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The law of value

In the surrounding reality, every day we are faced with economic laws. In particular, with the law of value. In this article, we consider the essence of this law, its operation and functionality.

All goods and services surrounding us have their own cost. It consists of the costs that were necessary in the production process. Moreover, these costs are averaged in the bidding for the establishment of social relations between the producers of these goods and services and their potential consumers. This, in fact, is the essence of the law of value.

This is a special law of economics, expressing the relationship of socially significant work in the field of commodity production and the cost of the resulting product in a situation of comparative coordination of supply and demand. Moreover, the regulation of the relationship of question and answer in the process of manufacturing the goods should not be subject to any restrictions that could affect the exchange of goods and decide the outcome of the rivalry of those who are responsible for the production of goods or services.

Circumstances in which the law of value works:

  • barter does not occur spontaneously, but naturally;
  • the production of a product is measured by the number of its needs;
  • There is no monopolistic structure that could affect the value of the product.

Functions of the law of value

  1. This law is the coordinator of the sectoral division of labor, which occurs randomly as a result of long-term changes in price. An area where product productivity will be exaggerated compared with demand will be subject to volume reduction due to the impact of lower prices. In the opposite situation, when the need will be more than necessary, the sphere of production will benefit from the increase in price.
  2. This law serves as a separator for those engaged in the production of goods and services. Measurement of all expended forces is conducted as a socially necessary value. If the subjective assessment of labor intensity is less than the public, then the supplier of the product reimburses its costs due to the realized surplus of production. And vice versa. As a result, someone gets richer, and someone gets poorer.
  3. The law of value helps to strengthen commodity relations characteristic of a capitalist society.Since enriched manufacturers increase their capacity, they need to increase the number of jobs. And bankrupt - go to hire.
  4. This law initiates the development of additional production forces. The main thing is the difference of subjective and socially significant labor time. Since an increase in productivity leads to a decrease in personal cost, this in turn increases the excess, which leads to greater profitability and, as a result, success in a healthy competition. Reduces the cost of production and the use of technical innovations. Progressing such production faster than existing in its original form. Moreover, today the market is trying to regulate the state. It becomes the main driving force of social production, organizing the best economic mechanism.

Thus, the law of value and its functions help in the development of the market of goods and services and in its improvement.

It must be said that not all that is produced for sale is subject to the law of value. In today's process of regulation of the market economy, the range of objects subject to capitalization has been increased. For example, securities or uncultivated land.The term "capitalization of income" implies the establishment of the value of any subject of bargaining, depending on its profitability. In this case, we can talk about pricing, which is determined directly by supply and demand. Previously, it worked in the circumstances of primitive production, in direct proportion to the price of the product and its value. Later, at the beginning of the establishment of capitalist relations, the operation of the law of value constitutes a circle of price fluctuations near the cost of production, and in the final development of capitalism - the movement of the price of a product in direct relationship with production prices. As a consequence, we can trace the law of value at any historical moment and it must be said that by now it has an increasingly regular and structured look.

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