive 4) profit.

He also selects, if possible, the most efficient 6) production technology, in which the ratio of results to costs is the greatest.

A market economy is based on entrepreneurship and private 3) structure.

Historical experience has shown the advantage of a market economy over other 8) economic systems.

Question 9. Using knowledge of the history of Russia, determine the signs of which economic systems characterize the economy of the era of Peter I. Give the necessary examples.

Peter's reforms were aimed at the transition from an agrarian society to an industrial one. He launched the construction of manufactories and adding villages to them to mobilize labor, developed factories, attracting foreign specialists. The creation of the Berg Board alone, which by the way was headed by the former Englishman Bruce, engaged in the development of the mining industry, says a lot. Peter I developed the trade in canal construction.

Question 10. Fill out the table in your notebook.

Market economy: economic independence of producers, equal rights for all forms of ownership

Command economy: control over the distribution of goods by the state, the predominance of state ownership, the adoption of state plans mandatory for producers, state support for a stable price level, centralized redistribution of economic resources

Traditional economy: dominance of natural economy, “simple labor” as the basis of the economy, production of products primarily for own consumption, closed economy, use of production resources based on customs.

Hello, friends!

Surely you have ever had a feeling of complete misunderstanding and difficulty after reading some article on economics or even a book? I’m sure it was, and more than once.

Economy, we hear this word all the time. The economy is all around us. On television, radio, newspapers and the Internet. We hear words such as stocks, bills, price indices, inflation, unemployment, budget, etc.

The question is, what do we understand from this? What is important about this? What will inflation, for example, and changes in stock prices lead to? I am sure that many people get confused with some indicators in thousands of economic reports. Not to mention thousands of books and articles on economics.

How can we be here? How to navigate all this? And how do we generally understand this science of economics? What is it about?

Friends, remember when a person tries to tell you something important and doesn’t know where to start. Remember!? What do we usually say at this moment? Yes that's right! We tell a person to start with the main thing. That is, from the point! No matter how much a person beats around the bush during a conversation, until he says the main thing, in fact, we still don’t understand anything.

Conclusion. Everything in this world has an essence. Economics is no exception. Knowing the essence and understanding it, we can understand any occurring phenomenon.

Let's get started!

Economics is a huge science with its thousands of definitions. But from these thousands of definitions, we will choose only... three main definitions. More precisely, not even definitions in their pure form, but THREE MAIN QUESTIONS. Yes, yes friends, just three questions! And we will begin to understand many of the processes occurring in the economy. We will stand with our feet on these three issues and everything else will remain at the top: stocks, commodities, inflation, trade, firms, corporations. Those. You and I will stand on those very “three pillars”, but unlike the earlier description of the structure of the Earth and planets, our “pillars” are absolutely real and it is on them that everything rests and is repelled from them.

I sense your confusion. How can you understand the essence of economics with questions? You're right, you can't ask questions. After all, a question is just a question and it does not give any idea. But! Dear friends, where there is a question, there must be an answer. And we have the answers. The correct question contains 50% of the answer. Our three questions could not be more correct.

So, drum roll... And they go on stage three main questions of economics:

1. What to produce?
2. How to produce?
3. For whom to produce?

Whatever one may say in economics, everything revolves around consumption and production.

There is a directly proportional relationship here. Consumption is growing, production is growing, production is growing, the welfare of people is growing, the welfare of people is growing, the welfare of the country is growing. And vice versa. All! That's prosperity. That's the whole mechanism. No need for economics! No textbooks, no theories are needed. It is enough to understand this mechanism to understand what is happening in the economy at a basic level.

Now let's get back to our questions. If you can answer these questions, you can safely go teach economics. I am not kidding!

The whole economic essence is based on these three questions. The entire economy, all economic activity is aimed at solving these issues. I'll say more. All human activity in the economy is determined by these questions.

All entrepreneurs, all firms, all corporations, all states, all factories, everything, everyone and everything are trying to give answers to these questions, but they answer not with words, but in the form of products or services that they produce.

You get it, friends! The reason for all economic processes, all economic phenomena are these three questions. These questions are the REASON! Everything else is a consequence.

The very least remains. Consider these three questions. So that our understanding of the economic essence is complete and clear.

First question.
What to produce. Since all people, firms, corporations, states consume a huge amount of different goods and services, there is a desire among other firms, corporations, states and people to satisfy this demand. But! Demand is such a thing. You need to guess it, or rather know it better. Yes, we all want to consume more goods and services. And our appetites are growing. But this does not mean at all that we are ready to consume everything that is offered! No! We want to consume what we need - one, what we like - two, and what interests us - three. And everyone’s needs, preferences and interests are different, wouldn’t you agree!?

So what should we do? But how to deal with this is the problem of those who are trying to satisfy our needs, interests, preferences. These are the same people who are engaged in business: the production of goods and services. Here we are talking about manufacturers. It’s their job to think how to please us. If they are satisfied, it means that the demand for their products will grow and remain large, which means that they will earn good money and have the opportunity to develop and grow. If not satisfied, then bankruptcy or search for new goods and services for production.

Well, how can you not agree that the client is always right!? Right! Everything is about him, for him and about him! The client is the head of everything, you know.

Corporations such as Apple, Microsoft, Yandex, Sony, Dell, Samsung are the result of the fact that they accurately guessed the preferences of consumers and were able to satisfy their interests, needs, and preferences. The result is how you see the growth of company profits, capital growth and brand development.

Some companies look at this and think that it is not difficult to satisfy consumer demand. That you need capital and an idea and things will work. Unfortunately no! It is not enough to have an idea and capital. You need to somehow mystically feel and know that your product or service is needed by people and is interesting. To do this, you need to analyze people's preferences, interests and needs. Correctly drawn conclusions will lead to the growth of the company, which means an increase in profits and well-being for you.

This is what all producers of goods and services think what to produce. At the same time, looking into our eyes in search of what we want. How they know what we want will be discussed in the next article of the economic column. Do not miss.

Second question.
How to produce. This question follows strictly from the first. Once firms have determined what to produce the question arises, how to produce. This is a very delicate question. How to produce means what technologies to choose for production, what resources to use, where to produce (i.e. in which country, in which region), i.e. The task is how to most effectively use available resources to produce a product or service.

Why is that? Yes, because in addition to the fact that the needs and interests of consumers are a signal for the production of goods and services, price is also a factor that influences the production of goods and services.

The higher the price, more entrepreneurs want to produce a given product or service, and therefore it is necessary to redistribute available resources. And even refuse to produce existing goods and services. In favor of expensive, and therefore more profitable.

Let's take a resource like labor or labor, as it is sometimes called.

For example, China or India are known to have an abundance of labor, hence the cheap labor, but at the same time in China and India there is a lack of capital, hence the high cost of capital (loans at higher rates). In the USA, everything is just the opposite: labor is expensive (high salaries), but capital is relatively cheap (interest rates on loans are lower, since the banking system is developed).

Entrepreneurs always strive to reduce their costs in order to obtain greater profits at lower costs, which at the same time gives them the opportunity to set a lower competitive price for their goods. After all, the cost of goods has become less.

This is why many companies today (Apple, Samsung, Dell, etc.) manufacture their products in China and India. Cheap labor is what attracts companies.

Conclusion. How to produce largely depends on the price of the product or service produced. If the price is higher, then high-quality and expensive resources are used, believing that everything will pay off due to the higher price of the product on the market.

And important. The choice of how to produce means how much money will be spent on the production of a particular product or service. And the quality of the products will depend on the choice of resources and technologies. And who will be the consumer of the product will depend on the quality. And it all comes down to price, as mentioned above. The high price allows the use of high-quality and expensive resources. What affects the product itself? Any way you look at the chain. Everything is tied up. This is the economy, friends!

Third question .
For whom to produce. This question would be better if it came first. Those. first. But our article is not about business and business modeling, but about economics. Therefore, we pose this question as the third one based on economic feasibility. We must understand that this issue comes first in the activities of businessmen.

The answer to this question can be formulated in different ways. But our task is to get to the bottom of it. Therefore, the answer will be simple and clear.

For whom to produce? How do you think? If you have read my previous posts in the economic column, especially the articles “Demand” and “Supply,” then you easily answered this question.

You're right! It is necessary to produce for those who have MONEY. That's all. That's the simple answer. Here you must understand that this simplicity is the big essence. If consumers have no money or very little of it, then no one will produce anything. Those. it is necessary to produce for those who have money, and those who, having purchased a product or service (i.e., benefit), will receive satisfaction.

Another question is how much money the manufacturer is counting on. There are products for people with high incomes, for average incomes, and the well-known “budget” option.

For example, the smartphone market. It is already clear that Apple smartphones are expensive. But Sony smartphones vary in several price segments: budget class, middle class and prestige class. The price depends on the class.

That's all, friends! We have revealed three main economic issues. They are the essence of economics. They are the entire economy. Whatever happens in the economy, everything happens from and to resolve these issues.

It can be said without exaggeration that the search for answers to these questions is economics.

One thing remains unclear. More precisely, the question is: what mechanism is used to bring all these three issues into harmonious existence? How do companies know what to produce if they don't survey people? How do they know what price to offer if they don’t have direct contact with us and we don’t fill out any forms?

We will discuss this issue in the next article of the economic column on the site. It `s Magic…. Just kidding, friends, it's not magic - it's the market. But, as we agreed, we will talk about this next time!

Jalalov Remzi, especially for the Golden MSN Club ® Millionaires Club