Market: types, structure, elements

Lecture outline
Subtopic 1 Essence, functions, types, structure of the market.
Subtopic 2 The market as a system of relations. Advantages and disadvantages of the market.
Subtopic 3 The market elements. Demand and supply. Interaction of demand and supply.

Aims of the lecture:
To understand the meaning of market economy
To explain the market functions
To differentiate the types of market
To analyze advantages and disadvantages of market economy
To list the elements of market economy and to understand each of them .

1. Essence, functions, types, structure of the market.
A market is a set of arrangements by which buyers and sellers are in contact to exchange goods and services.

Market development level depends on market infrastructure
market infrastructure is a set of organizations and government agencies to ensure the normal functioning of the different markets

Market infrastructure
System of establishments and organizations (banks, exchanges, fairs, insurance companies, consultation, informational and marketing firms and etc.), providing free circulation of goods and services in the market.

The market functions:
Self regulating function. The prices guide society in choosing what, how and for whom to purchase.
Stimulating function. Businessmen use an innovation equipments, effective ways of producing goods to get high level of profit on the market.
Informating function. The market closes unhealthy, non efficiency production, but it gives possibility to run perspective, new business.

Market types (according to market functions)
Commodity and service market
Production factors market
Financial market

Market types (according to market location)
Local / domestic/national market
External/ foreign/international market

The structure of a market is
a description of the behavior of buyers and sellers in that market.

The market has the following structure:
perfect competition imperfect competition

Perfect competition
Buyers and sellers have no effect on the market price.
The market price of a product is stable (constant)
Sellers produce standard type of the product.
There are a lot of sellers of a product
For example: potatoes market, wheat market

imperfect competition:
Monopoly/ monopolist
Oligopoly / oligopolistic
Monopolistic competition/ monopolistic competitor

Monopoly/ monopolist
Is the sole supplier and potential supplier of the industry’s product.(mono-sole, polio-selling)
e.g. the post office, real way company and others

Oligopoly / oligopolistic
Is an industry with only a few producers, each recognizing that its own price depends not merely (only) on its output but also on the actions of its important competitors in the industry. E.g. car industry, oil industry and etc.

Monopolistic competition/ monopolistic competitor
Is an industry with individually small producers, each of them supply different own product. Each has limited monopoly power in its special brand. E.g. shops, restaurants, sport clubs and etc.

Subtopic 2
Advantages and disadvantages of the market.

The market advantages:
It has an ability to satisfy enough level of demand with high level of goods
The sellers and buyers are an independent
It has ability to adopt quickly to any changes on the economy

Disadvantages of the market:
It only satisfies the needs of person who has money
It is not interested in producing social goods such as roads, education system, health system, public transportation and others.
It does not give warranty(protection) for full employment and stable income
It doesn’t care about ecology, pollution of the environment and others

Subtopic 3 The market elements. Demand and supply. Interaction of demand and supply.
The market has three elements.
Price
Competition
Demand and supply

Price
prices are generally expressed in units of some form of currency. (For commodities, they are expressed as currency per unit weight of the commodity, e.g. tenge per kilogram.)
P=AC+ extra charge

Competition
Rivalry (жарыс) between commodity owners for the best economically profitable conditions of manufacturing and production selling.

Demand is the quantity of a commodity buyers wish to purchase at each conceivable (possible) price.

Demand is influenced by several factors:
Income of the buyer
Price of substitution goods
Price of complementary goods
Buyers expectations

Supply is the quantity of a good sellers wish to sell at each conceivable (possible) price.

Supply is influenced by several factors:
production costs,
technology,
the number of competitors,
and the expectations of producers.

Interaction of demand and supply.
When the prices raise the demanded quantity of the goods decreased, because customers don’t want to buy expensive goods. When the prices decrease the demand for the goods increase as the customer prefer cheap goods. The links between the goods price and demanded quantity are explained by the demand law.

When the prices raise the supplied quantity of the goods increased, because producers want to get more profit. When the prices decrease the supplied quantity of the goods become less as the businessmen don’t want to work at low prices. The links between the goods price and supplied quantity are explained by the supply law.