The Market System Introduction - Business Environment

As indicated, the market system is an economy in which all of the basic economic choices are made through the market. The market is a place where buyers and sellers of a product are brought together. The nature and location of the market depends on the product. For example, within your local town there is likely to be a vegetable market where you would go to buy vegetables. Here, buyers and sellers meet face to face in the same location, but this is not always the case. The market for used cars might be the local newspaper classified section; the sale of stocks and shares passes through a broker so that the buyer never meets the seller. There are many different types of market, involving different buyers and sellers. Firms sell the goods and services they produce to households on the product markets, while in the factor marketsfirms are buying resources such as labour and raw materials. The discussion in this chapter will concentrate on the product markets but much of the analysis could also be applied to the factor markets.

A free market system is one in which the basic economic choices are made through the market, without any intervention by the government. In reality, markets are not completely free; governments intervene in markets for many reasons and in many different ways.

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