With the historical development of the production of goods and services, markets were created that went the hard way from traditional bazaars to modern structures characterized by computer equipment and high electronic technologies. In this article, the concept, functions and types of the market are studied in detail, and also certain categories of market structures are examined in accordance with modern standards.
Essence of the market
Today, the concept of the market should be understood as a highly organized system of economic relations between various economic entities: households, various types of organizations (of course, in this case the most large-scale companies come to the fore) and, of course, by the state (including bodies of a supranational focus). The state mainly fulfills the guiding and regulatory role in organizing the common system. These relationships are based on the sale of goods and services in the field of circulation. In addition, the modern market is also defined as an instrument for the implementation of such relations in full accordance with the laws on the production of goods and the circulation of funds.
The market structure today is highly organized, in addition, it involves the quality management of resources corresponding to one or another element of the classification considered below. So, the market structure includes sellers and buyers of goods, manufacturers and, of course, its consumers. The interaction of the presented categories always leads to the formation of market prices. For example, participants in the foreign exchange market are developing their activities in order for prices of this category to meet international standards and allow the national economy to fully develop.
Market infrastructure
It is important to note that the market is endowed with its own infrastructure, which should be understood as an organized set of organizations and institutions of state or commercial nature of activity, ensuring the full and high-quality functioning of market relations, as well as competent resource management. The key elements of market infrastructure are the following elements:
- Commercial network.
- Customs system.
- Tax system.
- National Bank of a country, as well as commercial entities.
- Exchange.
The concept of market infrastructure can be considered as a system of organizations and institutions that fully ensures the movement of goods and services on the market in a free way. This is a kind of complex of institutions and types of management that form the conditions of an organizational and economic nature in order for the market to function normally. The conditions for successful functioning, as noted above, are also created by participants in the economic process, which necessarily include organizations and enterprises of state or commercial nature of management, as well as various services.
The market infrastructure is endowed with an appropriate organizational basis, which is comprised of supply and sales, brokerage and other intermediary-type organizations, as well as large-scale enterprises, naturally endowed with a commercial character. It is important to add that the material base in this case is formed from such elements as the transport system (or several thereof), storage and packaging facilities, an information system, as well as a communication system.
The purpose of the existence and activity of market infrastructure participants is to facilitate the performance of transactions of a commodity exchange nature, exercise control over them (both economically and legally), increase the efficiency and effectiveness of the process of their implementation, as well as provide information support. As a rule, it is the type and type of market that determines the specific configuration of the infrastructure.
Market functions
When the structure of the market (finance, for example) is studied, it is advisable to determine the functions that this category performs. So, they are designated, as a rule, in accordance with the tasks facing the market. What to produce? How and for whom? To answer these questions, the market performs the following functions:
- The regulatory function allows us to ensure constant relations between various sectors of production activity, demand (depending on which market resources vary) and consumption. Through this function, economic proportions are clearly established, and continuity in the process of restoring production is also ensured.
- The pricing function is responsible for the formation of a market price depending on the demand for a particular product. It should be noted that there are certain factors of supply, which depend on demand. The price is set in the process of interaction between producers and consumers, as well as supply and demand for the product.
- The intermediary function causes the market to act as an intermediary between the producer and the consumer. At the same time, it is possible to find the most profitable alternative to the sale. For example, today, participants in the foreign exchange market can easily find each other, because all the conditions are created for this.
What else?
In addition to the functions listed above, the market also performs additional:
- The information function considers the system as the richest source providing the market information resources needed by all business entities. So, continuously changing prices provide objective information about the required quantity, assortment and quality of economic goods. The market, like a huge computer, collects in one set, qualitatively processes and presents competent information within a given economic territory.
- The sanitizing function argues "natural selection" produced by the market mechanism among economic entities. Thus, the market monitors supply factors, removes economically weak production and adequately encourages powerful ones.
- The stimulating function argues for the encouragement of the most rational users of factors of production (it is they who come to decent results). As a rule, these economic entities use the innovative achievements of science, technology, organization and, of course, management. For example, the development of the resource market will only take place if new technologies are introduced with regard to all aspects of the activity.
- The creative and destructive function determines the dynamic change in economic proportions between industries or regions. The market kind of blows up an outdated economic structure and gradually forms a new one.
Market elements
As it turned out, the successful functioning of the market requires the fulfillment of three conditions: the presence of private property, free prices and, of course, healthy competition. Between economic entities (namely, sellers and buyers), purchase and sale relations are developing, with which the market resources are directly related. So, the main elements should include supply, demand and, of course, the price of the product. The fact is that the first two are effectively balanced by the third element. In the case of increased demand and unchanged supply, the price will also rise. But if demand falls, the price will drop (for example, on market resources). With increasing supply and constant demand, the price will fall (and vice versa).
Market classification
In the economy there is an incredible number of types of market. So, it is advisable to group them according to various criteria: territorial aspect, economic purpose, and so on. So, in terms of spatial coverage, markets are divided into global, national and local. Depending on the degree of competition, the following structures are distinguished:
- The market of perfect competition includes a huge number of sellers who act independently from each other, and the corresponding number of buyers. In this case, the price range for transactions is very wide, and the participants in the process have equal rights and opportunities.
- Oligopoly is characterized by a small number of sellers and the interdependence of manufacturers. In this case, a separate economic entity is able to predict the response of competitors to changing market conditions.
- Pure monopoly assumes that there is only one seller of a certain product on the market. So, the manufacturer can dictate the terms of the transaction without fear - and they will certainly agree to them.
It is impractical to list all the classifications, but it is worth dwelling on the division of markets according to the object of sale, in accordance with which financial, commodity and raw material markets, labor, land and real estate markets are distinguished. They are discussed in detail in subsequent chapters.
The labor market and its role in society
The labor market should be understood not only as a set of relations in terms of hiring and employing labor, but also as a historically emerging mechanism that regulates a specific circle of social and labor contacts that establish and subsequently maintain a balance of interests between workers, entrepreneurs and, of course, the state. This mechanism covers a wide range of factors (economic, legal, psychological, social). It is they who determine the functioning of the labor market. It is important to note that the labor market models known today are formed due to the unequal state of these factors in different countries. It depends on the historical and economic conditions of the functioning of a market economy in a particular country. For example, in the USA, the economy is developing rapidly and productively, and, say, in India things are much worse. In the modern economy, the following labor market models are distinguished:
- Competitive market.
- Monopolistic.
- Labor market in which trade unions participate.
- Bilateral monopoly.
Financial market
The global financial market is nothing more than a combination of national and international markets. It provides direction, accumulation, as well as the redistribution of funds between market entities. These mechanisms occur through specialized financial institutions. Financial resources of the financial market are subject to the above operations mainly with the aim of achieving a good balance between supply and demand of capital. In this case, the key object of sale is financial resources. It is important to note that here the classification of the main structure into separate elements is appropriate: monetary, credit, foreign exchange, insurance, mortgage markets, securities, investment markets and so on. It is on such a classification that the structure of the financial market is based. The market in question performs a number of functions, the main ones of which are the following items:
- Redistribution of capital.
- Savings in terms of costs incurred in the circulation process.
- Accelerating the concentration of capital.
- Intertemporal trade, which allows to significantly reduce the costs of economic cycles.
- Promoting continuous reproduction.
Natural resources market
Under natural resources should be understood a set of environmental conditions, the use of which in the process of creating goods, services or spiritual values is considered possible. The market of non-renewable natural resources (its restoration after full use is impossible or inappropriate) is characterized by the following features:
- Limited resource potential.
- Resource owners have the power to effectively influence economic processes.
- Such resources are in any case effective for the owner (regardless of whether they will be used).
The renewable natural resource market is determined by the basis of the land market theory. Thus, the following provisions correspond to renewable resources:
- Full preservation in relation to fertility and high level of land productivity.
- Close relationship with both climatic and soil biological factors.
- Economic processes in agriculture are intertwined with natural ones.
- A long cycle of agricultural production is appropriate.
- Small or medium-sized firms dominate and so on.
The features listed above create a special type of economic relationship regarding the ownership and use of land, which gives rise to land rents. What is it? Land rent is nothing but income received by the owner of land resources. This is a kind of economic form of land ownership.
