The Market. Demand, Supply, Price

A market is any one of a variety of systems, institutions, procedures, social relations and infrastructures whereby businesses sell their goods, services and labor to people in exchange for money. Goods and services are sold using a legal tender such as fiat money. This activity forms part of the economy. It is an arrangement that allows buyers and sellers to exchange items. Competition is essential in markets, and separates market from trade. Two persons may trade, but it takes at least three persons to have a market, so that there is competition on at least one of its two sides. Markets vary in size, range, geographic scale, location, types and variety of human communities, as well as the types of goods and services traded. Some examples include local farmers' markets held in town squares or parking lots, shopping centers and shopping malls, international currency and commodity markets, legally created markets such as for pollution permits, and illegal markets such as the market for illicit drugs.

In mainstream economics, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and information. The exchange of goods or services for money is a transaction. Market participants consist of all the buyers and sellers of a good who influence its price. This influence is a major study of economics and has given rise to several theories and models concerning the basic market forces of supply and demand. There are two roles in markets, buyers and sellers. The market facilitates trade and enables the distribution and allocation of resources in a society. Markets allow any tradable item to be evaluated and priced.

Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. 

Supply represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply and demand.

 There are two laws concerning this topic:

·         The law of demand

·         The law of supply