A subsistence economy: the essence and evolution. Commodity production: the essence and main features.

Social economy - set of economic attitudes between the economic subjects connected by a public division of labour.

Natural economy arose in primitive society and prevailed in all pre – capitalist formations. Commodity production arose after first social division of labour exists now and it is the base of the market economy.

Natural economy – is the elementary form of economics organization, with the help of which products are made only for satisfaction of own needs. The natural form of wealth was natural product (that is, material benefit, which has definite profit and an ability to satisfy human needs in objects of utility and in means of production).

Essence of natural economy consists of its main features:

1. insularity ( producer supplies himself with all necessary things, uses only his own instruments of labour );

2. universal hand work with low productivity;

3. direct economic ties between production and consumption ( that is, products spread directly between the members of the family or community, were used by them, that’s why exchange was escaped ).

Triad of the economic problems: what, how and for whom to produce ( that is common for all modes of production ), in natural economy, because of the absence of exchange decided very easy- by the owner of the economy, based on his own needs. So, natural economy – is the self – contained system of the economic – organizing relations. As the historically first type of the production economic organization, natural economy arose in the primitive society and was prevailing in slave – holding and feudal modes of production.

Commodity economy: the nature, conditions and causes of the occurrence. Commodity economy of free competition of the organized market.
The reasons of the commodity production appearance are:

1. the social division of labour;

2. production specialization;

3. economic isolation of commodity producers.

The base of isolation – is private property on means of production and products of labour. Each commodity producer, entering exchange relations has his own interest - compensation of expenditure on output of products and profit earning, that is big stimulus for commodity producers to increase the productivity of labour.

Characteristic features of the commodity economy are:

1. open system of the economic – organizing relations, as products are produced for exchanging, but not for satisfaction of own needs;

2. production is based on the social division of labour, specialization and it is directly concerned with the productive forces progress;

3. indirect ( economic ties between production and consumption, that is mediated by the exchange ). Exchange realizes with the help of market, money, purchase and sale and only after this production get to the productive or personal consumption;

4. equivalent goods exchange ( exchanging goods have to contain equal quantity of labour to their production ) ;

5. using money as mediator in exchange;

6. presence of the competition between commodity producers;

7. free price formation;

8. spontaneity of the evolution as the form of the commodity production self – regulation.

Products of labour take economic form of commodity under the commodity production.

Commodity – is the product of labour, which is generated for purchase and sale or exchange. Products of labour are made for own consumption.