Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Market

What it is:

A market is a location where buyers and sellers meet to exchange goods and services at prices determined by the forces of supply and demand.

How it works (Example):

A market may be a physical location or a virtual one over a network (for example, the internet). Here, people who have a specific good or service (the supply) they want to sell interact with people who wish to buy it (the demand).

Prices in a market are determined by changes in supply and demand. If market demand is steady, an increase in market supply results in a decline in market prices and vice versa. If market supply is steady, a rise in demand results in a rise in market prices and vice versa. These relationships are demonstrated in the following graphs:


Producers advertise goods and services to consumers in a market in order to generate demand. Also, the term "market" is closely associated with financial assets and securities prices (for example, the stock market or the bond market).

Why it Matters:

A market facilitates transactions between buyers and sellers (financial markets) and producers and consumers (consumer goods and services market). Markets experience fluctuations and price shifts resulting from changes in supply and demand. These changes result from fluctuations in many variables including, but not limited to, consumer preferences and perceptions, the availability of materials, and external sociopolitical events (for example, wars, government spending, and unemployment).

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...