The law of value

market system has an internal integrity, which allows it to remain in contact with the external environment and develop.This development is done by its own laws, which are the rules of social action people.They are stable, constant, reflect the essence of the production relations and are manifested in daily activities not only in the economic sphere, but also the legal, political and ideological spheres.

mechanism of functioning of the market is governed by two important laws of economics.It's the law of supply and demand, and the law of value.The latter is a basic law of commodity production (A. Smith, D. Ricardo, Marx).

One of the most significant and objective laws regulating relations between producers of goods and the distribution of social labor under commodity production is the law of value.Its essence is to express the cost of goods in the socially necessary labor.It is manifested as the law of prices and its effect resembles the movement of a pendulum: the rise in prices intensify entrepreneurial activity, reduction leads to a reduction of production and cost reduction.In extreme cases, producers have to leave this area of ‚Äč‚Äčinvestment capital.In this case, the inflow of goods on the market is reduced, and thus the price goes up again.Thus, the law of value operates in the system of economic laws by the behavior of people, providing the balance of the economic sphere.

The economy is never absolute balance, however, and long-term imbalances in it impossible.In this respect, the law shall regulate the allocation of resources between the spheres of production and causes the differentiation of producers.

functions of the law of value are as follows.The first - the account of social labor by the socially necessary expenditure of labor.The second - ensuring the distribution of work between all spheres of production.Fluctuations in market prices around the cost of factors of production provides overflow from one into the other sectors of the economy, adjusting the volume of the release of goods.Third - differentiation producers.They all have different labor costs.The disadvantage are those who are below cost, it would otherwise have to incur losses, possible bankruptcy and ruin.The law of value encourages producers who are able to achieve lower individual costs as compared to the public.Fourth - stimulating the production costs.If the individual labor costs above the socially necessary, then, not to go bankrupt, a businessman must reduce them.This will ensure the acceleration of the sale of goods, the increase in revenues and profits, which is a stimulus for the development of production.Fifth - the distribution of the social product between the individual companies and entire regions.

law of value and its function in the economy is important, but its effect is not absolute, because its role is limited.He explains the motivations of economic actors (producers, seller).But it is difficult to explain the behavior of other subjects - consumer buyer.commodity producer aims to sell a product at a price that would fully reimburse all his costs and bring the maximum profit.That is the logic of his aspirations entirely due to the law of value.But the consumer is not interested in the cost of the manufacturer, it seeks to find a price that it satisfies a suitable for it as a commodity.The behavior of this market subject to the laws of value did not comply.It begins to act the second most important law of economics - the law of the law of supply and demand.