12. Market and market structures

In short, markets can be classified according to certain structural characteristics that are shared by most firms in the market. Economists have names for these different market structures: pure competition¹, monopolistic competition², oligopoly, and monopoly.

An important category of economic markets is pure competition. This is a market situation in which there are many independent and well-informed buyers and sellers of exactly the same economic products. Each buyer and seller acts independently. They depend on forces in the market to determine price. If they are not willing to accept this price, they do not have to do business.

To monopolize means to keep something for oneself³. A person who monopolized a conversation, for example, generally is trying to stand out from⁴ everyone else and thus attract attention⁵.

The term market, as used by economists, is an extension of the ancient idea of a market as a place where people gather to buy and sell goods. Today, however, markets such as the world sugar market, the gold market¹ and the cotton market do not need to have any fixed geographical location. Such a market is simply a set of conditions permitting buyers and sellers to work together.

13.Market price

Prices play an important role in all economic markets. Price is Money value of a good or service. In a market economy prices act as signals. A high price, for example, is a signal for producers to produce more and for buyers to buy less. price system is Economic system in which resources are allocated as a result of the forces of supply and demand.Prices, especially in a free market system, are also neutral. That is, they favour neither the producer nor consumer. Instead, they come about as a result of competition between buyers and sellers. The price system in a market economy is surprisingly flexible. Competition between buyers and sellers leads to market equilibrium — a situation where prices are relatively stable and there is neither a surplus nor a shortage in the market. In most economic systems, the prices of the majority of goods and services do not change over short periods of time. Prices perform two important economic functions: they ration scarce resources, and they motivate production. As a general rule, the more scarce something is, the higher its price will be, and the fewer people will want to buy it. Economists describe that as the rationing effect of prices. Prices may be either free to respond to changes in supply and demand or controlled by the government or some other (usually large) organisation.

14. Labour and capital

There are four major categories of labour that are based on the general level of skills needed to do any kind of job. These categories are unskilled, semiskilled, skilled and professional or managerial.

Unskilled labour. Workers who do not have the training to operate machines and equipment fall into³ the category of unskilled labour. Most of these people work chiefly with their hands at such jobs as digging ditches, picking fruit, etc.

Semiskilled labour. Workers who have mechanical abilities⁴ fall into the category of semiskilled labour. They may operate electric floor polishers, or any other equipment that calls for⁵ a certain amount of skill.

Skilled labour. Workers who are able to operate complex equipment and who can do their tasks with little supervisions fall into the category of skilled labour. Examples are carpenters, typists, toolmakers.

Professional labour. Workers with high level skills such as doctors, lawyers and executives of large companies fall into the category of professional labour.

Most occupations have wage rate — a standard amount of pay given for work performed.

How these rates are determined can be explained in two different ways. The first deals with supply and demand, the second recognizes the influence of unions on the bargaining process.

The third factor of production is capital — the tools, equipment and factories used in production of goods and services. It is a produced factor of production, a durable input which is itself an output¹ of the economy. For example, we build a textile factory and use it to produce shirts, or assemble a computer and then employ it in educating students.

As noted earlier, such items are also called capital goods². This is to distinguish them from financial capital³, the money used to buy the tools and equipment used in production.

Capital is unique in that, it is the result of production. A bulldozer may be an example of capital goods used in construction. At the same time⁴, it was manufactured in a factory which makes it the result of earlier production.

When the three inputs⁵ — land, labour and capital — are present, production or the process of creating goods and services, can take place. Even the production of the service called education requires the presence of land, labour and capital.