We live in an age of market economy supremacy - almost the entire progressive world has already moved to it, other countries are striving for this. The market itself is essentially nothing, but, according to many learned economists and even biologists, it is one of the main engines of progress, since for the purposes of profit a person is capable of much, including the invention of new technologies and the modernization of existing ones. All this leads to the general progress of human civilization.
Definition of the term “market”
Market functions directly affect the meaning of the term. There are many interpretations of it in dictionaries. The simplest and at the same time the most perfect definition is: the market is the place where buyers and sellers gather to either purchase a product or service or sell them.
Other sources provide information that the market is a process of exchange, while others describe it as a mechanism of interaction between suppliers and buyers. All the proposed definitions are correct - they complement each other. As a result, it turns out that the market, whose functions reveal the entire economic development of mankind, affects the life of both entire states and its individual inhabitants.
Market Essence
Under these two words lies the most complicated process, which includes 4 main stages:
1. Production. At this stage, the creation of goods or services necessary for society to meet the needs and at least necessary for the manufacturer, which acts as a source of profit. This stage is the basis of the market. Without production, there will be no other stages; it can even be called the “foundation” of the entire economic system.
2. Distribution. After the goods or services have been produced, there comes a time distribution of products. At first glance, it might seem that this does not affect the market at all, whose functions will not change in any way if the produced goods, for example, Vasya or Pete, are obtained. But in fact, this moment is important, because it is from him that the further development of production depends. To confirm these arguments, we can give an example: historians, one of the main reasons for the fall of the Roman Empire highlight slave relations. Slaves were not interested in the quality of their work, which caused problems in the state economy that led to a deep economic crisis, and then to a political one. As a result, the most powerful empire collapsed at that time.
3. Exchange. The essence and functions of the market are tied at this stage. Some dictionaries define the market with this word. And this is quite true: the market is a place in which one commodity is exchanged for another. The goods may be services. In the process of exchange, producers get what they care so much about the quality of their products — profit, and customers — what they need to meet their needs.
4. Consumption. it The final stage in the market chain. After it, the whole cycle repeats.
The main functions of the market
Market functions affect all aspects of the economic activity of individuals, states, and even entire geographic regions with a population of several billion people. To date, economists have identified the main functions of the market, a total of 5.
- Informational. In the process of functioning of commodity-money relations, various organizations, statistical companies, and ordinary consumers receive, transmit and store a huge amount of information, as well as analyze it.For example, a man opened a newspaper and saw that a liter of gasoline had risen in price to 30 rubles, and immediately remembered that 15 years ago gasoline cost only 5 rubles. At the level of his economic education, he analyzes why this happened. Most often, the government is guilty of raising prices, and if this “expert” has at least a little economic background and a concept of the market, he will find real reasons for this.
- Intermediary. The essence and functions of the market consist in the fact that it is a place that gives signals for the profitability of the production of any services or goods. Through it, the supplier can find the consumer he needs, and vice versa. Without a market, this would not have been possible.
- Pricing. The market acts as a natural, universal price regulator. Its functions can form social value. Those. the cost of the same product or service will vary depending on the company. For example, the service of a male hairdresser in the village will cost 50-100 rubles, and sometimes a bucket of potatoes or two heads of cabbage. In urban areas, for a similar service, you will need to give two or three times more hard earned.
- Regulatory. Competition, the law of supply and demand relate specifically to this function - it is the most important of all. As a result of it, progress in production, an increase in productivity and a decrease in the cost of producing a unit of goods can be observed.
- Sanitizing (in other words, cleansing). The result of this function is the termination by most young enterprises of their activities. This is natural selection - the fittest survives. A market economy leads to the fact that only the fittest and most entrepreneurial continue to operate. As a result, the entire economic system becomes more resilient to changes of a local or global scale.
Price and cost
Many people in the modern world often confuse these two concepts, but they are very important for understanding the existing market. Cost is the total cost of producing a unit of goods. And the price is the amount for which this unit of goods is sold on the market. Generally, cost and price are different.
Supply and demand
Having understood what supply and demand are, one can better understand the essence and functions of the market.
Supply is the quantity of goods on the market. Demand is the quantity of goods needed by the consumer. The market price directly depends on supply and demand. The less any product on the market, the higher the demand for it, while the price also rises. If an increase in supply is planned, and the quantity of goods on the market exceeds demand, prices are rapidly falling. A couple of years ago, buckwheat could be bought for a penny, then in the agricultural market there was a situation of unsatisfied demand. The result was a sharp increase in the prices of this product. The same thing is happening on the oil market at present: the prices for “black gold” are breaking all anti-records, dropping to less than $ 30.
Market shortcomings
Each phenomenon in the world has two sides: positive and negative. The main market functions contain at least 3 disadvantages:
- The market is an unstable system and most often acts spontaneously. In a truly market economy, there is no regulatory power — it makes itself. Imbalances in production and consumption sometimes occur, which in turn leads to economic crises, the consequences of which are felt by all the inhabitants of the planet.
- Out of control. This fact leads to monopolization of markets, which excludes competition, as a result of which the consumer suffers.
- Social stratification. As a result of the fact that the distribution of wealth is uneven, classes of the rich, poor and the middle class appear. This leads to social tension, racketeering, corruption and other phenomena that corrode society.
With all the existing shortcomings and the generation of social tension, the market system is by far the most advanced. It is hard to say which market function is the most necessary for society, but all of them together give the general positive dynamics of the economic development of modern states.
