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; mechanism of relations between sellers and buyers; the sphere of exchange of goods and services within the country or between countries. The market provides the relationship of consumers and manufacturers. He pushes the production that the customer needs.
It stimulates production efficiency and cost reduction due to the introduction of new technology, as well as the use of modern technologies, as the market activates scientific and technological progress. In addition, the manufacturer must take care of the quality of its products, otherwise it will not be sold out, which means that the seller will not make a profit and will not be able to cover his costs. And you also need to constantly think about updating your products. Thus , the meaning of the word “market” is multifaceted.
Market system
This is a complex of a huge number of markets of different directions. There are three main types: consumer, factors of production and financial. The first is divided into wholesale and retail. The second - to the markets:
- lands - this includes the earth itself, mineral resources, crops, as well as minerals;
- labor is the entire working population;
- capital - it includes all buildings, structures, equipment, machine tools, as well as investments.
The third is the securities market (stocks) and money market, which includes loans, loans.
Free market
There is such a thing as a free or competitive market. By it is meant a system that regulates itself and maintains its balance, and also achieves results without the intervention of external factors. What is characteristic of a free market? Its main properties are listed below:
- mobility of all resources;
- product uniformity;
- unlimited number of participants;
- free entry and exit from it;
- participants cannot influence the decision of others.
Its functions are as follows:
- economic regulator;
- through prices provides information about the market;
- provides reorganization, and also optimizes the national economy.
Market conditions
The following are factors that influenced its occurrence:
- Labor specialization is a form of division of labor, for example, between different branches or spheres of production both within the enterprise and beyond its external borders at different stages of the production process.
- The social division of labor. The presence of many currently existing types of work is called the division of labor. Due to this, an exchange is formed between them, as a result of which the 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 fulfill 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.
- The economic isolation of producers. Everyone decides how and what to produce, for whom and where to sell the products.
- The freedom of the manufacturer. Any subject has the right to choose a profitable, desired, appropriate type of economic activity and carry out it in a form permitted by law.
Market classification
The following types of markets are distinguished:
- Factors of production - these include real estate markets, materials and raw materials, minerals and energy resources.
- Intellectual product markets - inventions, innovations, works of art and literature, as well as information services.
- Goods and services - all consumer markets are included.
- Financial - these are the markets of capital, securities, credit, monetary.
- Labor markets represent economic forms of labor movement.
Next, we 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 delivered to the market. Low prices indicate a surplus of goods, and high prices indicate a lack of offers. Information that concentrates on the market allows any business entity to assess its position with the 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 on the market. The balance of producer costs and utility for buyers determines the market price. Costs for the production of 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 usefulness of products and costs for the production of these goods.
- Regulatory function. The essence of the market in this case is the impact on all spheres of economic activity, mainly on production. A rising price signals that it is necessary to expand production, and if the price falls, then reduce. Constant changes in prices provide information on the state of affairs, and also have an impact on economic activity. The information that the market provides encourages manufacturers to improve product quality and reduce costs.
- Intermediary. In this case, you can give such a definition to the market - this is an intermediary, since it acts as an arbiter between sellers and buyers, allowing you to find a more profitable purchase and sale option.
- Sanitizing. “Natural selection” of business entities regularly takes place on the market. Due to such a phenomenon as competition, the market saves the economy from inefficient enterprises. And active and purposeful gives a "green light". Thus, the average level of market efficiency increases and the stability of the national economy as a whole increases.
Structure
Market structure - this is the internal structure, order, as well as the location of its individual elements. It can be divided according to the following criteria.
By the degree of restriction of competition:
For economic purposes of market relations:
- consumer goods and services;
- industrial goods;
- intermediate goods;
- commodity market;
- labor market and stock;
- know-how.
By the nature of sales:
Market economy
The market and the market economy are a system that is based on private property, freedom of choice, and is also based on personal interests. The subjects of a market economy take all decisions on their own, 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 of production, as well as marketing of products for the highest profit. The market and 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 interacts buyers and sellers. It can be described as follows:
- satisfaction of various needs of an individual;
- efficient allocation of resources;
- high adaptability of market participants to changes in the market.
Advantages, disadvantages and features
What is a market? This is an effective mechanism that coordinates the activities of economic entities. The following advantages can be distinguished:
- susceptibility to scientific and technological progress, as well as its prompt implementation in the manufacturing sector;
- efficient allocation of resources;
- good adaptability to changes;
- freedom of action and choice;
- satisfaction of different needs.
In addition to the pros, there are also a number of disadvantages. These include:
- periodic ups and downs;
- does not contribute to the conservation of non-reproducible resources;
- Does not create such services as healthcare, defense, education;
- does not protect the environment;
- does not guarantee the right to income and labor;
- does not regulate world resources and wealth.
Some features of a market economy should include:
- variety of goods and services;
- flexible production;
- the formation of a new type of labor relationship;
- improving the quality of goods and reducing costs;
- state regulation of competition.
Competition methods
These include:
- Price competition - obtaining excess profits by reducing the cost of production.
- 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 predominates. In this regard, two types of markets can be distinguished: perfect and imperfect competition.
Markets for perfect and imperfect competition
What is a perfect competition market? This is a condition in which a huge number of manufacturers, acting independently from each other, sell the same goods, and none are able to control the market price. Such a market is called perfect, or free. Under these conditions, sellers cannot influence the market price of goods, and therefore must adapt to it.
What is an imperfect competition market? If at least one market condition of perfect competition is not fulfilled, then a type of market relationship is formed in which market entities have the ability to influence prices, terms of commercial transactions, to impose the most attractive conditions on themselves for other participants in this process. Thus, in the framework of imperfect competition, the following types of markets are distinguished: pure monopoly, oligopoly, monopolistic competition.
Conclusion
The market is a complex mechanism, which is 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 got acquainted with the concept of the market and its main functions.