Реферат: Market and its Functioning

Market is an instrument or mechanismwhich is function on the definite space where customers and sellerswith different goods and services arecooperating to each other. Markets are differing from each other withthe specific of goods and also services but with the freedom ofchoice for customer.

The main point in consideration of functions of themarket is coming to the exposure of regularity of forming prises forgoods and services under the influence of supply and demand.

Law ofdemand

Demand isforming by the customer which determinesthe structure and amount of bought products with definite prise inthe definite period of time. That means the demand is forming frommany factors.

One of characteristics of demand isan interrelationship between prise and amount of demand. When theprise goes up, as a rule, the demand goes down and vice versa whenthe prise goes down demand goes up. This interrelation is formed as alaw of demand. This lawis formedwith nextfactors: thefirst factor: for the customer prise issome sort of barrier which doesn’t let him to by the good heplanned. Low prise for good is stimulating to buy it and high priserestrains from buying. The second factor: there is an effect of theincome and of its real use. The high prise for one of the goods canbe compensated with the purchase of other good with lower prise whichis able suitable replace the first good. The effect of income isshowing that when the prise is lower the costumer is able to buy moreof given good and not rejecting himself from buying some ofalternative goods.

Beside the prise there are other factors which influenceon the average amount of demand. These factors are: divferences ofcostumer, changing of amount of costumers, the change of income, andchange of prise of provide goods (Makarkin, 2006).

The law of demand has it practicalmeaning for sellers and customers in case if its influence has aquantitative meaning as soon as it influence on the exchange ofproductivity and on the amount of possible expenses of costumers. Thelaw of demand has its reflection in the law of supply.

Law of Supply

It is obvious that that there is thestraight dependence between the prise of good and the amount of goodon the market. Rising of prise is stimulating the producer to risethe amount of good on the market. This interrelation between theprise and the amount of production is called the law of supply. Theinterest of producer in increasing the amount of producedgood can be easily canbe explained the singe number of good is leading to definite amountof income from selling of this good.

The supply inbig quantity is caused by next factors: change in prise for resourceswhich are includes in production of good, change in technologieswhich causes the rise of productivity, change in taxes, change inexpectations (reducing of prises in future which makes the producerswho rise the productivity in that time), and the change of number ofsuppliers.

The change in supply might be caused by other reasons aswell: the economy factors, amount of employees ext. (Verian, 1997).

Elasticity of supply and demand

The degree of sensitivity or reactionof consumer or producer on the change of prise of goods and servicesis actually the elasticity of supply and demand. In case if consumeris reacting on change of prise that the demand is elastic but in caseif consumer is not reacting that the demand is not elastic. The indexof elasticity is also applied in relation of the amount of producedproducts.

In everyday practice life of marketthere is a situation when shortage or surplus of goods which isinfluence on prices.

Firs case: supply of goods in exceeds the demand. Thisexceed might be caused by surplus of production of goods or byunfounded high prices. This situation also might be caused in case ifpopulation has low income.

Second case: the demand exceeds thesupply. This case is showing that the market has the deficit of thoseor other goods. This situationmakes consumersto lookfor theprovided goods.Market is reacting on deficit by risingprices for goods. The solutions of this situation might be:decreasing of the income of population, or by raising the amount ofproducts which are demanded.

Third case: equality of supply anddemand. This case might happen after some period of time. This exacttime shows that the price is optimal. The optimal price is coming incase of free competition and theoretically denies correspondence ofprice for the good to amount of needed expenses. Such equality showsus the stability of production and the market which makes the bestaffectivity of market economy (Matveeva,2007).

Models of market and its impact onproductivity

Market relationships are influencing on productivity byinterrelation of supply and demand. However this influence is notlimited only with role of price and pricing. The huge impact onproduction, distribution, material exchange, ext make model ofmarket. There are four models of market: 1 perfect competition, 2monopolies, 3 monopolistic competition, 4 oligopoly. On the base ofdifferent models of market in population the freedom of business isforming the tendency of forming expenditures of labour for productionof goods and services. (Dolan, 1996)

Kinds of market competition

Perfect competition characterized by big amount ofindependent firms which produce standard products. In perfectcompetition of firms products can be moved from one branch ofindustry to another. That means that firms can move from productionof one good to another (Chekanski, 2008).

The monopolies. The monopolist is thecompany which the only one producer of some good and which doesn’thave any replaceable alternative of this good. Monopolies are tryingto get maximum profit from every single product. Taking a uniqueplace on market monopolies has the possibility to set higher prices.On the other hand there are some barriers which monopolies have totake in a count. First of all the rise of prices is not always leadsto elasticity of demand. Secondly, by the law which is existing incountries with market economy setting the few prices for the samegood is price discrimination (Chekanski, 2008).

The competition which is goingbetween different kinds of markets has its positives and negatives.It isan importantelement inmechanism ofself regulation. Market is an indicator ofpopulation needs and common weal. On the other had market issignalling about future potential possibilities of productions whichwould form common finance weal.

On the perfect competition market thelaw of cost takes place. With its influence one producers are able tocompete with other producers and also successfully progressing on theother hand others are bankrupting or living the market.

Methods of regulation of market

On this level of evolution of marketit plays the very important role. Market is providing the balancedpay ability of supply and demand. The market itself is a place withhelp of with the exchange of products and services if going. Sowhen weare speakingabout marketregulation the main goal is to definemethods with help of which we can effectively influence the spherewhere the main economic relation of producer and consumer take place.The regulation of market is going with direct and indirect methods ofinfluence on the amount and structure of sale. The important way ofinfluence on amount and structure of demand is centralization whichis provided by governments’ politic of population income.Government has the direct impact to populations’ income. Allthese factors have impact on the amount of solvency demand ofpopulation.

As an indirect method of market regulation there isgovernment regulation of prices, taxes systems and also custom-housepolitics which is focused on protection of interests of producers(Makarkin, 2006).


Dolan, E. (1996) Microeconomics. Translated from English at 1996. Press.

Chekanski, A. (2008) Microeconomics for students. INFRA-M

Makarkin, N. (2006) Microeconomics for high schools. Academic Project

Matveeva, T. (2007) Introduction to Microeconomics. 5th edition GU VSHE

Verian, H. (1997) Microeconomics, Current View. Unity

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