control system of Hilton Hoteles

Price and income policy
Price policy
Principles and tools of price policy
Price policy in transformation process of SR
Income policy
Incomes, incomes policy and its tools

1. Price policy
Price policy is inseparable part of economic policy. It has a big influence on income level of economic subjects and the state and it influences living standards of people. In a broader sense we can understand the price policy as the entering of state into free price setting in all markets. States with its actions can change the conditions on price setting of products and services, and also the prices of factor of production. F.e. the state can set the minimum wage or regulation of incomes.
In condition of market economy price policy is mainly oriented on cases of market failures in markets of products and services. In condition of market economy is applied free price setting on the bases of supply of producers and demand of consumers. The prices so solve the fundamental problem of relation between the demand and supply by applying its informational and motivational function. Development of price level is given by the movement of relationship between the demand and supply.

In condition of effective working market mechanism the price influences decision making of all economic subjects on the side of demand and supply. Market price is considered to be the best coordinator of economic processes. Price reflects the real existing relations of production, status of demand and supply, consumer preferences and also the rationality of action of all economic subjects on the market. The market mechanism is the place of continuous interaction between a large number of buyers and sellers. Based on the consumers demand, companies keep introducing new products. In its search for the equilibrium between demand and supply, the market answers the questions of what, how and for whom to produce. This is the invisible hand of the market principle of classical and other liberal economy.
Even though market is a greatly sophisticated mechanism, it entails some imperfections that require government interventions, either to remove them or at least to soften their impacts.

2. Tools and principles of price policy
Price system has big impacts on performance of whole economic system. Principle of price system in market economy is option of free decision making of economic subjects about the prices of products and services. On the basis of situation on the market, economic subjects are applying price policy, which reflects their entrepreneurial strategy. However, economic subjects with their decision making strategies are also determined by legal standards that are applied by state. Necessity of state interventions into price area is to remove the market imperfections, or at least to soften their impacts. State interventions in price area could be different. State can regulate size of demand, its structure and also prices by means of direct interventions into price setting on the market, but also by applying different tools, f. e. in tax area and subsidies for certain subjects, commodities and services. States regulation should be applied only in the context of failure of market mechanism. In areas and situations when market mechanism does not provide achievement of main goals of economic policy and fails, price policy is applied as the part of economic policy of government.
Price policy represents all economic decisions, which corresponds with price setting, their changes or condition settings that influence the price setting.
Necessity of applying of price policy in the conditions of market economy is mainly because of these reasons:
Necessity of price regulation because of existing natural monopolies (efficiency)
Necessity of price regulation from the social reasons ( justice)
Necessity to solve impacts of crisis in economy development, f. e. when there is a threat of hyperinflation ( stability)
Necessity to solve impacts of negative externalities mainly in the area of environment.
Because of market imperfections, government applies price policy tools, by which they are trying to soften market failures in price area. The aim of state interventions is to ensure the minimum living standard for all classes of society.
Advantages of state price regulations are:
Immediate impacts on economic subjects
They are applied for all economic subjects toward which they lead,
They have high efficiency of removing market failures.
Disadvantages of state price regulations are:
Disrupt price system functioning that creates market competitive environment,
Reduce the effectiveness of acting of market economic subjects.
Restrict economic activities of subjects mainly in areas, into which price regulation leads
Represent barriers for capital entering into areas with price regulation.
Tools of price policy could be divided in to these basic categories:
1. Political and legislative state operations, which influence entrepreneurial environment. Amongst these tools belongs mainly:
Price surveillance over economic subjects, which can abuse their position on the market to their advantage through setting of prices
Custom duties and tariff changes, by which the state influences a cost item of business operations in international trade. Motivations of government are efforts to secure domestic producers to foreign competitiveness and efforts of raising revenues to state budget
Licenses and quotes application, which sense is restrict import and so allow to domestic producers to reach sales also with higher prices.
2. Price regulation represents the way of directly price setting (maximal or minimal) or regulation of way of their creation on the basis of the governmental administrative operations. In economy practice the regulation of prices is applied in three ways:
Time regulation of prices, what represents time-bound ban of price re-increasing
Officially determined prices can be set as maximal, minimal or fixed.
Substantially regulated prices, where the state determines the conditions for negotiating prices.
3. Price moratorium represents time-limited restrictions on price increasing. it is applied in crisis and it is the most conspicuous intervention of the state to price setting.
4. Price control is dealing with the observance of price and other related regulations, which influence the price setting.

Individual countries combine all price policy tools also with a range of other measures.

Income policy
Income policy is classified among the partial economic policies and most often is associated with price policy. The reason why price and income policy belong to the partial policies is that they both are using they own specific tools for the regulations of economic processes with the aim to support development of standard living. General economic theory divide income policy into three main phases and those are: creation, distribution and redistribution of incomes and the last one application. It examines and try to find out causes of differences and inequality in incomes. It also offers guides for solving those problems not just concerning differentiation and inequality in incomes but also in individuals and society wealth.
The basic tool for measuring inequality in incomes what we already know from economic theories, is Lorenz curve and from it derives Gini coefficient. Reality that inequalities in incomes exist, necessitates some regulation of income development from state side. Incomes and their actual development can impact positively, but also negatively on economic development and its sustainable growth in line with existing resources. Excessive growth of income can lead to an increase in aggregate demand, to which the supply is unable to adapt, and so what it can lead to overheating of economy and inflationary gap. On the other side, insufficient high grow of incomes, lag behind the grow of gross domestic product can lead to reducing the standard of living and decreasing rate of satisfaction what can further lead to social tensions and conflicts in society.

Incomes, Income policy and its tools
An income is a flow element, the total amount of money acquired by an individual or household over a certain period, usually a year. Here are many types of incomes, but when talking about economy policies we will consider the incomes as the sum of funds or finances, which the individuals obtain or they should obtain in different phases of reproduction process. ( phase of creation, phase of distribution, redistribution and phase of their usage).
Under the term income policy we will understand meaningful approach of government to incomes of population, to process their creation, distribution and lastly usage. Income policy as the partial economy policy is using many tools and measures for reaching its main goal- which is sustainable growth of living standards and through those tools it influences, regulates and directs development of total incomes of population in that way to be corresponding with the speed of economic growth and mainly with the speed of social productivity.
State with its income policy impacts on processes and conditions in the field of incomes creation ( formation) , their distribution and lastly in the field of their usage.
1. Process of creation
Into this process of incomes, which flow to owners of production factors, the state usually enters indirectly. The state participates on the formation, maintenance and development of appropriate macroeconomic and microeconomic environment, formulates the basic rules of behavior of economic subjects on the market and take care of observance them. state should also take care on positive motives and incentives for business, investment and performance of quality work. To process of income creation in the form of wages, revenues, profits, rents or interests also the other parts of economic policy of state should provide support. F. example, tax policy as a part of state budget policy, science-technology policy of state, but also monetary or stabilization policy.
Income policy of state could be in this process of income creation applied by providing prognosis, programs and recommendations concerning of economic development as a whole, the expected development of price level, development of labor productivity and so on…
By this, state indirectly “sets” some proportions in economic development for next period, which influence also the future creation of incomes.
Specific tools of income policy are agreements with social partners (trade unions and employers unions, so called tripartite and the results of their bargaining – general agreements). On the basis of bargaining government commitments about the increase wages and working conditions are formulated. In income policy important role plays also direct regulation of incomes in the case of wages and salaries for employees of public sector or enactment of minimum wage.

2. The greatest strength and scope has the income policy in the process of their distribution and redistribution. Distributional processes are objective because of market failures and creation of excessive, socially and economically unsustainable differences in incomes. Reality is that market gives a lot to somebody, less to someone else and nothing at all to yet someone else. Because of a high differentiation of real incomes, some people can afford to satisfy their most luxurious wants, others may not be able to satisfy even their most fundamental needs. That is why the governments take measures with the aim at fair income redistribution in the society. The main tool of income distribution are public budgets ( state budget, budgets of cities and municipalities, budget of national labor office, fund budget of national property, social insurance and health insurance. Within the redistribution of primary incomes ( incomes such as wages, dividends, rentals, interests which come from work or ownership and utilization of factors of production) state uses mainly taxes, fees, penalties, transfers, subsidies, tax allowances, duties …
The issue of the degree of redistribution processes is highly questionable and controversial. Excessive distributional processes in economy demotivate economic subjects, and discourage them to be economically active, and weaken incentives for work.
From the current perspective of theory and practice, from the opposite point of view, none or very limited distributional processes in the economy- do not have economically and socially justification. Unregulated distribution of incomes and their possession can cause intolerable social-economic differentiation and polarization of society and individuals. That is why the government enters into process of distribution and try to soften the excessive differences in incomes.

3. State fulfills its functions not just in those two processes but also in the process of income usage. Disposable incomes of individuals (households) are using for the consumption of consumer goods or savings. In this phase, the state influences either directly or indirectly the amount, or structure of consumption and amount of savings.
Influences of state on incomes in simply way: process tools
Production(formation) of incomes
Incentives from macroeconomic and microeconomic environment, rules, guidelines, programs, legislation
Distribution of incomes
Public budgets, taxes, duties, transfers, charges
Application of incomes
Regulation(deregulation) of prices, taxes, interests

Wage policy and labor productivity
Wage policy has the biggest importance for effective income policy of the state. Wage as the income, flows the owners of workforce, stays also at presence important source of revenues of population and is very sensitive indicator of its living standard. Amount of wages and tendencies of their development together with other indicators shows also economic level and maturity of national economy.
Relationship between the labor productivity and wages has special importance for state income policy. If the state using income policy purposefully do not influences relationship between labor productivity and wages, it could lead to disruption of macroeconomic balance. In practice it could mean that:
Wages grow faster than labor productivity ( we will consume more than we will create)
Wages grow significantly slower than labor productivity (created values, the population is not able to consume, living standard of state declines).
By income policy, but also by other policies and their tools should state support labor productivity growth and corresponding wage growth. Incomes and tendencies their development together with the development of price level influence the consumption that is important indicator of living standard of population. Mutual relationship between income and price policy is therefore for assessment of success of economy policy and the impacts of government on social and economic processes. Outwardly the relationship between income and price policy shows welfare and rate of satisfaction, what is the highest goal of economic policy.