Finance Summary V - Market, Producers, The economic role of the Government

The market

A market is a set of arrangements through which buyers and sellers make contact and do business. Perfect market is a theoretical model of market, where a lot of buyers and sellers and competition is free.
There are monopoly, duopoly, oligopoly are the models of the market. Monopoly is situation, when there is only one seller or a very limited numerous of sellers in some markets. Pure monopoly is a theoretical market structure where there is only one seller of a commodity or service and where entry into the industry is closed to potential competitors. There is patent, superior talent and huge strategic capital is needed to organize a firm with potential monopoly power. In the U.S. legislation and foreign competitors minimized the danger of monopoly corporations. Duopoly is situation, when there are two sellers of a commodity ore service at the market and oligopoly is situation, when there are 3 and more competitive sellers at the market.
Competition is the main characterize of the market. All businesses compete with one another in selling things, in labour, capital and natural resources. There are new ideas, professional managers; new ways to reduce costs and to make products attractive to consumers are needed business to survive in the face of competition.
So, market is one of the main mechanisms of development of the modern world.

Producers and their role in the economy

Producers (enterprises and firms) are the backbone of any economy. Their aim is to supply goods and services, seek profits and compete with one another. They are transform inputs into outputs. There is labour, capital and natural resources are the main factors of production.
Every economy faces the problem of what, how and for whom to produce. Market economy solves this problem thanks to the law of supply and demand, which states that imbalances in the market corrects by changes in prices. It is imbalances between the quantity of the goods that buyers want to purchase and the quantity that producers want to sell.
When price of a good or service goes down, people increase their purchases, when it goes up demand cut down. Producers, when price goes up, increase their output. When there is shortage at the market, supply increase and producers have a chance to make an extra profit.
Perfect market is the model of market, where are a lot of buyers and sellers and competition is free. Monopoly is situation, when there is one seller or a very limited numerous of sellers in some markets.

The economic role of the Government

In every economy the work of different firms has to be coordinated. In market economy it is achieved by means of market. The debate over the role for Government in this economy is continuing. Economy, based on free enterprise is characterized by private ownership and initiative, with relative absence of government involvement. From time to time government intervention has been found necessary to ensure that economic opportunities are fair, to dampen inflation and to stimulate growth.
In the American market economy government plays a big role. It taxes, regulate, and support business. There are agencies to regulate safety, health, environment, transport, communications, trade, labour relations, and finance. Some industries - nuclear power, for example - have been regulated more closely.
U.S. Government controls inflation, limits monopoly, protect the consumer, controls the money supply. The aim is balanced budget. Government uses fiscal and monetary policies. Policies are admired at raising productivity, for abolishing poverty, increasing employment opportunity for all, providing educational opportunity for all. Its aim is to keep inflation low, maintain sound public finances and create the right climate for markets to work better.

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