Question

What do you understand by Market in Economy? Explain.

Answer 1

MEANING OF MARKET -

 

In ordinary parlance, market is considered to be a place where the seller presents his goods and services for sale and the purchaser can go there and purchase those goods. However, in economics, the term market is not confined to any place or location. The term 'market' can be defined as  follows:

 

'Market is a mechanism, whereby the buyers and selles come into contact with each other and freely agree to exchange goods and services for money at a mutually agreed price.'

 

In this way, we can say that market is a mechanism, not a particular place or location, which brings the buyers and sellers into contact with each other. This contact can be direct (face to face) or by other means like a letter, telephone, telegram, internet or through an agent, broker or intermediary. The exchange taking place between buyers and sellers should be at a mutually agreed price. If they do not agree on a price, the exchange will not take place. It is also essential that this exchange should be free or voluntary. The seller should have the freedom to sell or not to sell and similarly the buyer should have freedom to buy or not to buy. There should be no force compulsion on either the seller or buyer.

 

FUNCTIONS OF MARKET -

 

The market performs the following functions:

1.  To bring together the buyers and the sellers.

2.  To determine price and

3.  To determine production level or supply.

 

In ordinary parlance, market is considered to be a place where the seller presents his goods and services for sale and the purchaser can go there and purchase those goods.