What is the market in business



1. Term: Market is called in more functional Regarding the meeting of supply and demand, through which prices are formed in the event of an exchange. The minimum requirement for the creation of a market is a potential exchange relationship, i.e. apart from the medium of exchange (usually money) at least one object to be exchanged (scarce good), at least one supplier and at least one buyer.

2. Species: a) A market can organized or not organized be. In the first case, there is a market in the institutional sense to which certain fixed rules apply; E.g. weekly markets, fairs, auctions, tenders, stock exchanges. Supply and demand are also brought together through trade fairs and exhibitions.
b) After Market entry can be divided into open, restricted and closed markets. If access to the market and exit from the market are open to all providers at all times, there is free competition, otherwise there is one more closed Market ahead. The latter can arise through state decree (e.g. earlier through the post office shelf, concessions), based on legal reasons (patent) or only factually (temporarily) given. The resulting effects are different in each case.
c) A market is free, if the market partners can freely negotiate or set their action parameters, especially the price. If the action parameter is subject to official intervention (e.g. in the form of fixed, maximum or minimum prices - price functions), a regulated Market ahead.
d) After preferences a distinction is made as follows: One calls a market homogeneous, if the good is technically homogeneous and is also perceived as such by the customers. The latter requires that personalpreferences between suppliers and buyers are missing, transport costs do not occur, so one spatial point market exists, and supply and demand refer to the same point in time (temporal point market). If one of these prerequisites is missing, a more heterogeneous Market ahead.

If there is complete market transparency in a homogeneous market and the participants react to market signals with infinite reaction speed, one speaks of perfect Market. In all other cases it is one imperfect Market. In a perfect market there is a uniform price (Jevons' law of the indiscrimination of prices). “Perfection” is to be understood as a purely analytical term, so it is not rated as superior in the normative sense.

3. Market definition: If a market is to be determined, a market definition must be carried out in terms of material, personal, spatial and temporal aspects, i.e. it must be determined who is to be among the suppliers and buyers of the goods belonging to the market under these criteria. There is no general market definition, but only with regard to a specific question or purpose. In addition, a certain degree of “arbitrariness” is unavoidable.

See also economic sociology.

Order economics

Markets or market economies are equated with spontaneous orders, while central administration economies are identified with established orders, organizations. Often the superiority of market economies over central administration economies is to be shown. Hayek points out the following: A market organization increases the chances of having various goods at disposal to a higher degree than any other order known to us. Superiority is achieved by the fact that each actor, while pursuing his own goals, inadvertently promotes the goals of other people as well. A market organization is a positive-sum game that contains incentives to be of service to others in the pursuit of their goals. Prizes play a central role here: They inform all players about changes in scarcity, but also about changes in appreciation, and direct behavior in a decentralized manner so that the most urgent wishes can be satisfied first. The competition can be thought of as a discovery process that discovers knowledge about the wishes and capabilities of other actors that would remain undetected without its use. Certain successes achieved in the past are, however, irrelevant for the present and the future: pecuniary externalities are necessary functional conditions for a functioning market order. The security of income positions through state aid is therefore rejected by regulatory economists. The abstract rules on which a market organization is based can only be interpreted as opportunities and not as a right to certain results.

The Necessity of the state to secure the spontaneous order market: Traditionally, order economists have called for a strong state that has to prevent the concentration of power in the hands of a few individuals. This position has often been criticized for neglecting the fact that representatives of the state can abuse a strong position for their own purposes. Positions of power protected by the state's monopoly on the use of force are even more dangerous than power in the hands of private individuals.