Types and ratio of markets. Types of market structures: perfect competition, monopolistic competition, oligopoly and monopoly

In a modern economically more or less developed state, there are several market systems. The types of markets, their classification, as well as highlighting the features of each of them are an important element in understanding the state economy. The market is, in essence, directly opposed to subsistence farming in one very important respect. The subsistence economy distributes the created products without taking into account the consumer's ability to choose them at will. Various types of markets are able to provide the consumer with such an opportunity.

Market: concept and types

Now let's look at the main types of markets, taking into account their characteristic features, since such a general description of the types of markets will enable us to see the structure of the economic system as a whole.

The market is a set of all kinds of relationships, forms, as well as organizations of mutually beneficial cooperation of people with each other in terms of buying and selling a variety of goods and services. Depending on the volume of purchase and sale, it is possible to single out such main types of markets as:

• the market of services and goods, existing in the form of exchanges of goods, auctions, as well as fairs and all kinds of wholesale trade enterprises;
• the market of factors of production (land, equipment, minerals);
• labor market;
• market for NT innovations and developments.

In addition to this classification, types and types of markets can be distinguished by differences in competition:

• free competition market (both sides of market relations, i.e. both buyers and sellers have absolutely equal rights);
• market of imperfect competition (variations with monopoly markets).
• The types and types of markets are distinguished on a territorial basis:
• world;
• National;
• regional;
• local.

Of course, all types of markets and their characteristics are an important element in understanding how the market and, more broadly, the entire economic system functions. There is also another classification of market types, namely, according to the level of development and independence:

• free market;
• illegal market;
• regulated market.

It should be said that the type of free market can be determined by the following criterion: it is characterized by maximum economic freedom (in the classical sense, of course). In other words, sellers are free to decide what to sell, to whom to sell it, and at what price. Buyers also have the same “freedoms”, since they themselves choose from whom to buy what goods. The state does not interfere in such a market, and there is no strict legal regulation.

The illegal market also includes “shadow” trade, in violation of the rules and established laws of sale and purchase. Like the free market, the illegal market is characterized by instability, some uncontrollability and even spontaneity.

However, all this was characteristic of markets until the 19th century, while in the 20th a new type of market relations entered the economic scene, which is called regulated. Such a market is subject to certain laws and procedures, which are not allowed to be violated by legal regulations and the state. The trend towards increased manageability and control over the market was caused by a number of reasons, such as the expansion of the scale of the economy, as well as the strengthening of the social nature of market relations.

It should be noted that the types of markets and their features make it possible to follow the historical perspective of economic development and predict the possibilities of market change, and this, in turn, is extremely important, since this very change can be directed in the right direction.

Third question. Types and types of markets.

The concept of "market" combines the idea of ​​a variety of markets that differ from each other in various characteristics. All of them constantly interact with each other, linking into a single whole, the system of all participants in market activity. Existing types of markets can be classified according to the following features (criteria):

- for economic purpose(according to the objects of sale and purchase): consumer products market, joint venture market, labor market, services market, investment market, scientific research market, financial and money market, securities market, currency market, spiritual goods market, information market.

- by geographic location: local, national, world markets. For example, the market of a separate city is local, a separate country is national; if we consider the markets of all countries of the world - the world.

- by industry- the market for computers, grain, cotton, automobiles, etc.

- by types of participants in market transactions- retail, wholesale, public procurement market.

In the retail market, goods are sold individually or in small quantities (such as in retail stores). The sellers in such markets in most cases are firms. The buyers are individuals.

On wholesale market goods are sold in bulk. As a rule, entire firms act as buyers and sellers in such markets.

In the public procurement market the buyer is the state, which acquires the products it needs for its activities.

The sellers in such a market are the producers of these products.

- degree of restriction of competition. Market of perfect competition (free), market of monopolistic competition, oligopolistic market, market of absolute monopoly.

The market differs from the subsistence economy (besides the fact that these systems are opposed to each other) - one thing - the market is able to provide its participants with the maximum degree of economic freedom. We have already spoken in detail about the fact that this is freedom of choice for both the seller and the buyer, and in relations with each other. For the buyer and the seller, freedom consists in an unlimited choice of the terms of the trade transaction (for example, ...).

According to the degree of development of these and other economic freedoms, markets can be divided into three types:

1. free;

2. illegal;

3. adjustable.

The free market has a maximum of economic freedoms in their classical sense (said above).

But who is the free market for? and free from whom? Such a market is free for its subjects. They own the so-called economic sovereignty. So the sellers themselves decide what to sell, to whom to sell the products and at what price. Buyers have similar sovereignty. Because of this, economic ties in the classical market built only horizontally. Partnerships are formed between counterparties on the basis of a business agreement, a contract (an agreement that establishes rights and obligations for both parties for a certain period of time).

Such freedom turns into its unsightly side. In our time, due to the willfulness of market participants and their non-compliance with the rules of the game, this type of market has received the unflattering names "wild", flea, uncivilized.

The second type of market - illegal - is close in the nature of the behavior of its subjects to the first type. The illegal market includes its variety - shadow trade. It is conducted in violation of the laws and rules for the sale of ordinary goods (in the absence of the necessary patents and licenses, in case of non-payment of fees and taxes). The black market is also illegal. It illegally sells goods that are forbidden by law to be sold (for example, drugs, weapons, pornography).

The first and second types of market relations are characterized by a defining feature - spontaneity, unpredictability of development and uncontrollability. These qualities are not accidental. They express the features of classical capitalism in the market sphere:

A lot of independent commodity producers who independently decide what to produce, to whom and how to sell;

A lot of independent consumers who independently decide whom to buy products from;

Equivalent exchange value;

Free, unregulated, spontaneous price fixing under the influence of supply and demand;

Spontaneous regulation of reproductive proportions;

Free competition, free flow of capital.

Such a market is free from state interference and strict legal regulation.

The market of the third type is regulated, subject to a certain order, which is enshrined in legal norms and supported by the state. The transition in the 20th century to this type of market is due to objective reasons. First of all, the sharply increased level of concentration and centralization of production and the expansion of the socialization of the economy played an important role. Large enterprises can no longer, as before, blindly work for a market unknown to them, subject to spontaneous changes. In order not to risk huge capital outlays, large firms strive to secure sales markets in advance, and willingly go to fulfill government orders that are beneficial to them. It is noteworthy that according to the orders of firms and the state, for example, cars are sold up to 60%, machine tools - 100%.

By the second half of the 20th century, market relations have become much more complicated. If in the past the manufacturer of the goods often sold it directly to the consumer, now they are on their way - a large army of intermediaries. They are engaged in various types of trading services, both sales and after-sales services. All this led to the strengthening of the social nature of market relations and turned regulated market into a social institution.

The fourth question: The market as a social institution. market infrastructure.

A social institution is understood as a certain organization of social activity that regulates the rules of people's behavior and their relationships.

In the second half of the 20th century, the normal market is based on a set of certain institutions.

What is included in system of market institutions?

Firstly, a legal system that performs two tasks in a market economy:

1. organizes legal market regulation - establishes uniform rules of conduct for market entities;

2. protects market participants and punishes those responsible for violating legal norms, and thereby protects the economic interests of market agents.

Legal regulation of the market provides comprehensively developed legislation covering the entire system of market relations. Its basis is the Civil Code. It acts as an economic constitution. It is obvious that the market as a social institution cannot exist without the preliminary and advanced development of legal legislation regulating the economic activity of people.

Secondly, the system under consideration includes state regulation and control bodies: institutions for sanitary and epidemiological control; tax system; bodies of financial and credit policy of the state. So the modern market is developing not only horizontal relations, but also organically includes qualitatively new vertical links. They go from top to bottom - from the state to economic entities and, within certain limits, regulate their behavior.

Third, market institutions include associations, consumer unions, entrepreneurs and workers (trade unions). They increase the degree of organization, civility and efficiency of market agents.

Fourth, market infrastructure is included in the set of institutions. It includes trading enterprises, commodity and stock exchanges, banks, state budgetary institutions. Moreover, each type of market has its own infrastructure. So, in the goods market (consumer and industrial) there are specialized organizations: commodity exchanges, wholesale and retail trade enterprises, numerous companies engaged in intermediary activities of the service service, etc.

Thus, the market as a social institution firmly unites the totality of market relations into a single entity.

So, each market has its own type of infrastructure:

fifth question: Advantages and disadvantages of a market economy (pluses and minuses of the market).

The market mechanism promotes efficient distribution society's limited resources. It is thanks to the action of the market that society produces those goods and services that are needed, i.e. the products for which there is a demand.

However, the market mechanism is not impeccable. It has both its advantages and its disadvantages. We present the main ones.

Market advantages.

1. In a market economy, those goods and services are produced that buyers are willing and able to buy.

2. The market provides high efficiency production. As we said earlier, competition encourages manufacturers to use the latest achievements in scientific and technical developments, introduce new technologies and equipment into production.

3. The market contributes efficient distribution resources. No one and nothing hinders the flow of resources from less efficient areas of production to more efficient ones. This explains the ability of the market to

3.1. rapid reorganization in production from one type of product to another;

3.2. as well as its ability to meet the diverse needs of people;

3.3. to improve the quality of goods and services.

4. The market mechanism ensures the freedom of choice of actions of participants in market relations. Anyone has the right to buy shares, real estate, open their own bank account, start their own business.

market cons.

1. The market works well when there is competition. However, the market mechanism is not capable of independently solving the problems associated with exceptional the position on the market of individual firms that have the opportunity not to worry about improving the quality of their products, as well as to dictate their prices to customers.

2. Market activities can provide negative impact on the state irreplaceable resources(such as forests, wild animals, reserves of the seas and oceans, minerals) and the ecological situation in general.

The release of most goods and the creation of services is accompanied by environmental pollution environment. The fight against these negative consequences of industrial activity unfavorable for producers because associated with additional costs.

3. The market does not provide the production of goods and community services(public transport, roads, bridges, parks). For the most part, this is not beneficial for private producers, because. associated with significant costs that are not paid off at the market price. For example, many of us would refuse to pay a high price to enter a park or to drive on the road in our private car. It is hard to imagine how a private firm would charge passers-by for city street lighting.

4. The market does not create conditions for the development of fundamental science, the system of general education, and cultural institutions.

5. The market does not guarantee the right to work, income, rest.

6. The market does not prevent the emergence of social injustice and the stratification of society into rich and poor.

The disadvantages of a market economy can be compensated for by state intervention in the market mechanism.

So, by definition, a market is an organized structure in which there are producers and consumers, sellers and buyers, where, as a result of the interaction of consumer demand (demand is the quantity of goods that consumers can buy at a certain price) and producers' offers (supply is the quantity of goods , which producers sell at a certain price), both the prices of goods and the volume of sales are set. There are many types of markets, the main of which can be grouped according to the following four features.

As an initial market criterion, it is advisable to recognize the division of markets on the basis of "factors of production".

Each of the markets, in turn, can be divided into constituent elements. Thus, the market for the means of production includes the market for land, machine tools, fodder, gas, etc.; information market - markets for scientific and technical developments, know-how, patents, etc.; financial market - markets for securities, bank loans and other credit resources.

When considering the structural organization of the market, the number of producers (sellers) and the number of consumers (buyers) participating in the process of exchanging the general equivalent of value (money) for any product is of decisive importance. This number of producers and consumers, the nature and structure of relations between them determine the interaction of supply and demand.

In microeconomic theory, the following 4 types of market structures are explored: perfect (pure) competition; monopoly; monopolistic competition; oligopoly.

In the theory of the structure of markets, the following main factors that determine the market structure are explored: the number of firms in the industry and their size; the number of buyers; the type of products manufactured by firms (of the same type (standard) or differentiated); the opportunity for other firms to enter and exit the industry; type of competition (price or non-price); awareness of sellers and buyers regarding changes in supply and demand factors.

The key concept expressing the essence of market relations is the concept of competition (lat. concurrere - to collide, compete).

Competition - according to A. Smith - a behavioral category, when individual sellers and buyers compete in the market for more profitable sales and purchases, respectively. Competition is the "invisible hand" of the market, which coordinates the activities of its participants.

Competition - rivalry between market economy participants for the best conditions for the production, purchase and sale of goods. Such a clash is inevitable and is generated by objective conditions: the complete economic isolation of each market entity, its complete dependence on the economic situation and confrontation with other contenders for the highest income. The struggle for economic survival and prosperity is the law of the market.

Perfect competition is a market where many firms sell exactly the same product, and no one firm has a large enough market share to influence the market price of the product.

The market structure of perfect competition is determined by 6 main characteristics:

• 1) Many firms and their small size in the industry (firms are "price takers").
• 2) Many buyers.
• 3) One-type (standardized) products.
• 4) Easy conditions for entry into the industry and exit from it for other firms.
• 5) Lack of price competition between sellers.
• 6) Full awareness of all market participants regarding changes in prices and properties of goods.

The demand curve for a competitive firm's product is a horizontal line.

because in conditions of perfect competition there are many firms, each of which produces only a small amount of output and therefore each of them individually cannot influence the price setting in the market. In other words, a perfectly competitive firm is a "price taker".

So, a firm in conditions of perfect competition: is not able to influence the market price; takes the market price as given; faced with absolute elasticity of demand for their products.

The average revenue (AR) of the firm and its marginal revenue (MR) are equal to the market price of the product, and the average and marginal revenue schedules coincide with the demand schedule. Total revenue (TR) rises as sales increase (Figure 2.2).

There are two approaches to profit maximization. The first is based on a comparison of average and limit values ​​(Fig. 2.2). Under perfect competition, a firm maximizes its profit or minimizes its losses by choosing the level of production at which marginal revenue equals marginal cost (MR = MC) provided that price (P) exceeds the minimum average variable cost (P > AVC).

• 1) If Q > Q *, then MC > MR and it is unprofitable to increase the volume of output.
• 2) If Q
• 3) At point e, MC - MR = P or MC - P.

The second approach is that the firm compares its gross income (TR) at various output levels with gross costs (TC). The firm will choose the option when the difference between TR and TC will be maximum, i.e. when the maximum profit is reached.

Before F1 and after F2 TS > TR - production is unprofitable and inexpedient.

However, there are flaws in this seemingly ideal model. Economists recognize four possible factors hindering the efficiency of resource allocation in a competitive economy:

• 1) there is no reason why a competitive market system would lead to an optimal distribution of income;
• 2) by allocating resources, the competitive model does not allow for side costs and benefits or the production of public goods;
• 3) an industry with pure competition can interfere with the use of the best known production technology and favor the slow pace of technical progress;
• 4) the competitive system does not provide a wide range of product choices, nor the conditions for the development of new products.

Strictly speaking, perfect competition in its purest form has never existed anywhere. It can be regarded as a kind of scientific abstraction, the analysis of which is nevertheless necessary for understanding the principles of the functioning of the market mechanism.

Depending on the degree of restriction of competition, several types of imperfect markets are distinguished: monopoly, oligopoly and monopolistic competition.

Monopoly - the exclusive right of production, trade and other types of activity, belonging to one person, a certain group of persons or the state. Market power is the ability of a firm (seller) or buyer to influence the price of a product. A monopoly has complete market power. A pure monopoly is a type of market structure in which a firm is the only manufacturer of a product that has no analogues. Pure monopoly is the extreme form of market structure, the opposite of perfect competition.

Characteristic features of a pure monopoly: the concepts of "firm" and "industry" coincide; buyers do not have a choice; a pure monopolist, controlling the entire volume of output of goods, is able to control the price, change it in any direction; the demand curve for the monopolist's products has a classical form and coincides with the market demand curve; a pure monopoly is shielded from competition by high barriers to entry.

Types of monopolies:

• 1) A closed monopoly is long-term, because it is protected by legal restrictions (issue of money, weapons).
• 2) An open monopoly is temporary, because associated with exclusive rights that secure the ownership of a unique product.
• 3) Natural monopoly is long-term, because the minimum level of average total costs can be achieved with very large volumes of production (electricity, railways, etc.).

The social cost of monopoly power is the loss or loss to society as a whole from monopoly power. Marginal cost is the cost of producing an additional unit of output. The Lerner indicator of monopoly power is L = (P - MC) / P, which shows the degree of excess of the price of a product over the marginal cost of its production. 0< L < 1, чем больше L, тем больше монопольная власть фирмы.

The Herfindahl-Hirschman index determines the degree of market concentration:

H \u003d P * + P * + ... + P *,

where H is the concentration indicator, Rp is the percentage share of the firm in the market or the share in the industry supply.

Price discrimination is the difference in prices for the same quality product for different buyers, not related to the cost of its production. Price discrimination of the first degree (perfect price discrimination) - the presence of a special price for each buyer. Second-degree price discrimination (by volume of sales) - setting a price depending on the volume of purchase. Third-degree price discrimination (segmented price discrimination) - setting different prices for different groups of buyers.

The monopolist's marginal revenue curve lies below the demand curve. To increase sales, the monopolist lowers the price of each additional unit of output. The demand curve for a pure monopoly product is downward sloping, so the firm can influence the price by controlling output. The ability to influence the price of a product is called monopoly power. In the case of a simple monopoly, the marginal revenue (MR) received from the sale of an additional unit of a product is lower than its price (except for the first unit) - MR< Р. График MR проходит ниже кривой спроса (рис. 2.3). Существует взаимосвязь эластичности спроса по цене, общего дохода (TR) и предельного дохода монополии (MR). Когда спрос эластичен, значение MR положительно и общий доход растет. Когда спрос не эластичен, MR < 0 и TR падает. Наконец, когда спрос единичной эластичности, MR = 0, a TR - максимальный, монополист, очевидно, ограничит объем выпуска эластичной частью кривой спроса.

Monopolistic competition (Fig. 2.4) is a type of market structure where firms selling a differentiated product with market power compete for sales volume, while none of them has full power to control the market price. Market power - the ability of the producer (or consumer) to influence the market price of economic goods.

Monopolistic competition is similar to the situation of "pure monopoly" and at the same time to "perfect competition". The American economist Edward Chamberlin, in his book The Theory of Monopolistic Competition (1933), explained that real prices in the market do not gravitate towards either pure competition or pure monopoly, but tend to an intermediate position, determined in each individual case in accordance with the relative strength of both factors.

Features of the market of monopolistic competition:

• 1) Product differentiation; the substitution of goods is high, but not absolute; brand loyalty; Firms have limited market power.
• 2) A large number of sellers; a small share of the company in the market supply; The firm incurs certain costs of attracting customers.
• 3) Relatively free market entry and exit; entry costs are higher than under perfect competition; absence of industry barriers.
• 4) The autonomy of the behavior of firms leads to the absence of collusion; freedom of decision-making; lack of strategic behavior.
• 5) Decreasing demand curve.

The level of production of a good by a monopoly-competitive firm is less than the level of production by firms that are not monopoly competitors, but operate at an efficient scale of production.

The efficient scale of production is the amount of output that minimizes ATC. Since the firm could increase Q and decrease ATC, one speaks of excess capacity (AQ). AQ = effective scale of production - Q* (actual output) .

The presence of excess capacity indicates that buyers do not consume the maximum possible amount of goods and not at the lowest price (P * > MC), which means that monopolistic competition is a less efficient market structure than perfect competition, because. P* > MC, then some consumers refrain from purchasing the product, thus there are irretrievable social losses of monopoly pricing.

In the short run, each firm in a monopolistic competition market is much like a pure monopoly (Figure 2.6). First, she chooses the output volume based on the equation MC = MR, and then uses the demand curve to set the price corresponding to this volume (P*). Whether the firm will make a profit or incur a loss depends on the ratio of price and ATC. However, under conditions of monopolistic competition, economic profits and losses cannot last long.

Sources of profit for a company under monopolistic competition: bringing a unique product to the market; favorable location of the company; marketing barriers; application of advanced technology. In the long run, profits attract competitors into the industry, while losses encourage exit. The process of firm migration continues until economic profit reaches zero.

Graphically, long-term equilibrium looks like this (Fig. 2.4). Point A is the point of long-term equilibrium. Curve D is tangent to LAC. Firms earn only normal profits.

Characteristics of the market equilibrium of monopolistic competition in the long run:

• 1) Prices are above the minimum long run average cost, resulting in excess production capacity.
• 2) Prices are higher than the marginal cost of production, because firms exercise market power. All this leads to a loss of efficiency associated with losses, firstly, due to underutilization of capacities; secondly, due to the appropriation by firms of part of the consumer's surplus. However, the loss of efficiency is compensated by the expansion of the range of benefits.

The modern market economy is an economy dominated by markets of monopolistic competition, because perfectly competitive markets, as well as completely monopolized markets, do not exist in their pure form.

Oligopoly - a market structure in which most of the sales are made by several large firms, each of which is able to influence the market price. The oligopolistic market has the features of both competitive and monopolistic markets, depending on the behavior of its participants and the characteristics of the product being produced. An oligopoly market is a market for the interaction of a small number of interdependent large producers (sellers). As a rule, the share of the oligopolistic producer accounts for a significant part of the market supply, which allows it to influence the market price. Characteristic features of an oligopoly:

The market is dominated by a small number of firms. The main feature of the oligopolistic market is the close and conscious interconnection and interdependence of firms from each other.

Consequences of the general interconnection of oligopolists: it is impossible to accurately estimate demand; MR cannot be accurately determined; it is impossible to determine P* (equilibrium price) and Q* (equilibrium sales volume).

The Broken Demand Curve model (Figure 2.5) explains price rigidity. The shape of the oligopolistic demand curve depends on the reaction of rivals to the actions of the firm. Demand for a firm's product will be elastic if it raises its price, since competitors will not raise their prices in response (D2). If the firm lowers its prices, then demand will become inelastic, since competitors are likely to lower their prices too (D1). The result is a broken demand curve for the firm (D2PD1). P is the set price. If the firm raises the price, demand will go to D2. If the firm lowers the price, then demand will not change.

The MR curve has a vertical discontinuity A-B. Because of the gap in MR, output will not affect the price of a good when marginal cost (MC) changes.

Pricing in an oligopoly market:

1) Cartel agreement.

Conspiracy is a form of oligopolistic behavior leading to the formation of cartels. A cartel is a group of firms that coordinates output and price decisions as if they were a single monopoly.

Establishing a single price increases the revenue of all cartel members, but a price increase is accompanied by a mandatory decrease in sales. Under this agreement, each firm, in an effort to maximize its profits, often violates the agreement by lowering prices in secret from others. It destroys the cartel.

2) Price leadership (tacit collusion) is an agreement between oligopolists on the prices of their products. The idea is that firms in an industry are guided by prices set by one leading company. As a rule, the leader is the firm that is the largest in its industry. The behavior strategy of the leading firm is a guide to action for other, smaller firms.

Leader tactics in price adjustments: price adjustments are infrequent and occur when there are significant changes in costs; impending price revisions are reported frequently through the media; the price leader chooses not necessarily the maximum price.

• 3) The practice of price containment. This is the practice of setting the lowest price that prevents other firms from entering the market. At the same time, firms temporarily give up current profits in order to prevent a competitor from entering the industry. The mechanism of this practice is that firms estimate the possible minimum average cost of a potential competitor and set the price below this level.
• 4) Cost-plus pricing means that when determining the price, the oligopolist first estimates his average cost level at a certain planned level of production, and then adds a “margin” to them in the amount of a certain percentage of profit. The cape should be sufficient to cover the costs and ensure a normal profit.

Every day, people carry out many operations, turning money into products. The resulting product is the result of an exchange. A person acquires a good in such quantity as he wishes, for a certain fee, which is established on a contractual basis. This form of exchange is called a market.

In contact with

What is a market

This is a system of relations connecting the supplier and consumer of these goods (services). The price is also formed there, which is monetary value product.

Types of markets operating in

Depending on the object of market relations, markets are:

• resource (natural resources, labor force, means of labor);
• consumer (food, non-food products, consumer services);
• financial (credit and monetary relations, gold and foreign exchange reserves, insurance, contracts).

The classification by scale is as follows:

• single, representing separate outlets;
• local - a large number of individual points, combined into one trading;
• regional - trading platforms that unite outlets of a certain locality;
• national - combining regional segments;
• international - trading platforms of integrated entities;
• world.

Classification depending on the volume of trade:

• wholesale;
• retail;
• state procurements.

According to the degree of freedom of the buyer and seller, there are:

• monopoly (one manufacturer);
• monopolistic (one consumer);
• oligopolistic (a small number of manufacturing firms leading their own collusive activity);
• oligopolistic (a limited number of buyers operating on the basis of collusion);
• model of perfect competition (an ideal type of competitive market where there are a large number of consumers and resellers independent of each other).

Market Signs

The main feature of a market economy is the freedom of trade, that is:

• the manufacturer himself decides how much product to produce;
• the buyer determines for himself how much to consume;
• price forms on the basis of the laws of supply and demand.

Important! In his work "Inquiries into the Nature and Causes of the Wealth of Nations" Adam Smith introduces the concept of "invisible hand". In fact, the "hand" is a market mechanism that coordinates the decisions of producers and buyers. The seller, wishing to maximize his own profit, is forced to satisfy the preferences of buyers.

Market Laws

Just like other mechanisms, the market operates on its own terms.

It is characterized by: the law of demand, the law, the law of equilibrium price, the law of competition.

Law of demand

When the cost of a good increases without changing other conditions, the demand for the product falls.

In addition to price factors that affect the buyer's interest, there are non-price factors, which include:

• increase or decrease in incomes of the population;
• an increase or decrease in the price of other goods;
• changes in the structure of the population;
• changing consumer preferences.

Law of supply

The higher the cost, the higher quantity of offered product assuming that the other conditions remain unchanged.

Non-price factors that affect the amount of supply include:

• increase or decrease in production costs;
• the emergence of competitors issuing substitutes;
• natural disasters, changes in the political situation in the country, etc.

Equilibrium price law

When a balance is reached between supply and demand, an equilibrium price is established that can Satisfy both consumer and buyer.

Important! The laws of the market do not operate in a planned economy, and it is impossible to achieve an equilibrium price. When implementing the plan, the personal preferences of consumers are not taken into account, there is a shortage or surplus of various benefits.

Law of competition

An increase in producers of the same product leads to a revision of costs, an increase in labor productivity, diversification of production, an improvement in the quality of products, a reduction in costs, an acceleration in scientific and technological progress, an increase in GDP, and structural changes in the economy.

Considering all the above positive aspects of competition, the desire of society is explained achieve perfect competition and the desire of monopolists to prevent this process.

Functions at a Glance

The market mechanism is designed to answer three main questions: What to produce? How to produce? For whom to produce? For this, a number of functions are performed, which are presented in the table.

Market functions in the economy

Market system

By itself, this system is a single system of segments for various purposes.

It consists of the following components:

• consumer goods, services;
• labor force (obtaining work and permanent income by the population);
• securities, currency (transactions on the stock exchange);
• intellectual property, achievements of scientific and technological progress;
• means of labor;
• spiritual goods (books, newspapers, magazines, exhibitions, cinemas, tourist trips).

What is a market for goods and services?

Otherwise known as consumer, it is an organized structure where demand from government and households and supply from small, medium and global businesses meet.

Its value is great, since it makes up a large part of the GNP. In addition, its functions include:

• creation and satisfaction of public goods;
• ensuring the profitability of entrepreneurs.

Structurally it looks like this:

• public procurement;
• means of production;
• consumer goods and services.

State procurements

Government orders to meet the needs of the municipal, as well as the state nature, for which funds from the state budget. They are characterized by large volumes, strategic purpose.

Means of production

The subjects of this type of relationship are small and large industrial enterprises engaged in the sale, purchase, exchange of production facilities.

Consumer goods and services

Public goods. For this type of goods, enter the concept of elasticity, which allows you to assess the degree of need for the good.

Attention! The elasticity of a product shows the degree of change in demand or supply depending on the price. Let's take sugar as an example. Regardless of the price, it will be bought in the same volumes. We can say that this type of product is inelastic, since a change in price will not lead to a change in its consumption.

Producer market

This is a type of relationship where industrial goods are offered. In the conditions of this trading platform, producers of goods are created in order to satisfy the need of another manufacturer by selling, exchanging, leasing equipment.

The main differences of this variety:

• a smaller number of buyers who buy in much larger volumes;
• in the producer market, demand does not change much as a result of changes in cost;
• geographical concentration of buyers;
• characterized by the consumption of a large mass of manufactured products.

Single product marketplace

A miniature representation of the movement of goods, its sale. When determining such a trading platform, they talk about places where there is the highest demand for this type of product, about its main competitors, about the methods and methods of marketing, about the share in the overall structure of product distribution.

The essence of the market and its importance in the economy

First of all free market relations reimburse the producer, maximize profits.

He also satisfies the needs of the buyer based on personal capabilities. Thanks to competition, the means of labor develop and improve.

Based on the laws of supply and demand, the quantity of goods and their value are formed.

However, despite all the positive aspects, there are also negative ones.

With the transition to market relations, such a concept as the "shadow economy" appears. Since tough competition conditions automatically eliminate weak players, they begin to look for illegal ways to maximize their income.

The most prominent representatives of the shadow economy are homeworkers. Of course, there are homeworkers registered as legal entities who constantly pay taxes and openly provide data on their activities. However, many of these conditions are not met. The shadow economy is bad because its activities are not included in the taxable one. Leakage of taxes from the budget always leads to its deficiency..

What is the market and the market mechanism in the economy

Market economy, signs and mechanisms

Conclusion

The market system of relationships is not ideal. However, based on its abilities, it is in many ways better than the planned economy.

A certain set of relations in the economic sphere, characterized by the mediation of monetary values ​​in sales and purchases by the market. This rather complex and branched structure allows manufacturers to sell their products in maximum accordance with existing consumer demand. It covers all spheres of modern economic relations with its influence.

The main features of the market are the presence of elements that are directly related to the provision of production, as well as the presence of components of monetary and material circulation. This economic structure is significantly influenced by various types of economic management, as well as specific features present in the sphere of circulation of finished products, the level of privatization of enterprises, etc.

The market has certain connections with the spiritual and also with the sale of products of the intellectual activity of writers, scientists, artists, etc. All this diversity of relationships determines its complex structure. It, in turn, includes various types of markets, as well as its various types. Scientists identify more than ten criteria that are key to characterizing this complex structure. Types of markets and their classification includes many groups. They are subdivided according to their spatial location and economic relationships:

1. By geographical location:

Local (local);

Regional;

National;

World.

2. According to the purpose of the objects, the market is divided into:

Consumer;

Valuable papers;

Work force;

Currency;

Informational;

Scientific and technical.

3. By groups of goods:

Markets for industrial products;

Markets for consumer goods;

Markets of materials and raw materials.

4. By subjects of market relations:

Buyer's market;

Sellers market;

Public institutions;

Intermediary.

5. According to the presence of competitors, the types of markets are divided into:

Monopoly;

Oligopolistic;

Monopolistic competition;

Perfect competition.

6. According to the signs of saturation, they are grouped into:

equilibrium;

Scarce;

Excessive.

7. By the nature of the maturity of the relationship, it can be:

Undeveloped;

Developed;

emerging.

8. In relation to the current legislation, the types of markets are grouped into:

official;

Shadow.

9. According to the types of implementation, they are divided into:

Retail;

Wholesale.

10. According to the assortment characteristics of the goods sold, the following types of markets are distinguished:

Closed (offering customers products manufactured by the first manufacturer);

Saturated (selling goods produced by various enterprises);

A wide assortment list (offering a number of specific products, the use of which satisfies related needs);

Mixed (selling a wide variety of goods).

11. By industry type, there are:

Oil market;

Automotive;

Computer market, etc.

Financial market (investment, credit, currency and securities, as well as securities);

The market of intellectual goods (innovations, inventions, information services, as well as literary and artistic works);

Labor market (labor resources).