Everything about Markets totally explained
» For the island shared by Finland and Sweden, see Märket.
In
economics, a
market is a social structure that has emerged more or less spontaneously or has been constructed deliberately by human interaction to enable the exchange of rights (cf.
ownership) of services and goods. Markets enable services, 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. This is commonly done through
trade. These trades may be handled a variety of ways, but in small market environments, buyers and sellers typically deal in
currency, and goods. In everyday usage, the word "market" may also refer to the
location where goods are traded, or in other words, the marketplace.
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
private electronic market, 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 don't 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 don't physically interact. There can also be markets for goods under a command economy despite pressure to repress them.
The market can be divided into several types according to various functions. 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.
Further Information
Get more info on 'Markets'.
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