Экономика России

But the response of consumers is only one side, the demand side, of the equation that determines the price of oranges. What happens on the other side, the supply side? A price increase for oranges sends out a signal to all fruit growers — people are paying more for fruit — which tells the growers it will pay to use more resources to grow fruit now than they did in the past. It will also pay the fruit growers to look for new locations for orchards where fruit isn't as likely to be damaged by bad weather. They may also pay biologists to look for new varieties of fruit that are more resistant to cold weather, insects and various plant diseases. Over time, all of these actions will increase the production of fruit, and bring prices back down. But this whole process depends first and foremost on the basic decision by consumers to spend some part of their income on oranges and other fruits.

    If consumers stop buying, or if they decide to spend less on a product — for whatever reason — prices will drop. If they buy more, increasing demand, the price will rise.

Keep in mind that this interaction of supply, demand and price takes place at every level of the economy, not just with consumer goods sold to the public. Consumption refers to intermediate goods as well — to the inputs that companies must purchase to provide their goods and services. The cost of these intermediate, or investment goods, will ripple throughout a market economy, changing the supply-and-demand equations at every level.

            Prices and Consumer Incomes

The other economic factor that consumers must consider carefully in making their purchases of goods and services is their own level of income. Most people earn their income from the work they perform, whether as physicians, carpenters, teachers, plumbers, assembly line workers, or clerks in retail stores. Some people also receive income by renting or selling land and other natural resources they own, as profit from a business or entrepreneurial venture, or from interest paid on their savings accounts or other investments.

We later describe how the prices for those kinds of payments are determined; but the important points here are that: 1) in a market economy, the basic resources used to make the goods and services that satisfy consumer demands are owned by private consumers and households; and 2) the payments, or incomes, that households receive for these productive resources rise and fall — and that fluctuation has a direct influence on the amount consumers are willing to spend for the goods and services they want, and, in turn, on the output levels of the firms which sell those products.

Consider, for example, a worker who has just retired, and as a result earns only about 60 percent of what she did while she was working. She will cut back on her purchases of many goods and services — especially those that were related to her job, such as transportation to and from work, and work clothes — but may increase spending on a few other kinds of products, such as books and recreational goods that require more leisure time to use, perhaps including travel to see new places and old friends.

If, as in many countries today, there are rapidly growing numbers of people reaching retirement age, those changing spending patterns will affect the overall market prices and output levels for these products, and for many others which retirees tend to use more than most people, such as health care services. In response, some businesses will decide to make more products and services geared toward the particular interests and concerns of retirees — as long as it is profitable for firms to produce them.

To summarize: whether consumers are young or old; male or female; rich, poor, or middle class; every dollar, peso, pound, franc, rupee, mark or yen they spend is a signal — a kind of economic vote telling producers what goods and services they want to see produced.

Consumer spending represents the basic source of demand for products sold in the marketplace, which is half of what determines the market prices for goods and services. The other half is based on decisions businesses make about what to produce and how to produce it.

Business in a market economy

As we have seen, a firm's success in a market economy depends on satisfying customers by producing the products they want, and selling those goods and services at prices that meet the competition they face from other businesses. Doing that requires firms to develop careful answers to one of the most important questions every economic system faces: how can a society produce goods and services most efficiently? In a market economy, that means getting the greatest value of output from the inputs producers use.

Production of bicycles

Let's take the case of a firm that is considering the manufacture and sale of bicycles. Before launching such a venture, any entrepreneur or company has to consider a host of factors. First, what is the potential size and nature of consumer demand for a new brand of bicycle? Is there a single, large market for standard model bicycles? Or is the bicycle market divided in many smaller markets, or niches, for specialized bicycles for children, customized racing bikes or bicycles built for two? A new trend, such as the sudden popularity of so-called mountain bikes that can handle wilderness trails, might also attract new manufacturers who see an opportunity to make a profit. On the other hand, prospective suppliers may simply feel that they have developed innovative manufacturing techniques for a standard bicycle, or possess significantly lower labor costs, so that the company can undersell their rivals in the marketplace and still make a profit.

Not only are there many kinds of bikes to make, but there are many ways to make these bicycles — from using a highly automated assembly line to stamp out thousands of identical parts and put the bikes together, to using more labor and much less machinery to design and make customized bikes. Once again, the firm making these decisions in a market economy has to consider several different prices that may rise or fall in response to the behavior of people who buy and sell those products.

For example, the prices the firm has to pay for its inputs will obviously play a major role in determining how much steel, aluminum, labor, machinery and other materials the firm will use in making its bicycles. If the price of steel rises and the price of aluminum falls, many bicycle firms will look for ways to use more aluminum and less steel. Similarly, if wages for workers rise sharply, firms will have a strong incentive to look for ways to use more machinery, or capital, and less labor. A firm might decide to buy more fork lifts, for example, using fewer workers to move its inventory around the company's warehouses. Or it might use more machines to make routine and repetitive welds on its bikes, and thus hire fewer workers to do welding jobs.

Any such venture carries a large element of risk: a new bicycle design may fail to attract customers, or manufacturing costs may be unexpectedly high, pricing the company's bikes out of the market. Companies alone bear this risk of failure — and reap the economic rewards of success if they have planned correctly and their bicycle venture succeeds.

This balancing of risk and rewards by individuals and private companies points to an essential role of government in any market economy: protecting private property rights and enforcing a law of contracts. Property rights must be well-defined legally, and business owners and investors must be treated the same by the law and commercial regulations whether they are citizens of the country or foreign nationals.

Only if property rights are free from the threat of expropriation by government, or exploitation by political interests, will individuals and companies be willing to risk their money by investing in new or expanded businesses. Moreover, they must be assured that the state's legal system will settle disputes over contract terms in a fair and consistent manner.

In short, entrepreneurs, whether domestic or foreign, must be willing to face economic uncertainty in their ventures —  but should not have to face political or legal uncertainty about the legitimacy of their enterprise.

The economic environment

                                                                                                             

The economy comprises millions of people and thousands of firms as well as the government and   local authorities, all taking decisions about prices and wages, what to buy, sell, produce, export, import and many other matters. All these organizations and the decisions they take play a prominent part in shaping the business environment in which firms exist and operate.

The economy is complicated and difficult to control and predict, but it is certainly important to all businesses. You should be aware that there are times when businesses and individuals have plenty of funds to spend and there are times when they have to cut back on their spending. This can have enormous implications for business as a whole.

When the economy is enjoying a boom, firms experience high sales and general prosperity. At such times, unemployment is low and many firms will be investing funds to enable them to produce more. They do this because consumers have plenty of money to spend and firms expect high sales. It naturally follows that the state of the economy is a major factor in the success of firms.

However, during periods when people have less to spend many firms face hard times as their sales fall. Thus, the economic environment alters as the economy moves into a recession. At that time, total spending declines as income falls and unemployment rises. Consumers will purchase cheaper items and cut expenditure on luxury items such as televisions and cars.

Changes in the state of the economy affect all types of business, though the extent to which they are affected varies. In the recession of the early 1990s the high street banks suffered badly. Profits declined and, in some cases, losses were incurred. This was because fewer people borrowed money from banks, thus denying them the opportunity to earn interest on loans, and a rising proportion of those who did borrow defaulted on repayment. These so-called "bad debts" cut profit margins substantially. Various forecasters reckoned that the National Westminster Bank's losses in the case of Robert Maxwell's collapsing business empire amounted to over £100 million.

No individual firm has the ability to control this aspect of its environment. Rather, it is the outcome of the actions of all the groups who make up society as well as being influenced by the actions of foreigners with whom the nation has dealings.

Measuring economic activity

 

There are a large number of statistics produced regularly on the operation of the world's major economies. The UK's economy is no exception in this respect. You will probably have noticed that often the headlines in newspapers or important items on television news programmers relate to economic data and the implications for individuals and businesses. A prime example of this occurs when interest rates are increased: the media responds by highlighting the adverse effects on businesses with debts and householders with mortgages.

Data is provided on a wide range of aspects of the economy's operation. Statistics are available to show.

• the level of unemployment;
• the level of inflation;
• a country's trade balance with the rest of the world;
• production volumes in key industries and the economy as a whole;
• the level of wages;
• raw material prices, and so forth.

The main statistics illustrating the economy's behavior relate to the level of activity in the economy. That is, they tell us whether the economy is working at full capacity using all or nearly all, available resources of lab our, machinery and other factors of production or whether these resources are being under-utilized.

The unemployment figures for the economy give an indicator of the level of activity. As the economy moves towards a recession and a lower level of prosperity it is likely that unemployment figures will rise. An alternative measure of the level of activity is national income statistics, which show the value of a nation's output during a year. Economists use the term Gross National Product to describe this data. Changes in the level or trends of such key data have great significance for businesses, as we shall see later.

There are numerous sources of data on the economy of which we can make use. The government publishes much through the Treasury, Department of Trade and Industry, the Bank of England and the Department of Employment. The Central Statistical Office, which was established during the Second World War, publishes about half of the government's economic data.

Much of this is contained in its annual publication, "The Annual Abstract of Statistics". It also publishes the equally valuable "Social Trends" annually. Additionally, private organizations, such as the banks, building societies and universities, publish figures on various aspects of the economy's performance. Economic statistics are presented in many forms, the most common being graphs and tables. Although these statistics can be valuable in assisting managers, they should be treated with some caution when predicting the future trend of the economy and thus helping the business to take effective decisions.

Economic issues

Three economic issues

Economics is the study of how people choose to allocate scarce resources to satisfy their unlimited wants. The main problem in economics is the question of allocating scarce resources between competing uses. In this section three economic issues are discussed to show how society allocates its scarce resources between competing uses. In this connection the question what, how and for whom to produce is of great significance.

The oil price shocks

Oil is an important commodity in modem economies. Oil and its derivatives provide fuel for heating, transport, and machinery, and arc basic inputs for the manufacture of industrial petrochemicals and many household products ranging from plastic utensils to polyester clothing. From the beginning of this century until 1973 the use of oil Increased steadily. Over much of this period the price of oil fell in comparison -with the prices of other products. Economic activity was organized on the assumption of cheap and abundant oil.

In 1973  – 74 there was an abrupt change. The main oil-producing nations, mostly located in the Middle East but including also Venezuela and Nigeria, belong to OPEC — the Organisation of Petroleum Exporting Countries. Recognizing that together they produced most of the world's oil, OPEC decided in 1973 to raise the price at which this oil was sold. Although higher prices encourage consumers of oil to try to economize on its use, OPEC countries correctly forecast that cutbacks in the quantity demanded would be small since most other nations were very dependent on oil and had few commodities available as potential substitutes for oil. Thus OPEC countries correctly anticipated that a substantial price increase would lead to only a small reduction in sales. It would be very profitable for OPEC members.

Oil prices are traditionally quoted in US dollars per barrel. Fig. 1 shows the price of oil from 1970 to 1986. Between 1973 and 1974 the price of oil tripled, from $2,90 to $9 per barrel. After a more gradual rise between 1974 and 1978 there was another sharp increase between 1978 and 1980, from $12 to $30 per barrel. The dramatic price increases of 1973  – 79 and 1980  – 82 have become known as the OPEC oil price shocks, not only because they took the rest of the world by surprise but also because of the upheaval they inflicted on the world economy, which had previously been organized on the assumption of cheap oil prices.

People usually respond to prices in this or that way. When the price of some commodity increases, consumers will try to use less of it but producers will want to sell more of it. These responses, guided by prices, are part of the process by which most Western societies determine what, how and for whom to produce.Consider first how the economy produces goods and services. When, as in the 1970s, the price of oil increases six-fold, every firm will try to reduce its use of oil-based products. Chemical firms will develop artificial substitutes for petroleum inputs to their production processes; airlines will look for more fuel-efficient aircraft; electricity will be produced from more coal-fired generators. In general, higher oil prices make the economy produce in a way that uses less oil.

Sions

Oil price ($ per barrel)

Figure 1. The price of oil. 1970  – 86

How does the oil price increase affect what is being produced? Finns and households reduce their use of oil-intensive products, which are now more expensive. Households switch to gas-fired central heating and buy smaller cars. Commuters form car-pools or move closer to the city. High prices not only choke off the demand for oil-related commodities; they also encourage consumers to purchase substitute commodities. Higher demand for these commodities bids up their price and encourages their production. Designers produce smaller cars, architects contemplate solar energy, and research laboratories develop alternatives to petroleum in chemical production. Throughout the economy, what is being produced reflects a shift away from expensive oil-using products towards less oil-intensive substitutes. The for whom question in this example has a clear answer. OPEC revenues from oil sales increased from $35 billion in 1973 to nearly $300 billion in 1980. Much of this increased revenue was spent on goods produced in the industrialized Western nations. In contrast, oil-importing nations had to give up more of their own production in exchange for the oil imports that they required. In terms of goods as a whole, the rise in oil prices raised the buying power of OPEC and reduced the buying power of oil-importing countries such as Germany and Japan. The world economy was producing more for OPEC and less for Germany and Japan. Although it is the most important single answer to the 'for whom' question, the economy is an intricate, interconnected system and a disturbance anywhere ripples throughout the entire economy,

In answering the 'what' and 'how' questions, we have seen that some activities expanded and others contracted following the oil price shocks. Expanding industries may have to pay higher wages to attract the extra labour that they require. For example, in the British economy coal miners were able to use the renewed demand for coal to secure large wage Increases. The opposite effects may have been expected if the 1986 oil price slump had persisted.

The OPEC oil price shocks example illustrates how society allocates scarce resources between competing uses.

A scarce resource is one for which the demand at a zero price would exceed the available supply. We can think of oil as having become more scarce in economic terms when its price rose.

Russia’s economy: Unsustainable support - FT.com

 

The oil-fuelled surpluses may vanish – forcing the Kremlin to borrow, devalue or spend less

Cash and carry: backers of Vladimir Putin with a mocked-up Rbs1,000 note. If Russia’s trade surplus falls as forecast, the president-elect’s ability to fulfil spending pledges made during his campaign will be curbed

Once Vladimir Putin is back as Russia’s president in May, he will again face pressure for change. But with the street demonstrations that began in December now showing signs of ebbing, those could be the least of his worries in the six-year term that is to come.

Instead, it is a tectonic shift in the economy that may preoccupy him. According to analysts, growing imports will gradually outpace exports of oil and gas; the oil-fuelled trade surpluses that have buttressed his leadership for more than a decade could vanish.

That would be dramatic, given that the surpluses totalled $785bn between 2000 and 2011, an amount equivalent to well over 40 per cent of last year’s gross domestic product. During those 11 years, oil prices quadrupled, budget expenditure rose nine times in real terms and real wages almost trebled.

But unless oil prices nearly double again, which most economists say is unlikely as it would tip the global economy deep into recession, this era of easy money that has buoyed incomes and social spending will be finite. “Halfway through Putin’s term the economy may hit the wall,” says Ivan Tchakarov of Renaissance Capital, a Moscow investment bank.

Mr Tchakarov predicts that the current account, which includes goods trade plus services and transfers, will turn negative in 2015. He calls this “the great transition” from a time in which both the fiscal and current account surpluses were huge to one in which the country is forced to borrow, devalue, or spend less. “Russia will become a classic twin-deficit economy,” he adds, with both a federal budget deficit and a current account deficit.

Already the signs are apparent. While budget spending grew 31 per cent in real terms in 2007 alone, at the peak of the nation’s energy-driven exuberance, in 2010 and 2011 expenditures were almost flat in real terms. Only an uptick in oil prices allowed the government last year to end up with a modest surplus on the federal budget, which since 2009 had been running small deficits for the first time since Mr Putin came to power at the turn of the millennium.

The end of massive trade surpluses is not necessarily a disaster waiting to happen – many countries, including the US, run both budget and current account deficits, which are made up for by attracting capital from abroad. While pointing out the risks such a scenario entails, analysts say somewhat counter-intuitively that the removal of the pillow of petrodollars may even be a good thing – one that could finally force the government to reform its economy and legal system in an effort to become an attractive destination for foreign investment.

“I think Putin doesn’t have any choice but to change. We hope he understands that if he doesn’t, the economy could experience severe difficulties in three years’ time,” says Mr Tchakarov. “If you don’t do anything no one is going to come to you and help finance these deficits.”

Rather than attracting capital, Russia at the moment is doing the opposite: partly because of political uncertainty, capital outflows totalled a net $84bn in 2011, equivalent to 5 per cent of GDP. That drain in funds was barely noticed because the country was running a big trade surplus. But if the cushion of petrodollar surpluses were to vanish, such outflows would cost Russia its reserves and could force a devaluation of the rouble.