Market and Market Economy

We can hardly develop the idea of a market economy without understanding the concept of a market. What is “a market?” Suppose the government isn't getting involved in the production and distribution choices. And suppose there is no tradition directing the economic activities and choices in the society. Without governmental or social control over the economic choices we are all on our own. But somehow things must be produced and distributed. Otherwise we will all starve! The only way seems like this: if you want something, produce it for yourself!

But perhaps you can induce someone else to produce things for you. This great idea might easily be realized. Just offer a high price, and someone will produce and sell whatever you want. And that, in a nutshell, is a market process.

Ideally, the market process is only an extension of the way things work in nature. That's the way it is with all the animals and birds – and even plants! The productive ones get to consume and live. The unproductive ones die.

The market process modifies this natural “produce and consume” cycle in only one way: it gives each person the opportunity to produce one thing and then consume a different thing. The market process lets you specialize in producing something you are good at, and then trade to get the other things you want on the market.

The historical origin of markets is the physical marketplaces which would often develop into small communities, towns and cities. So is it a place? A thing? Neither, it is a concept. If you are growing tomatoes in your backyard “for sale ”, you are producing “for the market”. If you mow lawns to earn money, you are producing a service “for the market”. When you spend your income you are buying “from the market”.

In professional terms, the concept of a market may be defined as any structure that allows buyers and sellers to exchange any type of goods, services and information. The exchange of goods or services for money is a transaction. Market participants consist of all the buyers and sellers of a good who influences its price..

Returning to the concept of a market economy, now we may define it as an economy based on market principles and using market mechanisms for its functioning. In other words, consumers and producers drive the economy. The former are free to spend their money as they wish, to enter into business and or to send their labour to whomever they want. The latter will decide what goods and services they will offer.

Sources:

http://www.britannica.com,http://en.wikipedia.org,

ECONOMICS Campbell R.McConnell., Stanley. L. Brue.

Date: 2015-10-18; view: 337; Нарушение авторских прав