# Market (economics)

Market referred to in the economics the coincidence of supply and demand for a economic good (eg. As a product or service ).

## General

An economy based on markets is called a market economy . A market that satisfies a relatively large number of hypotheses , including unrealistic ones, is called a perfect market and serves as a reference model in economics.

The basic principle of the market is exchange . By using a generally recognized medium of exchange (for example money ), the exchange “good for good” ( real exchange ) can be separated from one another in time. Depending on the trading object that is traded on the market, one also speaks of financial ( stock exchanges , money , foreign exchange or capital markets ), factor ( labor markets ) and consumer goods markets , etc.

Market participants (actors) are the suppliers and buyers who exchange their trading objects on the basis of a more or less fixed market order . The price of a good that leads to a match between the quantity offered and demanded, the so-called market equilibrium , is called the market price or equilibrium price .

## Types of markets

### Qualitative classifications

The market types are divided qualitatively according to three criteria:

Perfect market and imperfect market
Depending on how strong the homogeneity criteria are in a market, one speaks of perfect or imperfect markets .
Organized and non-organized markets
In organized markets, the meeting and interaction of suppliers and buyers is based on specific, fixed rules. Examples of this are the organized securities exchanges or the implementation of auctions according to certain rules, such as auction clocks at fruit and vegetable auctions. In unorganized markets, these rules are absent.
Markets with restricted and unrestricted access
Restrictions can be of a purely legal nature such as B. in the case of investment, start-up, establishment or branch establishment bans, and concessions . Legal and economic handicaps can arise from special taxes. Purely economic barriers are a lack of capital or skills.
Combinations of the three forms
The above criteria can appear in various combinations. An example of a perfect, organized market with limited access is the stock exchange.

### Market form table according to Stackelberg

Markets can be divided into different market types according to the number of suppliers and buyers. The most common division of the market goes back to Heinrich Freiherr von Stackelberg :

Enquirer
lots few a
providers lots Polypol Oligopsony Monopsony
few Oligopoly bilateral oligopoly limited monopsony
a monopoly limited monopoly bilateral monopoly

### According to demand intensity

strong demand weak demand
strong competition Mass market Shrink market
weak competition Growth market niche market

### According to the direction of the transaction

Depending on the direction of the transaction carried out on the market, a distinction is made between procurement and sales markets. A procurement market is such a market in which, from the perspective of the procurer, all suppliers of the products to be procured and all buyers with whom he competes for these products act. A sales market, on the other hand, is, from the perspective of the supplier, a market that includes all potential buyers of its products and at the same time all suppliers with whom it competes for the customers' favor.

### According to spatial expansion

Depending on the type of goods and the legal framework, the prices of the goods vary from region to region. This results in different sub-markets for the same good. These sub-markets can be broken down according to geographic extent:

• Local or regional markets are typical for products with high transport costs, quick spoilage and personal services. Examples are real estate markets and personal services such as hairdressers . Since a substitution of the locally offered goods and services by the same goods and services in other locations is not possible, the local markets represent the place of price determination. The prices are locally very different due to the low factor mobility .
• National markets typically arise from the national legal framework. Different tax laws and standards make it difficult to exchange goods across national borders and ensure the emergence of national markets. Added to this are national traditions, usages and language barriers. This means that the same products have different prices in different countries.
• International markets are markets in which trade processes between market players from different countries include, although not all countries worldwide are economically interwoven with the market under consideration (global market).
• The world market represents the global market on which goods and services traded around the world have a globally uniform world market price . These world market prices can deviate significantly from national and local prices due to transport costs , subsidies , customs duties and non-tariff trade barriers .

The price equalization between geographically separate markets is carried out through arbitrage . If the markets arise due to different legal framework conditions, a price equalization takes place between the markets via black market and smuggling .

### According to legal expansion

In the context of globalization , products are sold to many countries around the world. Since different laws , technical regulations or infrastructural requirements may apply in these countries , it must be checked whether the products comply with the respective laws and applicable regulations. An example of this is the power supply, which can be designed for different electrical voltages ( volts ) or alternating and direct currents. The regulations for protecting electrical products can also vary. This can mean that the products have to be technically adapted accordingly and manufactured in different variants. For certain products, proof of technical conformity is required, which is proven by homologation . This applies, for example, to motor vehicles, see ECE homologation . This is one of the reasons why vehicle manufacturers subdivide their sales plans accordingly.

### After distribution of power

Markets can be even after the ruling on them power distribution ( market power ) divide, for example in buyers markets and sellers' markets : a buyer's market and seller's market ( english market buyer's and seller's market ) represent two extreme market situations. What is meant is the market, the contractual terms of which are dictated by the buyer or the seller. Are conditions discounts , payment terms , delivery , trading hours and trading centers .

The reasons for the better bargaining power of the buyer or seller are in each case an excess supply when there is little demand ( supply excess ) or a short supply when there is very high demand ( excess demand ). The main consequences of the buyer's and seller's market are falling or rising prices as well as favoring black markets and monopoly situations. The cobweb theorem or the so-called pig cycle show how buyers and sellers' markets follow one another and can cause each other.

## Market sizes

Market sizes serve the quantitative description of markets. Well-known descriptive tools for market sizes are:

• Market share : Relative share of a provider in the market volume;
• Market extent: the specific geographic extent of the relevant market;
• Market development : the change in market data ;
• Market capacity : Theoretical maximum size of the market, prices and purchasing power are not taken into account;
• Market potential : total possible sales volume of a market. The market potential is the upper limit for the market volume;
• Depth of market : the ability of a market to implement large market volumes without significant changes in the market price;
• Market volume : total of sales actually achieved;
• Market growth : increase in economic performance in the market, measured e.g. B. on sales.

Without the definition of the market extent, the market area, the other market sizes mentioned above cannot be quantified. For example, in brick-and-mortar retail, a branch company finds very different market situations and competitive conditions for its individual operations locally, regionally, nationally, and possibly also internationally and globally. Nationally it must u. U. in polypolistic, locally it can u. U. act in a quasi-monopoly situation and its national market shares can be low, while its local market shares can be high.

## Market behavior

Under market behavior refers to the objectives, strategies, tactics, immediate actions and reactions of individual economic entities in the competitive market .

In principle, there are three possible categories of behavior on the part of providers and buyers , each of which can also compete with one another:

• to act, d. H. to set certain market parameters of price, quality, service etc. and to gain competitive advantages
• reacting to the actions of a competitor (i.e. following certain market parameter changes. This is the typical way in a functioning competition)
• nothing to do (this is almost always economically disadvantageous because it creates competitive disadvantages)

## Market saturation

Market saturation is the achievement of a certain market intake volume. Once this volume has been reached, no further goods can be sold on that market; H. the market is saturated. There is then only demand for new goods when the existing goods have reached the end of their life cycle, i. H. need to be replaced.

The degree of saturation is determined by the ratio of market volume to market potential .

${\ displaystyle {\ text {Market saturation}} = {\ frac {\ text {Market volume}} {\ text {Market potential}}} \ \ cdot 100 \, \%}$.

The saturation quantity indicates the demand quantity that would be demanded at a price of zero. The customer is no longer willing to pay a price for the purchase of another unit of goods. If the supply surplus or the demand gap continues to grow, a negative price even arises .

## Market players

• Inquirers: From a company perspective, buyers are (potential) customers who buy products in markets in order to satisfy their needs .
• Vendors: Vendors compete in markets for the favor of buyers in order to achieve profitability by selling their products and to survive economically.
• Sales partner : Sales partners cooperate with the customer when selling products from a supplier.
• State institutions : In markets, state institutions primarily perform the role of market regulation with regard to market development , for example preventing market disruptions or market failure through legal orders and prohibitions; Secondly, however, state institutions also act as suppliers and / or buyers on markets.
• Representation of interests : Representation of interests in markets, which include business associations and consumer organizations , try to influence markets in such a way that the interests of their interest group with regard to market events are preserved.

## literature

• Niklas Luhmann : The market as the inner environment of the economic system. In: The Economy of Society. Suhrkamp, ​​Frankfurt a. M. 1988, ISBN 3-518-57883-9 , Chapter 3, pp. 91-130.
• Reinhard Pirker: Markets as forms of regulation of social life. Metropolis Verlag, Munich 2004, ISBN 3-89518-479-9 .