The goal of any entrepreneur is to generate income. To do this, he needs to supply the consumer with goods / services, adding a commercial margin to the cost price. Margin is the engine of the market system.
Determination of margin
There are several definitions of margin. Margin is an important concept in a market economy, therefore, depending on the market area, the meaning of the word “margin” itself can be understood in different ways. In the general market sense, margin is a synonym for the word "profit"; it can be measured both in rubles and as a percentage of the cost price.
In the financial sphere, in the securities market, the "margin" will be perceived as a collateral against which trades are held.
Monopoly margin
The largest margin is in the products of the monopolies. Due to the lack of competition, there is also no price cap. Those entrepreneurs who manage to at least temporarily obtain a monopoly on their product become the richest people, and their companies flourish.
Natural monopolies arise in areas of "basic necessities". Everyone needs food, public transport, and energy. Sometimes large producers of essential goods and services collude to knock small entrepreneurs out of business. The situation is simple: their cash holdings allow them to simultaneously reduce margins to zero (or trade at a loss altogether). Small producers have no cash reserves and are highly dependent on cash flows. Buyers, seeing a colossal decrease in prices from well-known players, leave newcomers "out of work". When small businesses fail, large producers come back and increase margins dramatically, beating off costs.
America, Europe and Russia have a system for regulating natural monopolies. It is much more difficult to regulate monopolies on software and equipment - leading enterprises protect themselves with a patent system. An entire unprofitable enterprise can be bought due to the presence of patents that allow to deploy a monopoly increase in margin.
Business income tax
The margin tax is the most common government method of financing the state. Entrepreneurs should make their contribution to the development of the country: education, construction of roads, hospitals, maintenance of budgetary institutions. Since the entire income of an entrepreneur directly depends on the margin, many states, including Russia, have introduced an income tax for entrepreneurs - value added tax (VAT).
Since many entrepreneurs do not pay their own salaries, a salary income tax would be pointless. Therefore, VAT is a reasonable way to tax margins.
Leveraged trading
There is the concept of "margin trading". It is used in the financial sector. The bank provides a loan against the guarantee of available money or liquid (easily convertible into money) financial instruments. Leverage is the ratio of the amount of the loan collateral ("money in the pocket" of the businessman) to the amount of the loan. Leverage, or leverage, can be represented as 1:10 (a loan of 10 thousand is given for the available thousand rubles), 1:20, 1: 100, etc. Using leverage against margin guarantees allows financiers and traders to earn on a small difference in the exchange rate of currencies and securities - the spread.
