Market

Fruit Market in Singapore

Por menor market in Villa Nueva, Guatemala

In economics, a market is a set of transactions that processes or exchanges goods or services between individuals. The market does not make direct reference to profit or companies, but simply to the mutual agreement within the framework of transactions. These may have individuals, companies, cooperatives, among others, as participants. The market contains users in search of insufficient resources in relation to unlimited needs.

The market is also the social (or virtual) environment that fosters the conditions for exchange. In other words, it must be interpreted as the institution or social organization through which the suppliers (producers, sellers) and demanders (consumers or buyers) of a certain type of good or service enter into a close commercial relationship in order to carry out extensive commercial transactions.

The first markets in history functioned through barter. After the appearance of money, commercial codes began to be developed that, ultimately, gave rise to modern national and international companies.

As production increased, communications and intermediaries began to play a larger role in markets.

A definition of the market according to marketing: Set of consumers who want, can and are willing to buy or sell a product offered.

Miscellaneous definitions

• Market is any arrangement that allows buyers and sellers to obtain information and do business with each other
• Market is a mechanism through which buyers and sellers interact to determine prices and exchange goods and services.
• Market is a group of buyers and sellers of a particular good or service.

Types of markets

They are distinguished or differentiated by:

• The retail or retail markets and wholesale markets or distributors.
• Markets of intermediate products or raw materials.
• Securities markets (value balances).

-In the market there may be different intermediaries.

Another division or classification may be

• According to the type of good or service that is exchanged, we can talk about markets of goods and services and markets of productive factors. In a market economy, the markets of goods and services are those that determine what to produce and those of factors respond to the problems of how and for whom to produce.
• Attending degree of competition or market structureWe talk about competitive markets and non-competitive markets. In the first, the number of participants is very high and no one has power over market conditions, i.e. prices and quantities. In the latter, either because the number of participants is smaller or for other reasons that will be explained later, one of the market participants has some power over the determination of prices and/or quantities.
• Depending on the degree of regulationmarkets can be free or intervened. A market is free when no authority controls the conditions of the market, so that participants buy and sell freely, and the price is the result of the interaction of offenders and plaintiffs. We speak of markets intervened or regulated when prices or quantities are determined by someone outside the market.
• It is also common to hear about so-called "black markets". These refer to the markets that operate outside the existing legalityeither because what is exchanged is non-legal goods and services, or because the activities they carry out are beyond the control of the economic authorities and are not accounted for in the national product of a country.

The term market is also used to refer to potential or estimated consumer demand. The classical concept of free competition market defines a type of ideal market, in which the number of interrelated economic agents, both buyers and sellers, is such that none of them is capable of modifying the price (perfect competition), will be different from the one that is generated in a market where a reduced number of sellers concur (oligopoly). As an extreme case, where competition is non-existent, the one in which the market is controlled by a single producer (monopoly) stands out. In any of these situations, producers may share the market with a large number of buyers, with few or only one. Considering the internal structure, the number of agents that participate in the market and the level of competition, they can be classified as:

• Perfect competition markets.
• Markets of imperfect competition.

Perfectly competitive market

Not all markets are efficient in the sense that technical conditions called perfect competition do not exist in all of them. Efficient or perfectly competitive markets are those in which it is assumed that there are so many sellers and buyers of the same good or service that none of them, acting independently, can influence the determination of the price and that this, in turn, is given and it is set by the same market forces.

Perfect competition is an idealized representation of markets for goods and services in which the reciprocal interaction of supply and demand determines the price. A perfectly competitive market is one in which there are many buyers and many sellers such that no single buyer or seller exerts a decisive influence on the price. For this to happen, these seven elements must be met:

1. Existence of a large number of offenders and plaintiffs. The individual decision of each of them will exert little influence on the global market.
2. Homogeneity of the product. There are no differences between products that sell offers.
3. Market transparency. All participants are fully aware of the general conditions under which the market operates.
4. Freedom of entry and exit of companies. All companies, when they wish, can enter and leave the market.
5. Free access to information.
6. Free access to resources.
7. Benefit equal to zero in the long term.

The essence of perfect competition does not refer so much to rivalry as to the dispersion of the control capacity that economic agents can exercise over the market brand. When any of the requirements for perfect competition is violated or not met, a market failure occurs.

The functioning of markets in perfect competition

In a market free of restrictions or a market with perfect competition, the supply and demand of the different goods determine an equilibrium price for each good, and at that price the companies freely decide how much to produce. Consequently, the market determines the price and each company accepts this price as a fixed data on which it cannot influence. When the demand for a product does not significantly affect possible complementary or supplementary products, the demand curve can be defined and partial equilibrium determined for a market for a single good. Starting from the equilibrium price, each individual company will produce the quantity indicated by its supply curve for that specific price. The supply curve of each company is conditioned by its cost of production. (Marginal cost in more precise terms).

At the price determined in the equilibrium of a competitive market, companies will not, in general, have the same benefits. This will be because, although we assume that all companies know the same technology in the short term, the fixed installations of each company will be different, so that the costs and benefits will be different.

Although this situation may exist in the short term (as long as it is not possible to alter the size of the company), it will not continue as soon as the organizations manage to re-adapt their production processes. In addition, the benefits obtained by the most efficient companies will be taken into account by companies from other markets or sectors. Again. In the short term, they will not be able to leave the sector in which they are located, but as soon as they can liquidate their facilities, they will.

Thus, in a perfectly competitive market there is a tendency for costs to be minimized and thus benefits to be equalized.

The term "the market is emptied", comes from the same thing: the objective of perfect competition is met, which is to maximize excess supply by businessmen, and excess demand by consumers. An "empty market" it is the one in which everything that was produced was sold and bought.

Perfect competition and economic efficiency

In perfectly competitive markets, the long-term benefit is nil, since as long as a market offers the possibility of obtaining a net benefit from an investment, more and more producers will enter until the benefit is cancelled. Naturally, in practice, perfect competition is unrealizable and in the short and medium term the market is not perfectly competitive, and it is in this situation that companies can obtain benefits. When the market is close to being perfectly competitive, companies that want to make a profit must generally take better advantage of technology to reduce costs and increase the profit margin between the selling price and the unit cost of production.

Imperfectly competitive markets

Imperfectly competitive markets are those in which goods and producers are large enough to have a noticeable effect on price. There are several models of this type of market, including the monopolistic market and the various oligopolistic models. There are also markets where a buyer has enough market share to influence the price of such markets, an example of such markets are monopsony and oligopsony.

The fundamental difference with perfectly competitive markets lies in the ability of supplying companies to control the price. In these markets, the price is not accepted as foreign data, rather the bidders actively intervene in its determination.

In practice the real market is imperfect, perfect competition being a theoretical optimum. On the contrary, in strongly monopolistic markets, competition occurs between capitals, which seek the maximum benefit in competition with investments in other markets.

In general, it can be said that the higher the number of participants, the more competitive the market will be, but monopoly does not imply that there is no competition.

Denominations and market types

By geographical area

• International market or foreign market: It is the one found in one or more countries abroad.
• National market or domestic market: It is the one that covers the entire national territory for the exchange of goods and services.
• Regional market: It is a geographical area freely determined, which does not necessarily coincide with political limits.
• Marketing Exchange to the Greater: It is the one that develops in areas where companies work to the greater within a city.
• Metropolitan Market: This is an area within and around a relatively large city.
• Local market: It is the one that develops in established stores or in modern shopping centers within a metropolitan area.

Examples of an international market that at the same time constitute a regional market are:

• Interior market of the European Union
• Mercosur (Common Market of the South)

By its nature

• Financial Markets It is a mechanism that allows economic agents to exchange financial assets. In general, any market of raw materials could be regarded as a financial market if the purpose of the buyer is not the immediate consumption of the product, but the delay of consumption in due course.
  • Bonus Market It is a financial market where participants buy and sell debt titles, usually in the form of bonds
  • Capital market They are a type of financial market in which medium- and long-term financing funds or means are offered and demanded. In front of them, the monetary markets are those that offer and demand funds (liquidity) in the short term.
  • Securities market They are a type of capital market in which variable income and fixed income are negotiated in a structured way, through the sale of negotiable values. Allows mid- and long-term channeling of investors to users.
  • Primary market: The primary market or emission market is the financial market in which negotiable values are issued and where the titles are transmitted for the first time. Securities markets are divided into primary and secondary markets, separating the emission phase of securities and subsequent negotiation.
  • Secondary market It is a part of the financial market of capital dedicated to the sale of values that have already been issued in a first public or private offer, in the so-called primary market.
• Bilateral market It is a market in which a group of users generates externality over another, there is a platform that puts them in contact. Examples of bilateral markets are: Credit Cards, Video Games Consoles, Dating Agencies. The auction websites.

• The captive market is called a captive market in which there are a number of entry barriers that prevent competition, and turn the market into a monopoly or oligopoly. It's the opposite of the free market.
• Grey Market It is a term derived from the English language that refers to the flow of goods that is done through the distribution channels different from those authorized by the manufacturer or the producer. Unlike the black market, 'grises' goods are not illegal
• Free market System in which the price of goods or services is agreed by consent between sellers and consumers, through supply and demand laws. It requires for its implementation of the existence of free competition, which in turn requires that among the participants of a commercial transaction there be no coercion, no fraud, etc, or, more generally, that all transactions be voluntary.
• Black market Term used to describe the illegal and clandestine sale of goods, products or services, violating the pricing or rationing imposed by the government or companies.
• Labour market or marketplace where demand and supply of work converge. The labour market has particularities that differentiate it from other markets (financial, real estate, raw materials, etc.) as it relates to the freedom of workers and the need to guarantee it. In this regard, the labour market is often influenced and regulated by the State through labour law and a special form of contracts, collective labour agreements.

By the economic or cultural sector in which you work:

They can also be differentiated by economic or cultural sector:

• Real estate market: refers to the dynamics of buying-sale of real estate assets (vivienda, commercial, lots). "the growing interest in investing in real estate has led to the emergence of new investment vehicles in this sector, adding more complexity to the real estate market that increasingly looks like financial markets"
• Financial market
• Market of consumer goods and services
• Market of raw materials
• Stock market or capital
• Art Market
• Craft market

The market from marketing

Market tool

From a marketing point of view, the market is made up of all current and potential consumers or buyers of a certain product. The measurement process is a fundamental aspect in market research. The measurement of market phenomena is essential for the process of providing significant information for decision making. The aspects that are commonly measured are: the market potential for a new product, groups buyers according to demographic or psychographic characteristics, the attitudes, perceptions or preferences of buyers towards a new brand, or determining the effectiveness of a new campaign. advertising. For many research projects, the measurement error can be considerably larger than the sampling error. Having a clear understanding of the measurement problem and how to control this error is an important aspect in designing an effective marketing research project. The task of selecting and designing measurement techniques is the responsibility of the research specialist. However, often the decision maker must approve recommended measurement techniques and needs to be sure that these techniques are effective in controlling measurement error. The size of a market, from this point of view, is closely related to the number of buyers that should exist for a given offer. All market members should meet three characteristics: desire, income and possibility of accessing the product.