World market. The opened and closed economy. Structure of the world economy and various securities of the countries with production resources

Date: 2015-10-07; view: 403.

A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services (including labor) in exchange for moneyfrom buyers. It can be said that a market is the process by which the prices of goods and services are established.

For a market to be competitive, there must be more than a single buyer or seller. It has been suggested that two people may trade, but it takes at least three persons to have a market, so that there is competition on at least one of its two sides. However, competitive markets, as understood in formal economic theory, rely on much larger numbers of both buyers and sellers. A market with single seller and multiple buyers is a monopoly. A market with a single buyer and multiple sellers is a monopsony. These are the extremes of imperfect competition.

Markets vary in form, scale (volume and geographic reach), location, and types of participants, as well as the types of goods and services traded. Examples include:

· Physical retail markets, such as local farmers' markets (which are usually held in town squares or parking lots on an ongoing or occasional basis),shopping centers and shopping malls

· (Non-physical) internet markets

· Ad hoc auction markets

· Markets for intermediate goods used in production of other goods and services

· Labor markets

· International currency and commodity markets

· Stock markets, for the exchange of shares in corporations

· Artificial markets created by regulation to exchange rights for derivatives that have been designed to ameliorate externalities, such as pollution permits (see carbon trading)

· Illegal markets such as the market for illicit drugs, arms or pirated products

In mainstream economics, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and information. The exchange of goods or services for money is a transaction. Market participants consist of all the buyers and sellers of a good who influence its price. This influence is a major study of economics and has given rise to several theories and models concerning the basic market forces of supply and demand. There are two roles in markets, buyers and sellers. The market facilitates trade and enables the distribution and allocation of resources in a society. Markets allow any tradable item to be evaluated and priced. A market emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights (cf. ownership) of services and goods.

In economics, a market that runs under laissez-faire policies is a free market. It is "free" in the sense that the government makes no attempt to intervene through taxes, subsidies, minimum wages, price ceilings, etc. Market prices may be distorted by a seller or sellers with monopoly power, or a buyer with monopsony power. Such price distortions can have an adverse effect on market participant's welfare and reduce the efficiency of market outcomes. Also, the relative level of organization and negotiating power of buyers and sellers markedly affects the functioning of the market. Markets where price negotiations meet equilibrium though still do not arrive at desired outcomes for both sides are said to experience market failure.

Markets are a system, and systems have structure. The structure of a well-functioning market is defined by the theory of perfect competition. Well-functioning markets of the real world are never perfect, but basic structural characteristics can be approximated for real world markets, for example:

· many small buyers and sellers

· buyers and sellers have equal access to information

· products are comparable

There exists a popular thought that free markets would have a structure of a perfect competition. The logic behind the thought is that market failures are thought to be caused by other exogenic systems, and after removing those exogenic systems ("freeing" the markets) the free markets could run without market failures.

As an argument against such a logic there is a view that suggests that the source of market failures is inside the market system, so the removal of other interfering systems would not result in markets with a structure of perfect competition: capitalists don't want to enhance the structure of markets, just like a coach of a football team would influence the referees or would break the rules if he could while he is pursuing his target of winning the game. The capitalists are not enhancing the balance of their team versus the team of consumer-workers, so the market system needs a "referee" from outside that balances the game. The role of a "referee" of the market system is usually given to a democratic government.

An open economy is an economy in which there are economic activities between domestic community and outside, e.g. people, including businesses, can trade in goods and services with other people and businesses in the international community, and flow of funds as investment across the border.Trade can be in the form of managerial exchange, technology transfers, all kinds of goods and services. Although, there are certain exceptions that cannot be exchanged, like, railway services of a country cannot be traded with another to avail this service, a country has to produce its own. This contrasts with a closed economy in which international trade and finance cannot take place.

The act of selling goods or services to a foreign country is called exporting. The act of buying goods or services from a foreign country is called importing. Together exporting and importing are collectively called international trade.

There are a number of advantages for citizens of a country with an open economy. One primary advantage is that the citizen consumers have a much larger variety of goods and services from which to choose. Additionally, consumers have an opportunity to invest their savings outside of the country.

In an open economy, a country's spending in any given year need not to equal its output of goods and services. A country can spend more money than it produces by borrowing from abroad, or it can spend less than it produces and lend the difference to foreigners. There is no closed economy in today's world.