Market

From Wikipedia, the free encyclopedia

In economics, a market is a social structure for exchange of rights, which enables people, firms and products to be evaluated and priced. There are two roles in markets, buyers and sellers. The definition implies that at least three actors are needed for a market to exist; at least one actor, on the one side of the market, who is aware of at least two actors on the other side whose offers can be evaluated in relation to each other. A market allows buyers and sellers to discover information and carry out a voluntary exchange of goods or services. It is one of the two key institutions for organizing trade, along with the right to own property. In everyday usage, the word "market" may also refer to the location where goods are traded, or in other words, the marketplace.

[edit] Function

The function of a market requires, at a minimum, that both parties expect to become better off as a result of the transaction. Markets generally rely on price adjustments to provide information to parties engaging in a transaction, so that each may accurately gauge the subsequent change of their welfare. In less sophisticated markets, such as those involving barter, individual buyers and sellers must engage in a more lengthy process of haggling in order to gain the same information. Markets are efficient when the price of a good or service attracts exactly as much demand as the market can currently supply. The chief function of a market, then, is to adjust prices to accommodate fluctuations in supply and demand in order to achieve allocative efficiency.

An economic system in which goods and services are exchanged by the mean of markets (i.e. the decision of exchange regarding the prices and the quantity are decentralized - taken by the agents involved in the exchange themselves) is called a market economy. An alternative economic system in which non-particpants to the exchange (often government mandates) determine prices are called planned economies or command economies. The attempt to combine socialist ideals with the incentive system of a market is known as market socialism.

[edit] Types of markets

Although many markets exist on the traditional sense--such as a flea market--there are various other types of markets and various organizational structures to assist their functions.

A market can be organized as an auction, as a shopping center, as a complex institution such as a stock market, and as an informal discussion between two individuals.

In economics, a market that runs under laissez-faire policies is a free market. It is "free" in the sense that the government makes no attempt to intervene through taxes, subsidies, minimum wages, price ceilings, etc. Market prices may be distorted by a seller or sellers with monopoly power, or a buyer with monopsony power. Such price distortions can have an adverse effect on market participant's welfare and reduce the efficiency of market outcomes. Also, the level of organization or negotiation power of buyers, markedly affects the functioning of the market. Markets where price negotiations do not arrive at efficient outcomes for both sides are said to experience market failure.

Most markets are regulated by state wide laws and regulations. While barter markets exist, most markets use currency or some other form of money.

Markets of varying types can spontaneously arise whenever a party has interest in a good or service that some other party can provide. Hence there can be a market for cigarettes in correctional facilities, another for chewing gum in a playground, and yet another for contracts for the future delivery of a commodity. There can be black markets, where a good is exchanged illegally and virtual markets, such as eBay, in which buyers and sellers do not physically interact. There can also be markets for goods under a command economy despite pressure to repress them.

[edit] See also

• Farmers' market
• Financial market
• Grocery store
• Stock market
• Media market
• Marketplace
• Street market
• Market square
• Market town
• Market customization
• Market microstructure

[edit] References

Marshall, Alfred. 1961. Principles of Economics, edited with annotations by C. W. Guillebaud, 2 Volumes. London: Macmillan and Co.

[edit] Sources

• Microeconomics by Robert S. Pindyck, Daniel L. Rubinfeld

[edit] External links

• Qualitionary - Legal Definitions - Market
• The EU's Market Access Strategy in a Changing Global Economyar:سوق

ay:Rikuwa bs:Tržište ca:Mercat cs:Trh de:Markt et:Turg es:Mercado eo:Merkato fa:بازار fr:Marché gl:Mercado zh-classical:市場 ko:시장 (경제) hi:बाज़ार hr:Tržište id:Pasar it:Mercato he:שוק (כלכלה) lv:Tirgus hu:Piac nl:Markt (economie) ja:市場 nn:Marknad nrm:Marchi pl:Rynek (ekonomia) pt:Mercado qu:Qhatu ru:Рынок simple:Market sk:Trh sr:Тржиште fi:Markkinat sv:Marknad th:ตลาด vi:Chợ zh:市場