The market system has an internal integrity, which allows it to be preserved in interaction with the external environment and develop. This development takes place according to its own laws, which are the rules of public actions of people. They are stable, constant, reflect the essence of production relations and are manifested in everyday activities not only in the economic sphere, but also in the legal, political and ideological fields.
The mechanism of market functioning is regulated by two major laws of the economy. This is the law of supply and demand and the law of value. The latter is the main law of commodity production (A. Smith, D. Riccardo, K. Marx).
One of the most significant and objective laws regulating relations between producers of goods and the distribution of social labor in commodity production is the law of value. Its essence is reduced to the expression of the value of goods in socially necessary labor. It manifests itself as the law of prices, and its action resembles the movement of a pendulum: a rise in prices activates the activities of entrepreneurs, a decrease leads to a curtailment of production and a reduction in costs. In extreme cases, manufacturers have to leave this area of capital investment. In this case, the influx of goods into the market decreases, and due to this, the price goes up again. Thus, the law of value acts in the system of economic laws through the behavior of people, ensuring the balance of the economic sphere.
There is never absolute balance in the economy, but long-term imbalances in it are impossible. In this regard, this law regulates the distribution of resources between spheres of production and determines the differentiation of producers.
The functions of the law of value are as follows. The first is the accounting of social labor through the socially necessary costs of this labor. The second is to ensure the distribution of labor between all areas of production. The fluctuation of market prices around value ensures the transfer of factors of production from one sector of the economy to another, regulating the volume of output of goods. The third is the differentiation of commodity producers. All of them have different labor costs. Those who have lower costs are in an advantageous situation, otherwise they will have to incur losses, bankruptcy and ruin are possible. The law of value encourages producers who are able to achieve lower individual costs than public ones. Fourth - stimulation of production costs. If the costs of individual labor are higher than socially necessary, then, in order not to go broke, the entrepreneur must reduce them. This will provide an acceleration of the sale of goods, an increase in income and profit, which is an incentive for the development of production. The fifth is the distribution of the social product between individual enterprises and entire regions.
The law of value and its functions in the economy plays an important role, but its action cannot be absolutized, because its role is limited. He explains the motives of the behavior of economic entities (producer, seller). But it is difficult to explain the behavior of other entities - the consumer, the buyer. the commodity producer seeks to sell the product at a price that would fully offset all its costs and bring maximum profit. That is, the logic of his aspirations is fully explained by the law of value. But the consumer is not interested in the costs of the manufacturer, he seeks to find a price that satisfies him with a suitable quality product. The behavior of this market entity is completely not subject to the laws of value. Here the second most important law of economics begins to operate - the law of the law of supply and demand.