2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
What is a market? In the economic literature there are a large number of different definitions of this concept. Here are some of them: the market is the sphere of circulation of money, goods and services; the mechanism of the relationship between sellers and buyers; the exchange of goods and services within a country or between countries. The market provides the relationship between consumers and producers. It pushes the production of the products that the buyer needs.
Stimulates production efficiency and cost reduction through the introduction of new machinery, as well as the application of modern technologies, so the market activates scientific and technological progress. In addition, the manufacturer must take care of the quality of their products, otherwise they will not be sold out, which means that the seller will not receive a profit and will not be able to cover his costs. And you also need to constantly think about updating your products. SoThus, the meaning of the word "market" is many-sided.
Market system
This is a complex of a huge number of markets of different directions. There are three main types: consumer, production factors and financial. The first is divided into wholesale and retail. The second is to the markets:
- land - this includes the land itself, subsoil, crops, as well as minerals;
- labor is the entire working population;
- capital - it includes all buildings, structures, equipment, machines, as well as investments.
The third is the securities market (shares) and the money market, which includes loans, loans.
Free market
There is such a thing as a free or competitive market. It means a system that regulates itself and maintains its balance, and also achieves results without the intervention of external factors. What is characteristic of the free market? Its main features are listed below:
- mobility of all resources;
- homogeneity of products;
- unlimited number of participants;
- free entry and exit;
- participants cannot influence the decisions of others.
Its functions are as follows:
- regulator of the economy;
- provides market information through prices;
- provides rehabilitation and also optimizes the national economy.
Market Emerging Conditions
Following are the factors that influenced its occurrence:
- Specialization of labor is a form of divisionlabor, for example, between different industries or areas of production both within the enterprise and beyond its external boundaries at different stages of the production process.
- The social division of labor. The presence of many types of labor activity existing at the moment is called the division of labor. Thanks to this, an exchange is formed between them, as a result of which an employee of one type of activity gets a chance to use goods or services of another type of labor.
- Limited resources - there is an exchange of one product of labor for another. In the absence of such an opportunity, each individual would perform a huge number of different jobs to satisfy his needs, and this, in turn, would lead to a slowdown in economic progress and the development of civilization as a whole.
- Economic isolation of commodity producers. Everyone decides how and what to produce, for whom and where to sell the resulting products.
- Manufacturer's freedom. Any entity has the right to choose a profitable, desirable, expedient type of economic activity and carry it out in a legally acceptable form.
Classification of markets
The following types of markets are distinguished:
- Factors of production - this includes markets for real estate, materials and raw materials, minerals and energy resources.
- Intellectual product markets – inventions, innovations, works of art and literature, and information services.
- Goods and services – all markets includedconsumer purpose.
- Financial - these are capital, securities, credit, monetary markets.
- Labor markets represent the economic forms of labor movement.
Next, consider the functions and structure of the market.
Functions
The following market functions can be distinguished:
- Informational. Prices for goods and services contain information that all participants in economic activity need. For example, changing prices for goods provide objective information about the quality and quantity of goods supplied to the market. Low prices indicate a surplus of goods, while high prices indicate a lack of supply. Information that is concentrated in the market allows any business entity to assess its position with market conditions and adapt to market demands.
- Pricing. Due to the interaction of buyers and sellers, supply and demand for services and products, prices are formed in the market. The balance of costs to producers and utility to buyers determines the market price. The costs of producing goods and services, as well as the usefulness of products, are reflected in the price. Therefore, in a market economy, the price is set by comparing the utility of products and the costs of producing these goods.
- Regulating function. The essence of the market in this case is the impact on all areas of economic activity, mainly on production. Rising pricesignals that it is necessary to expand production, and if the price falls, then reduce. Constant changes in prices provide information about the state of affairs, and also have an impact on economic activity. The information provided by the market encourages manufacturers to improve product quality as well as reduce costs.
- Mediation. In this case, it is possible to give the following definition to the market - it is an intermediary, since it acts as an arbiter between sellers and buyers, allowing you to find a more profitable option for buying and selling.
- Restoring. A “natural selection” of business entities regularly takes place in the market. Thanks to such a phenomenon as competition, the market rids the economy of inefficient enterprises. And he gives the green light to active and purposeful people. Thus, the average level of market efficiency increases and the stability of the national economy as a whole increases.
Structure
The structure of the market is the internal structure, order, as well as the location of its individual elements. It can be divided according to the following criteria.
Degree of restriction of competition:
- free;
- mixed;
- exclusive.
According to the economic purpose of objects of market relations:
- consumer goods and services;
- industrial products;
- intermediate goods;
- commodity market;
- labor market and stock market;
- know-how.
By the nature of sales:
- retail;
- wholesale.
Market economy
The market and the market economy is a system that is based on private property, freedom of choice, and also relies on personal interests. All decisions are taken by the subjects of the market economy independently, guided by the desire to obtain maximum benefits. All market functions are carried out through competition. The latter is a rivalry between the subjects of market relations for the most attractive conditions for production, as well as for the sale of products to obtain the highest profit. The market and the market economy is a system of economic relations that leads to price movements and is based on the satisfaction of one's own economic interests. The market mechanism is the interaction of buyers and sellers. It can be described as follows:
- meeting the various needs of the individual;
- efficient allocation of resources;
- high adaptability of market participants to market changes.
Advantages, disadvantages and features
What is a market? This is an effective mechanism that coordinates the activities of economic entities. Benefits include:
- susceptibility to scientific and technological progress, as well as its prompt introduction into production areas;
- efficient allocation of resources;
- good adaptability to change;
- freedom of action and choice;
- meeting different needs.
In addition to pluses, there are also a number of minuses. These include:
- periodic ups and downs;
- does not conserve non-reproducible resources;
- does not create services such as he althcare, defense, education;
- does not protect the environment;
- does not guarantee the right to income and work;
- does not regulate the world's resources and we alth.
Some features of a market economy should be considered:
- variety of goods and services;
- flexible manufacturing;
- formation of a new type of labor relations;
- improving product quality and reducing costs;
- state regulation of competition.
Competition Methods
These include:
- Price competition - making super profits by reducing production costs.
- Non-price competition - increasing the quality of goods through the improvement of technical characteristics, the production of substitute goods, improving customer service, the use of mass advertising.
In modern conditions, the latter mainly prevails. In this regard, two types of markets can be distinguished: perfect and imperfect competition.
Perfect and imperfect competition markets
What is a perfectly competitive market? This is a state in which a huge number of producers, acting independently of each other, sell the same goods, and no one is able to control the marketprice. Such a market is called perfect, or free. Under these conditions, sellers cannot influence the market price of goods, and therefore must adjust to it.
What is an imperfect competition market? If at least one condition of a market of perfect competition is not met, then a type of market relations is formed in which market entities have the ability to influence prices, the conditions of commercial transactions, and impose the most attractive conditions for themselves on other participants in this process. Thus, within the framework of imperfect competition, the following types of markets are distinguished: pure monopoly, oligopoly, monopolistic competition.
Conclusion
The market is a complex mechanism based on different forms of ownership, financial and credit system and commodity-money relations. This is a system of economic relations between buyers and sellers, which covers the processes of distribution, production, consumption and exchange. Thus, the market is a certain type of economic system.
After reading the article, you have become familiar with the concept of the market and its main functions.
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