Market definition

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What is a market?

A market is a place where parties can come together to facilitate the exchange of goods and services. The parties involved are usually buyers and sellers. The market can be physical like a point of sale, where people meet face to face, or virtual like an online marketplace, where there is no direct physical contact between buyers and sellers.

Key points to remember

  • A marketplace is a place where buyers and sellers can meet to facilitate the exchange or transaction of goods and services.
  • Markets can be physical like a point of sale, or virtual like an e-trader.
  • Other examples include illegal markets, auction markets, and financial markets.
  • Markets set prices for goods and services which are determined by supply and demand.

Understanding the markets

Technically speaking, a market is any place where two or more parties can meet to engage in an economic transaction, even those that are not legal tender. A market transaction may involve goods, services, information, currencies or any combination of these passing from one party to another. In short, markets are arenas in which buyers and sellers can come together and interact.

In general, while only two parties are needed to complete a transaction, at least one third party is needed to introduce competition and balance the market. Thus, a fully competitive market, among other things, is necessarily characterized by a high number of active buyers and sellers.

Beyond this broad definition, the term “market” encompasses a variety of things, depending on the context. For example, it can refer to where the securities are traded, the stock market. Alternatively, the term can also be used to describe a group of people who wish to purchase a specific product or service in a specific location, such as the Brooklyn real estate market. Or it could refer to an industry or business sector, such as the global diamond market.

Whatever the context, the market sets the prices for goods and other services. These tariffs are determined by supply and demand. Supply is created by sellers, while demand is generated by buyers. Markets try to find a certain equilibrium in prices when supply and demand are themselves in equilibrium. But that balance in itself can be upset by factors other than price, including income, expectations, technology, cost of production, and the number of participating buyers and sellers.

Markets can be represented by physical locations where transactions take place. These include retail stores and other similar businesses that sell individual items to wholesale markets selling products to distributors. Or they can be virtual. Internet stores and auction sites such as Amazon and eBay are examples of marketplaces where transactions can take place entirely online and the parties involved never physically connect.

Markets can emerge organically or as a means of enabling property rights in goods, services and information. When at the national or other more specific regional level, markets can often be classified as “developed” or “developing” markets, depending on many factors, including income levels and openness. from the country or region to foreign trade.

The size of a market is determined by the number of buyers and sellers, as well as the amount of money that changes hands each year.

Types of contracts

Markets vary widely for a number of reasons, including the types of products sold, location, duration, size and mix of customer base, size, legality, and many other factors. Besides the two most common marketplaces (physical and virtual), there are other types of marketplaces where the parties can meet to execute their trades.

Underground market

An underground market refers to an illegal market where transactions take place without the knowledge of the government or other regulatory bodies. Many illegal markets exist in order to circumvent existing tax laws. This is why many involve cash-only transactions or non-traceable forms of currency, making them more difficult to track.

Many illegal markets exist in countries with planned or controlled economies, where the government controls the production and distribution of goods and services, and in countries with economic development. When there is a shortage of certain goods and services in the economy, members of the illegal market step in and fill the void.

Illegal markets can also exist in developed economies. These parallel markets, as they are also called, become prevalent when prices control the sale of certain products or services, especially when demand is high. Ticket scalping is an example of an illegal or parallel market. When the demand for concert or theater tickets is high, the scalpers will step in, buy a bunch of them and sell them at inflated prices in the underground market.

Auction market

An auction market brings together many people for the sale and purchase of specific lots of goods. Buyers or bidders try to outdo each other for the purchase price. Items put up for sale end up going to the highest bidder.

The most common auction markets are for livestock, foreclosed homes, art, and antiques. Many are operating online now. For example, the US Treasury sells its bonds, notes and bills through regular auctions.

Financial market

The generic term “financial market” refers to any place where securities, currencies, bonds and other securities are traded between two parties. These markets are the basis of capitalist societies and they ensure the formation of capital and the liquidity of companies. They can be physical or virtual.

The financial market includes exchanges such as the New York Stock Exchange, Nasdaq, LSE, and TMX Group. Other types of financial markets include the bond market and the forex market, where people trade currencies.

Market regulation

In addition to underground markets, most markets are subject to rules and regulations established by a regional or governing body which determines the nature of the market. This can be the case when the regulation is as broad and as widely recognized as an international trade agreement, or as local and temporary as a pop-up street market where vendors keep order and rules between them.

In the United States, the Securities and Exchange Commission (SEC) regulates the stock, bond and currency markets. It puts in place provisions to prevent fraud while ensuring that traders and investors have the right information to make the most informed decisions possible.

How do the markets work?

Markets are arenas where buyers and sellers can come together and interact. A fully competitive market is necessarily characterized by a high number of active buyers and sellers. The market sets the prices for goods and other services. These tariffs are determined by supply and demand. Supply is created by sellers, while demand is generated by buyers. Markets try to find a certain equilibrium in prices when supply and demand are themselves in equilibrium.

What is a black market?

A black market refers to an exchange or illegal market where transactions occur without the knowledge or supervision of officials or regulatory bodies. They tend to arise when there is a shortage of certain goods and services in the economy, or when supply and prices are controlled by the state. Transactions tend to be undocumented and only cash, especially since they cannot be found.

How are the markets regulated?

Most contracts are subject to rules and regulations established by a regional or governing body which determines the nature of the contract. These can be international, national or local authorities.


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