Methods of economic theory

Goods and its features

What kind of things are called as goods? There are three answers for this question:

1. Thing should be the result of labour

2.  It should satisfy the needs

3. It should be exchanged on the market.

Goods are the results of production and they are produced to be sold on the market.

Goods have two features, such as exchange value and consumption value. The exchange value means the interchange of goods to the other goods (later for money).

The goods value is defined by the labour, which is used in the production process. There are two types labour, such as real labour and abstract labour. The real labour helps to create a product, abstract labour calculate how much money, forces (physical and mental works) are used in the production of the goods so it is foundation of defining goods value.

The goods value is defined by social necessary working time. The social necessary working time is the time when the most number of goods are produced by using widespread equipments and with average rate of intensity of labour.

There are the following factors are influenced on the value: productivity of labour, intensity of labour and labour complication.

 

Property and its forms

Property is not a thing, it is a relation between people concerning the thing. It means the relations between people in the production process of material and non material goods (services)

The property as economic term means production relations between people in possession of the production results and the production assets.

The property has two elements:

• Subject - a person, corporation, local and government organs. (Who is user?)

• Object(target) - a real estate(earth, water, forest resources, buildings and etc), moveable (money, securities and other needed properties).

Property as juridical term: All economic relations between people based on property. These relations are regulated from the government side through juridical tools. They are normative acts, laws, documents and etc.

The property from economic point of view is divided into following stages:

• the lowest stage is conducting a business alone

• the highest stage is cooperation.

According to these stages there are three types of the property such as:

Individual that takes all the results of the production or any other activities.There are two types of individual property: individual property based on owner’s labour (owner does all work, duties) and individual property based on others labour (owner engages other workers)

 

Shared using all production factors of owners together to achieve planed aims.

There are several types of shared property: partnership, joint-stock company, joint venture

 

Common In case of common type of the property all members of the society use the results of the activity. Common property is divided into government property, municipal, family.

Basic economic organizations

Economic Organization is the act of coordinating the other factors of production – land, labor and capital. Organization performs a very important function in modern production, which is carried on a large-scale. Organization is done by the entrepreneur. The entrepreneur may be described as the captain of industry. The economic development of many rich nations like the U.K. and the U.S.A was made possible only by the activities of the entrepreneurs. Sometimes the entrepreneur is also known as “organizer” or “undertaker”.

Types of Economic organization

Economic organization may be broadly classified into the following types:

1. Individual

2. Partnership

3. The Joint Stock Company

4. The Joint Venture Organization

5. Common

Individual takes all the results of the production or any other activities.

Partnership is a commercial unit. The aim of partnership is to get a profit. The establishment fund of the partnership is formulated from the capital(money) of each participant.

Joint-stock company It is a commercial company, where its establishment fund

is divided into shares. Only joint-stock company has right to issue shares.

Joint venture is an enterprise where national and foreign businessmen combine their capital to produce goods and services.

In case of common type of the property all members of the society use the results of the activity. Common property is divided into government property, municipal, family.

The government property is an object, which is used to provide social stability and national security in the society. They are military, health, education, agricultural spheres and others.

Municipal property is a property rights of local management. The objects of municipal properties are water supply system, canalization, gas supply system,

electricity supply system, transportation and others.

Methods of economic theory

The Economic science includes:

- A branch economic sciences (the economic industry, transport, agriculture, construction and others);

- functional (the finances, credit, accounting, аудит, statistics, marketing and others)

- interindustry (the economic geography, demography, management and others).

The methodological base of all economic sciences is economic theory as system of scientific explanations to economic people’s activity. It studies the causal relationship and regularity of the economic development processes, economic relations appearing between subjects in the process of their economic activity, enables to forecast the development of the country economics. 

The Economic theory - is a base of economic policy since the last is based on objective acting economic laws, takes into account the different interests a society, expects different variants of decisions appearing economic problems and choice of the optimum variant of their decision.

The Functions of economic theory are:

- cognitive - reveals itself in studying of the economic laws, the methods of economic activity, without which is impossible all other types of vital activity;

-  methodological - is the science of development of the methods, ways scientific instrument, required for investigations all economic sciences; - practical - is a direct ensuring of economic policy, production management on macro- and мmicroeconomic levels;

- world outlook function - is a forming scientific economic way of thinking.

Subject of economic theory - is a study of the economic laws and economic relations, acting in a process of public production and motivation of the choice managing subjects the ways of the optimum limited resources usage for the reason of satisfactions increasing individual’ and society’s needs. In an economic theory analysis is realized on two levels: micro- and macro economic. Microeconomics studies the mechanism of organization economy conduct by the separate economic subject (the enterprises, companies, businessmen), investigates intercepting the consumers and companies in a market system: interaction of the supply and demand, problems of the pricing, market’s conjuncture and factors, defining it and etc. The aim of the microeconomic analysis - is detailed study behavior of the individual economic units to reveal the separate specific components of the economic system. Macroeconomics studies the economic state of the country’s economy as a whole i.e. economic relationship between economics branches and spheres: processes of social reproduction, usage of the national income, taxes, profit, investment, salaries and the price, inflation and unemployment, and etc.

Positive economics. The aim of positive economics is to explain how society makes decisions about consumption, production, and exchange of goods.

Normative economics. It offers recommendations based on value judgements.

The following statement combines positive and normative economics: “The elderly have very high medical expenses, and the government should subsidize their health bills”.