CONCEPTUALIZATION OF THE MECHANISM OF DOMESTIC TRADE FUNCTIONING

Abstract

The article examines the mechanisms and instruments of state policy aimed at ensuring the effective functioning and development of the country’s domestic trade. The purpose of the study is to substantiate the methodological and applied provisions for conceptualizing the mechanism of domestic trade functioning. The study of the evolution of perspectives on domestic trade has made it possible to generalize the theoretical and methodological foundations of the mechanism of domestic trade functioning in ensuring the effective socio-economic development of the country. In particular, within the framework of classical economic theory, domestic trade was understood as an objective result of the deepening of social division of labor and production specialization, which creates conditions for the efficient functioning of the national economy; its development is driven by the presence of freedom of competition, guaranteed private property rights, processes of capital accumulation, growth in labor productivity, and dynamics of social needs, supported by a minimally necessary exchange infrastructure. The regulatory mechanism is built around the self-regulatory action of market prices, the principle of the “invisible hand” free competition, and the coordination of production and consumption, where money is regarded solely as a technical instrument of circulation. The role of the state is limited to ensuring institutional and legal conditions, protecting property and security, and creating prerequisites for the development of economic freedom. In turn, neoclassical economic theory viewed domestic trade as the result of individual choices and the operation of the law of marginal utility, which determines demand, supply, and price proportions; the development of domestic trade is possible under conditions of perfect competition, economic freedom, and rational behavior of actors, with key factors including individual needs, assessment of the utility of goods, availability of resources, and organizational-institutional prerequisites. The regulatory toolkit is based on market mechanisms of coordinating supply and demand, equilibrium prices, and the general equilibrium model, ensuring efficient allocation of resources, while state intervention is limited to creating institutional conditions, regulating natural monopolies, and correcting market failures. The role of domestic trade lies in ensuring optimal use of national resources, forming balanced price proportions, and enhancing societal welfare. This economic discourse provided the basis for conceptualizing the mechanism of domestic trade functioning and regulation, substantiating the postulate that the actors of the mechanism should rely on the priority of market self-regulation while the state ensures the institutional conditions for its efficiency. Based on the results of the theoretical and methodological generalization of domestic trade and its state regulation, it has been established that the conceptual mechanism of domestic trade functioning in ensuring effective socio-economic development in Ukraine is an integrated system of economic, legal, organizational, institutional, infrastructural, and social instruments and methods. Through these instruments and methods, trade processes are regulated and coordinated, competitive conditions are formed, consumer needs are met, entrepreneurial activity and the investment attractiveness of the trade sector are enhanced, ultimately contributing to the sustainable development of the national economy.