MARKET ELEMENTS: MAIN CHARACTERISTICS - CULTURE VOCABULARY - 2025

The main elements of the market are the seller, the buyer, the price, the offer and the demand, among others. Market is the term that is used in economics to describe the context where purchases and sales are made.

The market moves and fluctuates according to the goods that are offered and the demand they have. The market is the mechanism that sets the pattern of prices and quantities to be offered in daily transactions.

The concept of the market is very old and even predates money; Formerly these exchanges were made through barter and there were methods to determine the value of certain products, such as their weight, size and functionality.

Currently there are market elements that have changed little, such as the existence of products on offer and a sector interested in acquiring them.

Because it is an essential part of society and vitally important for the health of the economy, the market has been studied, measured, analyzed and even tried to predict.

The 6 elements of the market

1- Product or service

It is the element that will be exchanged by the economic actors. A supplier offers the good or service to a consumer, with the intention of satisfying a need.

2- Seller

A seller is one who identifies a need in consumers and tries to satisfy this need through the provision of a good or service.

3- Buyer

The buyer is the person who pays to purchase a product or service. It is one who has a need to cover and seeks to do so through the market.

4- Price

The price is the monetary amount that the buyer must pay the seller to obtain the product or service he wants.

Although money is the main form of payment today, there are occasions when the exchange of one good for another is used.

Despite being simple in theory, there will be cases where a single seller has a product that many buyers need, or vice versa.

There may also be circumstances in which the same product is sold at different prices. These variations are dictated by the type of market, competition, supply and demand.

5- Offer

In economics, supply is the quantity of goods that producers are willing to sell under certain market conditions.

That is, if the value of a product rises, it will consequently be produced in greater quantity. On the other hand, if the price of a product or service falls in a stable market, it will be less offered.

An example is the production of avocados: their popularity has skyrocketed in developed countries. For this reason, more and more people are willing to pay more for the fruit, which leads farmers to produce it in greater quantity and thus obtain greater profits.

The supply is determined by factors such as the price in the market, the technology available for its production, how many producers there are or the consumption expectations, that is, if it is expected that many people will demand a specific product.

Likewise, the offer can be modified by various factors other than price, mainly due to production expenses.

6- The demand

Unlike supply, demand works from the perspective of the consumer, not the producer.

Demand is the quantity of products that consumers are willing to buy based on their price.

The law of demand establishes that if a product is cheaper, it will be more in demand; a more expensive product will find fewer consumers. In a supermarket, for example, the most purchased apples would be the lowest priced.

Demand is determined by factors such as the price of products in the market, consumer preferences or the price of substitute goods

A substitute good for a pen would be a pencil; if pencils are much cheaper and are also suitable for writing, this can affect the demand for pens.

Income (the money consumers have) is also a strong determinant of demand.

If rent increases, prices increase; if this decreases, the price will also be affected. Therefore, if a country decided to print more money, it would increase income and consequently, everything would go up in price.

Market types

1- According to the volume of sales

If measured by their sales volume, markets can be wholesale (handling large quantities of product) or retail (small quantities intended for the individual customer).

2- According to regulations

A market, being an essential part of the economy, can be managed by government agents.

If it is controlled by the State, it is a regulated market. The free market, whose prices are set by supply and demand, is a deregulated market.

3- According to the object of the transaction

In the goods market, products and goods are exchanged through the sale. In the service market, a profit is obtained through hiring.

4- According to the actors involved in the offer

In this case there are three possibilities:

- Perfect competition

It is a hypothetical market in which there are many buyers and sellers, it is not regulated and the prices vary little from each other since, since there are several bidders, the increase or decrease of just one would not generate any change.

- Monopoly

A single individual offers a highly demanded product. Having no competition, it can decide its price and sales conditions.

- Oligopoly

When there are few bidders for a product, they reach an agreement and set prices in a similar way, thus eliminating competition between them.

Market equilibrium

By finding the point where producers and consumers converge, a market equilibrium is found: the balanced price corresponds to the one in which the number of products offered is equal to the number of people willing to consume them.

When the price is higher than the equilibrium price, the supply will be higher. This is known as surplus: more apples are produced than consumed; therefore, they must lower their price, in order to reach more consumers and balance the market.

When the price of a product is lower than the equilibrium point, the supply will be lower, since there will be less profit in producing apples, for example, if they are sold very cheaply.

However, in the above scenario, more people will want to buy apples, thus there is a shortage of product. Therefore, these must rise in price to reduce their demand and thus achieve a balance.

References

1. Álvarez, C. Et al. (sf) Supply, demand and the market. Introduction to economic theory. Recovered from campusvirtual.ull.es
2. Economy Web Site (sf) The market. WS Economy. Recovered from economia.ws
3. Khan Academy (2013) Supply, demand and market equilibrium. Khan Academy. Recovered from khanacademy.org
4. McGraw Hill Education (nd) Supply, Demand, and Market. McGraw Hill Education. Recovered from is
5. Principles and Instruments (2012) Market, demand and supply. Economic Analysis - Basic Concepts. Recovered from principleseinstrumentos.wordpress.com