This article is the first article in the world, which is written in the meta-language. *
3 Market life cycle
We will use the standard schedule of supply and demand for the market analysis. Supply and demand lines are crossed in a point of balance of the market.
Let's assume that the market is in A. Point A is to the left of a balance point, below a line of demand and above an offer line. The market point is below a demand line, the buyers are more happy. The market point is above a demand line, the manufacturers are more happy. Distance А1-А2 is proportional to satisfaction which is received by the buyer and the manufacturer from sale of one product. Therefore distance А1-А2 is proportional to volume of entropy which is received by the buyer and the manufacturer from sale of one product or service. Product of distance А1-А2 on volume of output proportionally volume of entropy which receives a society.
We will study volume of entropy which the market gives to a society. We will not find out volumes of entropy which receives manufacturers separately. And we will not find out volumes of entropy which are received by buyers separately. Each person in a society is the buyer and the seller simultaneously. It is important to us to know volume of entropy which receives a society as a whole.
Market will move to a point of balance in the conditions of a competition. The market stops in a balance point. A balance point – the worst point of the market. Buyers and manufacturers have the minimum satisfaction in this point. The price will a little increase - buyers will refuse purchase. The price will a little decrease – manufacturers will refuse purchase. In this point the market makes the minimum volume of entropy.
Let's consider market life cycle in other co-ordinates. X- axis - time, Y-axis - entropy volume.
At first it is necessary to spend certain volume of entropy (I). Then the entropy volume starts to grow (II). The entropy volume reaches a maximum through any time (M). Then the volume of entropy which makes the market, decreases (III). The market reaches balance points through any time (B). After that the entropy volume does not change, if demand (IV) does not change.
The more absolutely the competition, the faster the market reaches balance points. We will assume that the market instantly appears in a balance point. In this case the market makes an entropy minimum. An example of such market – small online services. The markets with a perfect competition influence economy and society development a little. Therefore restriction of volume of release can increase entropy which makes the market.
To limit growth of volume of release it is possible in several ways. The first way - monopoly. If the enterprise is a monopolist in the market the enterprise can reduce output volume. However the monopolist will rise the price, most likely. The new price will be above "the fair" price. The fair price - the price at which the buyer and the manufacturer receive identical volume of entropy.
Еxchange law – all participants of an exchange receive identical quantity of entropy, on long-term intervals. The law can be broken on short-term intervals. The processes and the information in economy and a society are more free, the is less deviations from this law.
Let's assume, the monopolist establishes the prices, which above the fair prices. If the price is unfair, the enterprise should spend additional efforts for maintenance of a monopoly position and decrease of public discontent. Costs increase. The offer line rises, entropy of a monopolist will decrease. The exchange law will be executed. Such market makes entropy a little. For the same reason arrangement of manufacturers on price increase is inefficient too.
If the monopolist kept the fair prices and limited release volume the entropy volume could be maximum. But in the conditions of monopoly it is almost impossible to define size of the fair price. And the monopolist will want to rise the price above the fair price, most likely.
Second way of restriction of volume of release is the establishment of quotas. Quotas should establish either the state, or the companies. But it is difficult to distribute quotas for a considerable quantity of the companies.
Third way of restriction of volume of release - informing of a society on profit which is received by the various markets. When the market will reach an entropy maximum, the market profit will start to fall. Now the market will move to a point of balance and the entropy volume will decrease. If all companies are informed on it they will not enter this market. This information will limit release volume. Reduction of profit of the market signals about reduction of volume of entropy. Between money and volume of entropy we will consider interrelation in other sections.
I consider that the third way of restriction of volume of release - more effective.
If to slow down movement of the markets to a balance point they will create more volume of entropy. The markets create more entropy, there are new markets. Because entropy – criterion of freedom and development. If market movement to a balance point stops, manufacturers can receive superprofit, and buyers keep unsatisfied desire. Therefore manufacturers have an opportunity to create the new markets, and buyers keep desire for creation of new demand.
to be continued ….
* Meta-language is - a special structure of the text, which is translated by an automatic translator without loss of meaning.
P.S. This article is a very small part of my new economic theory.