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The term market in economics refers to

What is 'Market Economy'

❶It typically entails support for highly competitive markets, private ownership of productive enterprises. However, property rights does not specifically mean private property rights, and market economies do not logically presuppose the existence of private ownership of the means of production.

Market theory

BREAKING DOWN 'Market Economy'
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The market in economic doctrine and history

A typical cultivator fed his family and paid the landlord and the moneylender from his chief crop. He had sidelines that provided salable products, and he had needs that he could not satisfy at home. It was then convenient for him to go to a market where many could meet to sell and buy. The second point was in service to the landlords. Rent , essentially, was paid in grain; even when it was translated into money, sales of grain were necessary to supply the cultivator with funds to meet his dues.

Payment of rent was a one-way transaction, imposed by the landlord. In turn, the landlord used the rents to maintain his warriors, clients, and artisans, and this led to the growth of towns as centres of trade and production.

An urban class developed with a standard of life enabling its members to cater to each other as well as to the landlords and officials. The third, and most influential, origin of markets was in international trade. From early times, merchant adventurers the Phoenicians, the Arabs risked their lives and their capital in carrying the products of one region to another.

The importance of international trade for the development of the market system was precisely that it was carried on by third parties. Within a settled country, commercial dealings were restrained by considerations of rights, obligations, and proper behaviour. But in trade in which the dealer is not subject to any obligation at either end, no holds are barred; purely commercial principles have free play.

It was in trade for instance, the export of English wool to the weavers of Italy that the commercial principle undermined feudal conceptions of rights and duties. As Adam Smith observed, a great leap occurred when trade released the forces of industrial production. Throughout history the relations between the trader and the producer have changed with the development of technique and with changes in the economic power of the parties.

The 19th century was the heyday of the import—export merchant. Traders from a metropolitan country could establish themselves in a foreign centre, become experts on its needs and possibilities, and deal with a great variety of producers and customers, on a relatively small scale with each.

With the growth of giant corporations, the scope of the merchant narrowed; his functions were largely taken over by the sales departments of the industrial concerns. Nowadays it is common to hold international fairs at which industrial products are displayed for inspection by customers, a grand and glorified version of the village market; the business, however, consists in placing orders rather than buying on the spot and carrying merchandise home.

The function of the independent wholesaler, like that of the merchant, has declined as great retail businesses have grown to a scale whereby they can deal directly with manufacturers; but specialized exchanges for primary commodities are still important. Markets are essential to the free enterprise system; they grew and spread along with it. In the Soviet Union and other Socialist countries, a different kind of economy existed and a different ideology was dominant.

There were two interlocking systems in the economy of the Soviet Union: Industrially, all equipment and materials were owned by the state, and production was directed according to a central plan. In theory, payments to workers were thought of as their share of the total production of the economy; in practice, however, the system of wages was very much like that in capitalist industry except that rates as a rule were set by decree and the managers of enterprises had little scope for bargaining.

Materials and equipment were distributed among enterprises by the state planning offices. Faulty planning gave rise to intermediaries who operated between enterprises, but this is not at all the same thing as the highly developed markets in materials, components, and equipment that exist under capitalism.

Consumption goods, on the other hand, were distributed to Soviet households through a retail market. Though some Socialist idealists, regarding buying and selling as the essence of capitalism , have advocated that money should be abolished altogether, in a large community it has proved to be most convenient to provide incomes in the form of generalized purchasing power and to allow each to choose what he pleases from whatever goods are available.

Classical economists usually assert that the advantage of the retail market system is that it runs itself without excessive regulation; consumers who go shopping are in charge of their own money and need account to no one for what they do with it. Retail markets in the Soviet economy differed from those in capitalist economies in that, while in both systems the buyer is in this sense a principal, the seller in the Soviet model was an agent.

Retailers and manufacturers all served as agents of the same authority—the central plan. Rather than making it their business to woo and cajole the customer, sellers threw supplies into the shops in a somewhat arbitrary way and customers would search for what they wanted. Soviet agriculture was organized on principles quite different from those operative for manufacturing. The value of a work point was affected by the prices set for the products of the farm, and these were politically, rather than only economically, determined.

In the Western industrial economies, there is also a political element involved in the setting of agricultural prices; generally the problem here is to prevent excess production from driving prices too low.

For the Soviets, the problem was the opposite. There, agricultural output failed to expand rapidly enough to keep pace with the requirements of the growing industrial labour force , and prices were therefore kept down so that they would not be unfavourable to the industrial sector.

At the same time, individual members of the collective farms were permitted to sell the produce of their household plots on a free market. In this specific market, the peasant was as much a principal as the buyer.

In China , cooperative farms established after were much more genuinely cooperatives than were those in the Soviet Union, and trade with the cities in China is organized through a kind of Socialist wholesaling.

City authorities place contracts with neighbouring farms, specifying prices, varieties, quantities, and delivery dates, and then direct the supplies to retail outlets, which are part of the Socialist economy. A similar system controls trade in manufactured consumer goods.

Through the retail shops, the authorities monitor demand and guide supply as far as possible to meet it by the contracts that they place with the Socialist manufacturers. By adapting the wholesale trade to its own requirements, the Chinese economy seems to have avoided some of the difficulties that the Soviets encountered.

An example of socialism without a formal market was seen in the early days of the cooperative settlements known as kibbutzim in Israel , where cultivators shared the proceeds of their work without any distinction of individual incomes. Because a kibbutz could trade with the surrounding market economy, its members were not confined to consuming only the produce of their own soil. At the outset some of the kibbutzim carried the objection to private property so far that a man who gave a shirt to the laundry received back just some other shirt.

But to dispense altogether with market relationships is apparently possible only in a small community in which all share a common ideal, and the austere standards of the original kibbutzim have softened somewhat with growing prosperity; but they still maintain a small-scale example of economic efficiency without commercial incentives. The general run of agricultural commodities is produced under competitive conditions by relatively small-scale cultivators scattered over a large area.

The final purchasers are also scattered, and centres of consumption are distant from regions of production. Thus, a market place is thought to be a place consisting of a number of big and small shops, stalls and even hawkers selling various types of goods.

It refers to an arrangement whereby buyers and sellers come in close contact with each other directly or indirectly to sell and buy goods. Further, it follows that for the existence of a market, buyers and sellers need not personally meet each other at a particular place. They may contact each other by any means such as a telephone or telex.

It does not refer only to a fixed location. It refers to the whole area of operation of demand and supply. Further, it refers to the conditions and commercial relationships facilitating transactions between buyers and sellers.

Therefore, a market signifies any arrangement in which the sale and purchase of goods take place. They must be in touch with one another, so that they are aware of the prices offered or accepted by other buyers and sellers.

The existence of a commodity. Market economies can and often do include various types of cooperatives or autonomous state-owned enterprises that acquire capital goods and raw materials in capital markets. These enterprises utilize a market-determined free price system to allocate capital goods and labor.

These models range from systems based on employee-owned enterprises based on self-management to a combination of public ownership of the means of production with factor markets. Capitalism generally refers to an economic system where the means of production are largely or entirely privately owned and operated for a profit, structured on the process of capital accumulation.

In general, in capitalist systems investment, distribution, income, and prices are determined by markets, whether regulated or unregulated. There are different variations of capitalism with different relationships to markets. In Laissez-faire and free market variations of capitalism, markets are utilized most extensively with minimal or no state intervention and regulation over prices and the supply of goods and services.

In interventionist , welfare capitalism and mixed economies, markets continue to play a dominant role but are regulated to some extent by government in order to correct market failures or to promote social welfare. Capitalism has been dominant in the Western world since the end of feudalism , but most feel [ who? In capitalism, prices determine the demand-supply scale. For example, higher demand for certain goods and services lead to higher prices and lower demand for certain goods lead to lower prices.

Laissez-faire is synonymous with what was referred to as strict capitalist free market economy during the early and midth century [ citation needed ] as a classical liberal right-libertarian ideal to achieve. It is generally understood that the necessary components for the functioning of an idealized free market include the complete absence of government regulation, subsidies, artificial price pressures, and government-granted monopolies usually classified as coercive monopoly by free market advocates and no taxes or tariffs other than what is necessary for the government to provide protection from coercion and theft, maintaining peace and property rights, and providing for basic public goods.

Right-libertarian advocates of anarcho-capitalism see the state as morally illegitimate and economically unnecessary and destructive. Free-market economy refers to an economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets, private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting property rights.

Welfare capitalism refers to a capitalist economy that includes public policies favoring extensive provisions for social welfare services. The economic mechanism involves a free market and the predominance of privately owned enterprises in the economy, but public provision of universal welfare services aimed at enhancing individual autonomy and maximizing equality.

Examples of contemporary welfare capitalism include the Nordic model of capitalism predominant in Northern Europe. Anglo-Saxon capitalism refers to the form of capitalism predominant in Anglophone countries and typified by the economy of the United States.

It is contrasted with European models of capitalism such as the continental Social market model and the Nordic model. Anglo-Saxon capitalism refers to a macroeconomic policy regime and capital market structure common to the Anglophone economies.

Among these characteristics are low rates of taxation, more open financial markets , lower labor market protections, and a less generous welfare state eschewing collective bargaining schemes found in the continental and northern European models of capitalism.

The East Asian model of capitalism involves a strong role for state investment, and in some instances involves state-owned enterprises. The state takes an active role in promoting economic development through subsidies, the facilitation of "national champions", and an export-based model of growth. The actual practice of this model varies by country. A related concept in political science is the developmental state.

The social market economic model sometimes called "Rhine capitalism" is based upon the idea of realizing the benefits of a free market economy, especially economic performance and high supply of goods, while avoiding disadvantages such as market failure , destructive competition, concentration of economic power and the socially harmful effects of market processes.

The aim of the social market economy is to realize greatest prosperity combined with best possible social security.

One difference from the free market economy is that the state is not passive, but takes active regulatory measures. Characteristics of social market economies are a strong competition policy and a contractionary monetary policy. The philosophical background is Neoliberalism or Ordoliberalism. Market socialism is a form of market economy where the means of production are socially-owned. In a market socialist economy, firms operate according to the rules of supply and demand and operate to maximize profit; the principal difference between market socialism and capitalism being that the profits accrue to society as a whole as opposed to private owners.

The distinguishing feature between non-market socialism and market socialism is the existence of a market for factors of production and the criteria of profitability for enterprises. Profits derived from publicly owned enterprises can variously be used to reinvest in further production, to directly finance government and social services, or be distributed to the public at large through a social dividend or basic income system.

Market socialism traces its roots to classical economics and the works of Adam Smith , the Ricardian socialists , and Mutualist philosophers. In the s the economists Oskar Lange and Abba Lerner developed a model of socialism that posited that a public body dubbed the "Central Planning Board" could set prices through a trial-and-error approach until they equaled the marginal cost of production in order to achieve perfect competition and pareto optimality.

In this model of socialism, firms would be state-owned and managed by their employees, and the profits would be disbursed among the population in a social dividend. This model came to be referred to as "market socialism" because it involved the use of money, a price system , and simulated capital markets; all of which were absent from traditional of non-market socialism. A more contemporary model of market socialism is that put forth by the American economist John Roemer , referred to as Economic democracy.

In this model, social ownership is achieved through public ownership of equity in a market economy. A Bureau of Public Ownership BPO would own controlling shares in publicly listed firms, so that the profits generated would be used for public finance and the provision of a basic income.

Libertarian socialists and left-anarchists often promote a form of market socialism in which enterprises are owned and managed cooperatively by their workforce so that the profits directly remunerate the employee-owners. These cooperative enterprises would compete with each other in the same way private companies compete with each other in a capitalist market.


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5) The term 'market' in economics refers to: A) a group of buyers and sellers of a product and the arrangement by which they come together and trade. B) a place where money changes hands. C) an . In economics, the term ''market'' refers to the functional association between the buyers and sellers of a good or service. In a market, buyers and See full answer below.

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In Economics however, the term “Market” does not refer to a particular place as such but it refers to a market for a commodity or commodities. It refers to an arrangement whereby buyers and sellers come in close contact with each other directly or indirectly to sell and buy goods. Find an answer to your question The term? "market" in economics refers to a. a place where money changes hands. b. an organization which sells goods and service.