market - exchange center, central economic unit
- place where buyers/sellers come together to exchange product/good
- retail market - buyers = consumers, sellers = retail stores
- wholesale markets - buyers = retail stores, sellers = goods producers
- factor markets - buyers = goods producers, sellers = workers/capital suppliers
- contains different range of products w/ different geographies (extent of market)
- used to find actual/potential competitors
- arbitrage - buying low, selling high in another market
- determines extent of market, due to significant differences in price
- complete market (perfectly competitive) - consumers/producers can’t determine/change price
- impossible in real life
- large number of buyers/sellers >> hard to influence price
- competition keeps different markets’ prices even
- no need for market to pay attention to single consumer
- no influence from either side on price (fast food is closest real example)
- incomplete market (noncompetitive) - either demand or supply affects price
- balance between demand and supply
- not just one decision marker (economic agent), may be based on brand loyalty/price
- producers influence the price individually (w/ monopoly) or cartel (ie OPEC)
- oligopoly - sellers combine forces (OPEC, railways, etc)
- monopoly - only 1 choice, source >> seller has all power
- commodity market - many units of same goods (supermarket)
- consumers decide how much to buy
- product differentiated markets - buyers purchase fixed number of units
- units differ in quality, specifications (ie cereal, cars)
- monopolistic competition - ie Mac vs PC >> specialty brands
- producers have limited ability to influence price (due to competition from other brands)
- new/different brands >> competitive force
market operation - live auctions, sealed bids
- live auctions -
- sellers starts low, raises price until 1 buyer left
- seller starts high, lowers until 1st buyer emerges
- buyers place max price orders (allowance), sellers place minimum price requests
- sealed bids -
- seller says what’s for sale, buyers submit a single bid >> highest bid wins
- buyer says what’s needed, buyers submit a single bid >> lowest bid wins
- posted prices - difference prices for different quality
- compare prices/quality >> look for best trade off
- unsold units >> seller cuts prices (w/ sales, discounts)
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