What this lesson teaches
I can define a market, give examples, and describe what buyers and sellers do in it.
Syllabus K343, 2.1.1. How markets work: definition of a market; examples of markets; roles of buyers and sellers
Make a guess
You sell your old bicycle to a stranger through a resale app. Was that a market?
- No, because a single bicycle is too small a trade to count.
- No. A market needs a physical place like a mall.
- Yes. A buyer and a seller agreed a price and traded.
Show the answer
Yes. A buyer and a seller agreed a price and traded.
A market is any arrangement that lets buyers and sellers trade. It does not need a shop or a physical place.
A market is any place or arrangement where buyers and sellers exchange goods or services.
A market is where buyers and sellers come together to exchange goods and services. It does not need to be a physical place. A wet market is a market, but so is an online shopping platform or the global market for crude oil.
Buyers, also called consumers, want to get what they need at the lowest price. They show what they want by what they are willing and able to pay for.
Sellers, also called producers or firms, want to earn revenue and profit. They decide what to offer and at what price. When buyers and sellers agree on a price, a trade happens.
Some markets are for products, such as phones and haircuts. Others are for factors of production. In the labour market, for example, workers sell their time.
- Market
- Any arrangement where buyers and sellers exchange goods or services.
- Buyers
- Consumers who want goods at low prices.
- Sellers
- Producers or firms who want revenue and profit.
Worked example: Spotting markets in everyday life
Each example has buyers, sellers and a price, even when nobody meets face to face.
- Product market: shoppers buy groceries from a supermarket chain.
- Online market: buyers bid for second-hand bicycles on a resale app.
- Labour market: a hotel hires housekeepers, who sell their labour for a wage.
- Global market: airlines across the world buy jet fuel from oil companies.
Watch out for this
A market has to be a physical place like a shopping centre.
A market is any arrangement that lets buyers and sellers trade. Online platforms and phone orders are markets too.
Check your understanding
Which of these is a market in the economic sense?
- A list of the textbooks a school uses, with the price of each one
- A warehouse where a publisher stores the textbooks it has printed
- A website where people buy and sell used textbooks
Show the answer
A website where people buy and sell used textbooks
Right. Buyers and sellers exchange goods at agreed prices, even though they never meet.