What is a market?
A market is a physical or digital place where two parties, usually buyers and sellers, meet to make an economic transaction. Physical markets include retail outlets, shops, malls, dealerships, and real estate locations. On the other hand, examples of digital markets include e-commerce websites, online marketplaces like Amazon, iTunes, mobile app stores. In physical locations, there is usually face-to-face interaction between the stakeholders while online markets involve interaction with a digital interface.
Apart from the conventional definition, the word ‘market’ can be used to refer to other types of platforms that host economic transactions. For instance, the stock market and securities market. The term can also be used to describe a certain group of consumers who are willing to buy a particular product like the housing market, gold market, ride hailing market, etc.
How do markets work?
The underlying function that drives any market is demand and supply dynamics. Supply is the magnitude of products or services that sellers can make available while demand reflects the magnitude buyers are willing to purchase. Price is often determined by the balance of demand and supply. If there is an abundance of products or services and there are fewer buyers, the price will fall. However, if the demand for products or services is more than what can be met by the suppliers, the price will rise.
Apart from the two main stakeholders, i.e. sellers and buyers, markets often have to operate in compliance with regulations implemented by government agencies. These regulations attempt to establish an equitable environment for all stakeholders. For example, there are laws against anti-competition practices to encourage all sellers to be a part of the economic activity and then there are consumer protection regulations to prevent big corporations from exploiting their customers.