Role of markets 2.1

Market and exchange defenition

A way of bringing together buyers and sellers to buy and sell (exchange) goods and services

e.g. street markets, online markets, stock markets, intl. trade

exchange : involves the giving up of something the individual or firm has, in return for something they need but do not posses.

Market features (MF) of - 1. buyers and sellers : 2. prices clearly visible : 3. Confidence in the payment methods

1 . there are 2 parties to each deal that goes through (so both have to be happy about the price)

2 . Dealers and customers are aware of prices charged e.g. smth for £X

3 . Once the deal is agreed, the seller knows they will get the money from the buyer

MF 4. digital or physical 5. limited government involvement

6 . competition between sellers

4. some buyers like to attend, though not rlly necessary

5. buyers and sellers can make their own mind up without the state intervening

6. If prices are too high to attract buyers, one seller will offer a lower price, then others will follow quickly

4 types of markets

there are physical, digital, retail, and auction markets

Market economy

where all resources are allocated by private individuals and groups of individuals (no state intervention in the allocation of resources)

all resources are allocated by supply and demand and ppls act with self interest 

consumers want the cheapest price possible

producers want the highest profit possible 

market economy explained using strawberry ice cream and flavoured milk

e.g. lots of ppl suddenly want strawberry ice cream. so in a market econ. producers can look at the demand and the profit incentive and therefore produce the ice cream,

however in an all state controlled econ. e.g. communism, the Gov can allocate resources differently for a diff. obj. , e.g. ice cream isn’t healthy so make them drink flavoured milk instead

sectors of production : primary sector and secondary and teritary

Extraction and use of natural resources and materials from the land and the sea - inc. agro. They are either consumed directly or are raw materials for the production of other goods

all the activities concerned with either manufacturing or construction

All the activities in the economy in which a service is provided

examples of each one and proportion of GDP and employment of UK

pri - agro , fishing, oil/mineral extraction, quarrying

sec - manufacturing final products , building infrastructure

ter - transport , retail, tourism, finance, media, healthcare

GDP : p1% s19% t80

EMP : p1% s15% t84%

Interdependence

consumers are dependent on the tertiary sector to access products and services they need and want

tertiary marketing and product selling is reliant on secondary to manufacture/construct of refine a product

however secondary manufacturing is dependent on primary extraction to get the resources in the first place to make them

Factor market

market in which the services of the factors of production are bought and sold, (e.g. different skills of workers are demanded)

demand for factors derive from demand for EOs e.g. robotics are needed in car production demanded by consumers

Factor market info

factor markets are markets in the resources used by firms, such as buildings (property market), staff(labour market), raw materials commodity market (raw materials like copper of cocoa)

if factor market is running smoothly then a firm should be able to to get hold of the resources it needs when it needs them

however after brexit, finding skilled staff decreased as it interfered w the labour market

product market

market in which finished goods and services are offered to consumers, businesses and the public sector e.g. sales of clothes, printers, and food

prices of goods are determined by supply and demand

Interdependence of factor markets with product markets

using the example of households. :

houses supply labour to firms to operate sectors of production - to supply to the product market -and in turn receive a salary (factor mrkt)

however the households then use the wages to buy goods and services from the product market, which is able by production from the factor market.