Econ: Marketplace


marketplace

What is the marketplace? A market represents the freely chosen action between buyers and sellers of goods and services. A market for a particular item can be local, national, international, or a combination of these. In a market economy, individuals, whether buyers or sellers, decide for themselves the answers to the What?, How?, and For Whom? economic questions.

The basis of activity in a market economy is the principle of voluntary exchange. A buyer and a seller exercise their economic freedom by working toward satisfactory terms of an exchange. The seller sets a rice based on his or her view of market conditions, and the buyer, through the act of buying, agrees to the product and the price. In order to make the exchange, both the buyer and the seller must believe they will be better off – richer or happier – after the exchange than before.

The supplier’s problem of what to charge and the buyer’s problem of how much to pay is solved voluntarily in the market exchange. Supply and demand analysis is a model of how buyers and sellers operate in the marketplace. Such analysis is a way of explaining cause and effect in relation to price.

Arrows-02-june

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