The logic of present research is the following. At the first stage of designing a physical model and deriving equations of motion of economic systems from the first principles, or ab initio, we first make all approximations and assumptions required for deriving equations of motion of physical systems in the course of theoretical physics by Landau and Lifshitz [1, 2], then we obtain economic systems equations which are similar to physical systems equations in form and are considered by us as starting or initial approximation for a physical model of the economic system. At the second stage massive model calculations are carried out, their results are compared with experimental or test results, in other words, with the data of empirical economics. At the same time, some optimum values of model parameters and potentials are obtained and the applicability limits of the given initial approximation are estimated. At the third stage suppositions are estimated comparing calculation results and experimental data, and more precise and appropriate optimization principles and corresponding equations of motion are found.
The present book concerns only results of the completed first stage of research at which the main principles of proposed approach to developing physical models of simple market economic systems including economy consisting of several buyers and sellers of certain commodities, and external environment, were developed.
2. Main elements of the physical models
Main elements of our physical models of the economic systems are shown schematically in Fig. 2.1. A large sphere covers a market subsystem or simply economy consisting of active market subjects: buyers who have financial resources and a desire to buy goods or commodities, and sellers who have goods or commodities and a desire to sell them. They are the buyers and sellers who form demand and supply in the market. Small dots inside the sphere denote buyers, big ones denote sellers. Cross-hatched area outside the sphere represents external environment including the state, society and other institutions. The whole economic system is located in some commodity-and-price space which will be discussed below. It is evident that all elements of the system influence each other: buyers compete with each other in the market for commodities; sellers compete with each other for buyers.