Economics is the oldest science. Economic relationships are a natural aspect of the life of all people. Production and consumption of products characterize various cycles of economic activity, the object of realization of which is the market.
Instructions
Step 1
The market is a place where various goods are bought and sold. This is done to meet social needs. However, every single need will never be satisfied, because the resources that are involved in the production of good are limited. Therefore, a person strives to buy, simply because he always desires something.
Step 2
The economy is market, administrative-command and traditional. All these types differ in the degree of presence of a market element in the economy.
Step 3
The market economy is the result of centuries of evolution. It is characterized by the following features: minimal interference in the economy of the state apparatus, unlimited competition, a huge range of products, pricing is based on the behavior of supply and demand.
Step 4
Supply and demand are two interrelated quantities, although inverse to each other. Demand is directly proportional to the volume of products and inversely proportional to the price. On the contrary, the offer is directly related to the price and inversely to the volume of products.
Step 5
Graphically, the intersection of supply and demand lines conventionally looks like the letter "X". The core of this letter, that is, the point of intersection of the lines, means that the market is in equilibrium, demand compensates for supply, in other words, exactly as much production is bought as it is produced. This is what an ideal economic model looks like.
Step 6
The administrative-command economy is a type of economy in which all aspects of market activity are completely controlled by the public sector. The state sets prices for each type of product, limits the volume of production and sales, limits all the advantages of perfect competition, is a monopolist in the production of the most consumed goods. This type of economy can be called a dead-end branch of development, since the state completely excludes the possibility of the market moving to the next level.
Step 7
The traditional economy is understood as a natural type of management. That is, all goods are produced not for sale, but only for personal consumption. Market development in such an economy is minimal. Cash turnover is completely excluded due to lack of liquidity. If market relations are present here, then they are barter, otherwise the goods are exchanged for goods. This economy also cannot be called progressive. After all, it will not always be possible to find such a benefit that meets the desired utility for both parties.
Step 8
For market relations, a specific product is needed, which is considered the only equivalent that can be exchanged for any product or service. Today, such a commodity is money.
