EZ Pedia » Society » Economics » Markets

Overview

Within the economy several markets exist for exchange between producers and consumers. A market is a place or situation where a buyer and seller communicate with each other and undertake an exchange, although they do not need to meet in person. Auctions, door-to-door sales, mail-order sales, retail shops, fleamarket stalls, telephone sales, home demonstrations, mobile shops, internet shopping websites and sales through brokers or agents are all examples of markets.

Types of Markets

There are four main types of markets:

• Goods and services market: This is the most common type of market and is where producers provide consumers with goods and services in exchange for consumer spending as payment.
  
• Resources market: This is where natural, capital and human resources, or factors of production, are exchanged for income. For example:
  

  The household sector provides human resources in the form of labor in exchange for wages and entrepreneurship in exchange for profit.
  

  The financial sector provides capital resources in the form of capital investment, which will be invested in capital goods, methods and processes, in exchange for interest.
  

  The household and producer sectors provide natural resources in the form of land in exchange for rent.

• Domestic money market: This is the market for money. Supply of money within an economy usually remains equal. Financial institutions loan from households and producers for interest and then loan this on to other households and producers at a higher interest rate.
  
• Foreign exchange market: This involves the exchange between two different currencies. A currency can depreciate or appreciate in relation another currency.

Non-Market Activity

Not every economic activity within society is done in a market. Non-market alternatives to market allocation may be used for a variety of reasons, such as consideration for the environment. Non-market exchange systems such as barter and local currency exchange systems are common ways in which exchange can occur outside of a market. Any form of self-sufficiency, like growing one's own vegetables or participating in "do-it-yourself" activities, eliminates some need for market activity, although only a very small proportion of the world are fully self-sufficient.

Gross Domestic Profit, or GDP, is typically used to measure economic activity within an economy, but it does not include non-market activity. Therefore, there is no official measurement of non-market activity and no way to fully indicate how much economic activity occurs within an economy.