MARKETS

The function of a market requires that both parties expect to become better off as a result of the transaction. Markets are efficient when the price of a good or service attracts as much demand as the market can currently supply. The chief function of a market is to adjust prices to accommodate fluctuations in supply and demand. An economic system in which goods and services are exchanged by market functions is called a market economy. An alternative economic system in which non-market forces determine prices is called planned economy or command economy. The attempt to combine socialist ideals with the incentive system of a market is known as market socialism.

There are various types of markets and organizational structures to assist their functions. A market can be organized as an auction, 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. Markets may be distorted by a seller or sellers with monopoly power, or a buyer with monophony power. The level of organization or negotiation power of buyers, markedly affects the functioning of the market. Markets where price negotiations do not arrive at efficient outcomes for both sides are said to experience market failure.

‘Market’, Wikipedia

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