The essence of the market, its functions and types

The market is a complex system of economic relations and relations between entities that participate in the processes of production, consumption, distribution or exchange of various goods and services at appropriate market prices, formed on the basis of a supply-demand balance, taking into account competition.

The essence of the market

In the market there is an interaction of buyers and sellers. Agreements and contracts arise between them, according to which various transactions are carried out with the agreed terms of interaction. Market participants are all business entities - from private households to the state. At the same time, a significant role in this interaction is assigned to intermediaries who can simultaneously act as sellers and as buyers.

The essence of the market is a mechanism of interaction between consumers who demand the goods, and sellers who form the offer of the product. At the same time, the products themselves are the objects of the market. The concept of goods is not limited only to material things. It can be services, resources, currency, securities, government benefits, etc.

To build adequate relationships, market participants need information about the supply and demand for the product. The essence of the market is also in the transmission of this information - usually in the form of prices. The amount of incoming goods and services, the amount of income of customers, the increase in their needs form a demand and supply that ensures the continuous functioning of the market.

In general, the essence and functions of the market are as follows:

- Coordination of the needs of buyers and the opportunities of sellers, which occurs through the identification of the relationship between supply and demand in this segment of the market.

- Providing opportunities for buyers to choose the right products and services, and sellers - the most attractive markets. This is made possible by the free movement of goods, labor, capital both within the country and between states.

- Stimulating the reduction in production costs, so that sellers can bid on their products in the range between the market price and the cost price.

- Improvement of the state of the country's economy through the use of bankruptcy and self-liquidation of firms that offer substandard, too expensive or out-of-date goods and services.

Thus, the processes of pricing, mediation, regulation, informativity and sanitation determine the essence of the market. All these functions are performed by the direct economic entities in the course of the sale and purchase operations. With the help of the market, economically isolated buyers and sellers can form the necessary links, thus creating a variety of market structures.

There are many classifications of such structures. First of all, the markets can be divided into two large segments: goods and services. Then they split into smaller parts. Depending on the industry of production of goods and services, this may be the markets of manufactured goods, food, resource markets, etc.

There is also a division according to the types of productive resources used: land markets, information, capital, labor, etc.

Separate segments also break up into smaller structures. For example, in the field of information, it is possible to single out individual markets for scientific and technological developments, innovations, and technologies. And in the financial environment there are separate securities markets (stock), currencies, etc. All of them fulfill their tasks and satisfy the narrow specific needs of customers. For example, the essence of the foreign exchange market is to regulate the processes of exchange, purchase and sale of currencies at the most varied levels of interaction of economic entities.

On a territorial basis, markets can be local, intra-regional, national, or international.

Depending on the availability of competition, there are monopolistic, oligopolistic or free-competitive markets.

As we see, there are many classifications and ways of division into segments. The diversity of markets grows in proportion to the growth of human needs and opportunities.