The concept of transactions leads to the concept of a market. A market is the set of actual and potential buyers of a product.
To understand the nature of a market, visualize a primitive economy consisting of four residents: a fisherman, a hunter, a potter, and a farmer. These skilled trades people can interact in different ways to meet their needs.
In a self-sufficiency model, they gather the needed goods for themselves. Thus the hunter spends most of the time hunting, but also takes time to fish, make pottery, and farm to obtain the other goods. The hunter is less efficient at hunting, and the same is true of the other trades people.
In a decentralized exchange model, each person values the other three as potential "customers" who are apart of a market. The hunter then may make separate excursions to trade goods with each of the fisherman, the potter, and the farmer to exchange meat for their goods.
In a centralized exchange representation, a new person called a merchant emerges and sets up shop in a common area called a marketplace. Each tradesperson delivers goods to the merchant and trades for other needed goods. Thus the hunter transacts with one "market" to acquire all the needed goods, rather than with three other persons.
The emergence of a merchant substantially reduces the total number of transactions required to accomplish a given volume of exchange. In other words, merchants and central marketplaces increase the transactional efficiency of the economy.
As the quantity of persons and transaction increase in a society, the number of merchants and marketplaces also grows. In advanced societies, markets do not need to be physical places where buyers and sellers interact. In todays modern communication and transportation system, a merchant can market a product on late evening cable television, take orders from hundreds of customers with a call center, and ship the goods to the buyers on the following day without having had any physical contact with the buyers.
A market can develop around a product, a service, or anything else of value. For example, a job market consisting of unskilled people who are willing to offer their efforts in return for wages or products. Various services will blossom around a labor market to facilitate its functioning, such as employment agencies and insurance firms. Banking is another important market that emerges to meet the needs of people so that they can borrow, lend, save, and safeguard money. Donor markets can emerge to meet the financial needs of nonprofit organizations.
To understand the nature of a market, visualize a primitive economy consisting of four residents: a fisherman, a hunter, a potter, and a farmer. These skilled trades people can interact in different ways to meet their needs.
In a self-sufficiency model, they gather the needed goods for themselves. Thus the hunter spends most of the time hunting, but also takes time to fish, make pottery, and farm to obtain the other goods. The hunter is less efficient at hunting, and the same is true of the other trades people.
In a decentralized exchange model, each person values the other three as potential "customers" who are apart of a market. The hunter then may make separate excursions to trade goods with each of the fisherman, the potter, and the farmer to exchange meat for their goods.
In a centralized exchange representation, a new person called a merchant emerges and sets up shop in a common area called a marketplace. Each tradesperson delivers goods to the merchant and trades for other needed goods. Thus the hunter transacts with one "market" to acquire all the needed goods, rather than with three other persons.
The emergence of a merchant substantially reduces the total number of transactions required to accomplish a given volume of exchange. In other words, merchants and central marketplaces increase the transactional efficiency of the economy.
As the quantity of persons and transaction increase in a society, the number of merchants and marketplaces also grows. In advanced societies, markets do not need to be physical places where buyers and sellers interact. In todays modern communication and transportation system, a merchant can market a product on late evening cable television, take orders from hundreds of customers with a call center, and ship the goods to the buyers on the following day without having had any physical contact with the buyers.
A market can develop around a product, a service, or anything else of value. For example, a job market consisting of unskilled people who are willing to offer their efforts in return for wages or products. Various services will blossom around a labor market to facilitate its functioning, such as employment agencies and insurance firms. Banking is another important market that emerges to meet the needs of people so that they can borrow, lend, save, and safeguard money. Donor markets can emerge to meet the financial needs of nonprofit organizations.
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