Markets

In a very abstract sense, a market is where private goods are exchanged. A good can be anything for which a well-defined property right exists. This abstract definition is related to the concepts of an allocation, the competitive market equilibrium, and an economic equilibrium in general.

More intuitively, the concept of a market describes the idea that the suppliers of a product (or a service) meet the demand side, and both sides negotiate over the price until an optimal combination of price and quantity is reached. Typically, the supply side offers a higher quantity the higher the price, whereas the demanded quantity falls the higher the price. In equilibrium, suppliers and consumers trade at a price at which the supplied quantity equals the demanded quantity.

See also: allocation, competitive market equilibrium, equilibrium

Entry by: Joachim Winter

June 17, 1999
Direct questions and comments to: Glossary master