Market (economics)

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"Market forces" redirects here. For the novel by Richard Morgan, see Market Forces. For
other uses, seeMarket.
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A market is one of the many varieties of systems, institutions,procedures, social
relations and infrastructures whereby parties engage in exchange. While parties may
exchange goods and services by barter, most markets rely on sellers offering their goods or
services (including labor) in exchange for money from buyers. It can be said that a market
is the process by which the prices of goods and services are established.
For a market to be competitive, there must be more than a single buyer or seller. It has
been suggested that two people may trade, but it takes at least three persons to have a
market, so that there is competition in at least one of its two
sides.
[1]
However, competitive markets, as understood in formal economic theory, rely on
much larger numbers of both buyers and sellers. A market with a single seller and multiple
buyers is a monopoly. A market with a single buyer and multiple sellers is a monopsony.
These are the extremes ofimperfect competition.
[citation needed]

Markets vary in form, scale (volume and geographic reach), location, and types of
participants, as well as the types of goods and services traded. Examples include:
Physical retail markets, such as local public markets,farmers' markets, street
markets, flea markets, bazaars, and other public marketplaces; shopping
centers andshopping malls
Physical wholesale markets
(Non-physical) internet markets (see electronic commerce)
Ad hoc auction markets
Markets for intermediate goods used in production of other goods and services
Labor markets
International currency and commodity markets
Stock markets, for the exchange of shares in corporations
Artificial markets created by regulation to exchange rights for derivatives that have
been designed to ameliorate externalities, such as pollution permits (see carbon
trading)
Illegal markets such as the market for illicit drugs, arms orpirated products
In mainstream economics, the concept of a market is any structure that allows buyers and
sellers to exchange any type of goods, services andinformation. The exchange of goods or
services for money is atransaction.
[citation needed]
Market participants consist of all the buyers
and sellers of a good who influence its price. This influence is a major study
ofeconomics and has given rise to several theories and models concerning the basic
market forces of supply and demand. There are two roles in markets,buyers and sellers.
The market facilitates trade and enables the distribution and allocation of resources in a
society. Markets allow any tradable item to be evaluated and priced. A
market emerges more or less spontaneously or may be constructed deliberately by human
interaction in order to enable the exchange of rights (cf. ownership) of services and goods.
Contents
[hide]
1 Types of markets
o 1.1 Financial markets
o 1.2 Prediction markets
2 Organization of markets
3 Mechanisms of markets
4 Study of markets
5 Size parameters
6 See also
7 Notes
8 References
9 Further reading
10 External links
Types of markets[edit]
A Market is a group of buyer and seller, where buyer determine the demand and seller
determine the supply is called the market, there are some Market which is given below.
Although many markets exist in the traditional sense such as a marketplace there are
various other types of markets and various organizational structures to assist their
functions. The nature of business transactions could define markets.


Corn Exchange in London circa 1809
Financial markets[edit]
Financial markets facilitate the exchange of liquid assets. Most investors prefer investing in
two markets, the stock markets and the bond markets.NYSE, AMEX, and the NASDAQ are
the most common stock markets in the US. Futures markets, where contracts are
exchanged regarding the future delivery of goods are often an outgrowth of
general commodity markets.Currency markets are used to trade one currency for another,
and are often used for speculation on currency exchange rates. The money market is the
name for the global market for lending and borrowing.
Prediction markets[edit]
Prediction markets are a type of speculative market in which the goods exchanged are
futures on the occurrence of certain events. They apply the market dynamics to facilitate
information aggregation.
Organization of markets[edit]
A market can be organized as an auction, as a private electronic market, as a commodity
wholesale market, as a shopping center, as a complex institution such as a stock market,
and as an informal discussion between two individuals.
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 during negotiation. There can also be markets for goods under a
command economy despite pressure to repress them.
Mechanisms of markets[edit]
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 relative level of organization and
negotiating power of buyers and sellers markedly affects the functioning of the market.
Markets where price negotiations meet equilibrium though still do not arrive at desired
outcomes for both sides are said to experience market failure.
Markets are a system, and systems have structure. The structure of a well-functioning
market is defined by the theory of perfect competition. Well-functioning markets of the real
world are never perfect, but basic structural characteristics can be approximated for real
world markets, for example:
many small buyers and sellers
buyers and sellers have equal access to information
products are comparable
There exists a popular thought that free markets would have a structure of a perfect
competition. The logic behind the thought is that market failures are thought to be caused
by other exogenic systems, and after removing those exogenic systems ("freeing" the
markets) the free markets could run without market failures.
As an argument against such a logic there is a view that suggests that the source of market
failures is inside the market system, so the removal of other interfering systems would not
result in markets with a structure of perfect competition. For instance, such an argument
may suggest that capitalists don't want to enhance the structure of markets, just like
a coach of a football team would influence the referees or would break the rules if he could
while he is pursuing his target of winning the game. Thus, it argues the capitalists are not
enhancing the balance of their team versus the team of consumer-workers, so the market
system needs a "referee" from outside that balances the game. The role of a "referee" of
the market system is usually given to a democraticgovernment.