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Organization of the market economy - Defining market types

Updated on May 28, 2016

The term “market” is commonly used in everyday language. In economic literature, numerous definitions on market have been offered such as the followings:

A market is the entire enterprise of buying and selling goods and services at a particular location or geographical dispersed locations.

A market is a process in which buyers and sellers of goods and services interact to determine prices and quantities to be exchanged.

A market is the intersection at a certain point of time between supply of and demand for goods and services.

A market is a self-coordinating mechanism which adjusts the behaviors of the sellers and buyers on the basis of prices.

Noticeably, a market may not be situated at a certain place, for example: stock market and telephone and telex sale-orders.

There are many classifications of markets, depending on different criteria. Here, we speak of markets related to economic cycles as follows.

  1. a. Goods and service market:

Goods and service market can be divided into general consumer goods and service market such as: food, clothes, household appliances and entertainment equipment.

  1. b. Labor market

In labor market, there are households that provide labor force and conversely enterprises that provide employment and pay. Labor market includes the entire working population, i.e. people of working age.

  1. c. Capital market

There exists every type of demand for and supply of finance-related services. Normally, there are three types of capital markets:

Money market has the function of providing short-term and medium-term financing and investment.

Financial market has the function of supplying long-term financing and investment, such as shares of stock and bonds.

Exchange market has the function of exchanging national currencies for foreign currencies and vice versa.

It is also necessary to explain about the term “market mechanism”.

Speaking of market mechanism is to mention the use of price and quantity of consumption in the market to predict the expected output or to distribute the resources.

Therefore, the basic feature of market mechanism is price signal. Price system is an effective means of communication. It is necessary to notice that market mechanism is a means to achieve an end, not an end in itself.

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