Market (economics): Difference between revisions
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Revision as of 01:59, 25 April 2008
In economic theory, a market exists when a would-be buyer makes contact with a would-be seller for the purpose of agreeing an exchange. In his Principles of Economics Alfred Marshall offered several definitions and gave a range of examples [1].
Perfect markets
Marshall also introduced the concept of a perfect market when he wrote .. the more nearly perfect a market is, the stronger is the tendency for the same price to be paid for the same thing at the same time in all parts of the market. The hypothetical ideal of a perfect market has since been developed to mean a situation in which:
- price is determined by the costless interaction of collective supply with collective demand;
- all information that is relevant to the price of a commodity is immediately known to all market participants;
- all market participants act rationally;
- it is impossible for any individual participants or groups of participants to influence the price of a product.
(See also the discussion of perfect competition in the article on competition and the discussion of the efficient market hypothesis in the article on financial economics.)