Name : Ariyadi Pratama

NIM : G021191067

Study Program : Agribusiness

Market
Adam Smith who was a Scottish philospher and a economist who is best known as The
Author of An Inquiry into the Nature and Causes of the Wealth Of Nations (1776). He quote that
“The division of labour is limited by the extent of the market” Adam Smith, Wealth of Nations,
Glasgow Edition (Oxford, 1976). So basically the market is the key of specialization of the
economic circle. The firms cannot handle or take part in particular product lines, or particular
stages of production. The reason? It is the growth of the market that facilitates both of the
emergences of new production metods and the growth of the firms and industries that exploitate
these methods. So basically the production of an industrical state cannot be handle within just the
firms, but it also being handle fully by a market. Just like the first explanation that the market is
the most important “Object” in the economic circle.

The differences that many people recognize in many ways in which the term “Market” is
employed in the literature. In economics, the market often described in abstarct for as an
intersection of supply and demand. The goverment tried to play the market in competitive forces
is having purposes to generate an equilibrium market price. This make a lot of unanswered
quesition, such as where the market is actually located and where the people who use the market
actually reside. In the end of the day, those unanswered question came up with an answers that
lead to the concept of the market as a place, serving in a particular area in which its particpants
reside. And the parties met at the market because it is an information hub.

Back then, market behaviour has aways been controlled by rules, even though they have
been more intrusive for some commodities and in some localities than others. These rules and
regulations are leading us to pricing, quality control, freedom of entry, and etc. They are
enforced by the law, by agreement, and by social convention even in some particular meeting
that consist with many highers back then. So when this enforced by some conclusive law, they
also provide reassurance to the customers and help them to maintain the reputation of the
capitalist market system. Today these rules are most apparent in the case of regulated natural
monopolies, such as utilities, but in fact they apply to all markets.

The markets, sometimes can be formal or informal. In the formal form of the market,
transactios are transparent and controlled by regulations. Formal markets are open regurarly at
work hours for the exchange of a setted range of commodities or product at either the wholesale
or retail level. Trust between distributor is based upon trust in the system. Basically like, if they
don’t have the trust, then they aren’t allowed to be the distributors. Large transaction maybe
witnessed, and if credit is involved, then a record will almost certainly be kept. A formal market
is therefore a specialized institution for the faciltation of transaction. It is normally linked with
with a concetration of transaction (E.g., a market hall and surrounding shops, inns, and taverns
for refreshment) is provided at that formal market place. Simply the another part of the market
execpt the formal market is the informal market. The informal market can be based at any
convinient place, such as the street corner or the doorstep. The transaction tend to be small,
lightly regulated, spreaded over a range of locations, and dependent on personal trust, rather than
on trust in the system.

The development of markets cannot be studied without reference to complementary

institutions. In early western Europe, for example, marketplaces often developed close to the
castles, monestaries or royal (Or aristocratic) residences. These large centers of consumption
attracted sellers of goods, including luxuries as well as neccestites. As major land owners, the
occupants of these establhsments often promotoed the local market as a speculative businesss
invesment. A well-situated market for example, near the bridging point of a river—would
stimulate the growth of a town.

That’s some explanation about market back then. When we jump into the present day, the
market have different meaning in economic circle. Back then the market were explained as “A
place” well now the market is the proses that been done to promote the product or introduce the
product to the society with many ways, until the product can have a lot of buyers or so the people
that have the interrest to the product, so the product have the possibilty to be selled.

Back then, there are only 2 types of market. Formal and infomal market. But nowadays in
market economies, there are a variety of different market system that exist, depending on the
industry and the companies within that industry. It is important from now on to understand what
type of market system they are operating hen making pricing an production. It is not just
important for big industrical business owner, but it is also important for the newbie business
owner. So basically when you tried to run a business we have to understand types of market.
Nowadays there are 5 type of market such as :

1.) Perfect Competition Market

In a perfect competition market structure, there a huge number of buyers and sellers. All
the sellers of the market are small sellers in competiton with each other. There is no one
big seller with any significant influence on the market. So all the firms in such a market
are the price takers.

The main characteristics of the perfect competition market such as:

1. There are many sellers (companies) and buyers and each of them cannot
determine the price. Prices are formed by agreement between the two parties
(market mechanism).
2. Homogeneous products (exactly the same)
 Goods produced by homogeneous producers, are exactly the same in form, color,
quality etc. so that one product is a substitute for perfect for products from other
manufacturers.
3. Free to enter and leave the market
In a perfectly competitive market both sellers and buyers are free to enter and exit
the market, there are no specific rules that limit it.
4. Sellers and buyers know the market conditions perfectly.
Each seller or buyer can get information quickly and precisely about changes in
prices and products so that each cannot be a determinant of prices.
5. Free moving production factors.
Free moving production factors are not controlled by just one or a number of
producers so that no party can determine prices unilaterally.
6. There is no government interference
The presence of government intervention will lead to limitations and obstacles to
perfect competition.

2.) Monopolistic Competition Market

In a perfect competition market structure, there a huge number of buyers and sellers as
well. But the different between these two are, the monopolistic competition market, they
all do not sell same products with same function at once. But they are selling the products
that are different with the physics condition, but still have the same function. We can call
this product as “The subtitute product”.

3.) Oligopoly

In an oligopoly, there are only a few firms in the market. While there is no clarity about
the numbers of firms, 3 – 5 dominant firms are considered the norm. so in the case of an
ologopoly, the buyer are far greater than the sellers.

The oligopoly type of market can differenciate as two such as :

 Natural Oligoply, which is characterized by several companies that sell

homogeneous products
 Differentiated Oligopoly, which by marked several companies selling
differentiated products

As for the characteristics of the oligopoly market are as follows:

a. There are several sellers or companies that dominate the market.

b. Goods traded can be homogeneous and can also be of different
 c. There is a strong entry barrier for companies outside the market to enter the
market. One of the oligopolies is the market leader, the seller with the largest
market share.

4.) Monopoly

In a monopoly type of market structure, there is only one seller, so a single firm will
control the entire market. It can set any price it wishes since it has all the market power.
Consumers do not have any alternative and must pay the price set by the seller. This type
of market is similar as the liberalization type of market.

This type of market is exist because of :

a) There’s a protection of a law, which is the patent of an product.

b) Licence that allowed them to sell legally.
c) It have such a big modals until it can’t have it owns competitors, because it’s so
big.
d) Mastering raw material that are quite strategic.
e) The product being product in natural because a lot of demand comes in.
f) The market is not that big, so it only can serve one consumers optimally.

By seing that, the type of market according to the past and the present one, the
differences is not that big. The circumstances that were being used is still the same with old one.
The only differences is that the present type of market is being more separated than before.

After talking about the type of market, we should not forget abou the structure that build
the market. So the market structure is best defined as the organisational and other characteristics
of a market. We focus on those characteristics which affect the nature of competition and pricing
– but it is important not to place too much emphasis simply on the market share of the existing
firms in an industry.

Traditionally, the most important features of market structure are:

1. The number of firms (including the scale and extent of foreign competition)
2. The market share of the largest firms (measured by the concentration ratio – see
below)
3. The nature of costs (including the potential for firms to exploit economies of scale
and also the presence of sunk costs which affects market contestability in the long
term)
4. The degree to which the industry is vertically integrated - vertical integration
explains the process by which different stages in production and distribution of a
product are under the ownership and control of a single enterprise. A good example
of vertical integration is the oil industry, where the major oil companies own the
 rights to extract from oilfields, they run a fleet of tankers, operate refineries and have
control of sales at their own filling stations.
5. The extent of product differentiation (which affects cross-price elasticity of demand)
6. The structure of buyers in the industry (including the possibility of monopsony
power)
7. The turnover of customers (sometimes known as "market churn") – i.e. how many
customers are prepared to switch their supplier over a given time period when
market conditions change. The rate of customer churn is affected by the degree of
consumer or brand loyalty and the influence of persuasive advertising and
marketing.

When we want to develop the market we need to do further inspection or we know it as

“Research”. In market definition research is “The process of gathering, analyzing and
interpreting information about a market, about a product or service to be offered for sale in that
market, and about the past, present and potential customers for the product or service; research
into the characteristics, spending habits, location and needs of your business's target market, the
industry as a whole, and the particular competitors you face”.

Market research provides relevant data to help solve marketing challenges that a business
will most likely face—an integral part of the business planning proccess. In fact, strategies such
as market segmentation (Identifying specific groups within a market) and product differentiation
(creating an identity for a product or service that separates it from those of the competitors) are
impossible to develop without market research.

Market research involves two types of data:

1. Primary information. This is research you compile yourself or hire someone to

gather for you.
2. Secondary information. This type of research is already compiled and organized
for you. Examples of secondary information include reports and studies by
government agencies, trade associations or other businesses within your industry.
Most of the research you gather will most likely be secondary.

In market we know that there’s two things that are important to be involved with. That is
the supply and demand. The demand defenition is a request of an services and goods that has
been requested/buyed by consumers in a possibilties of prices, places, and times. While the
supply is the amount of services and goods that has already served and ready to get by selllers in
some different level of prices, places, and times.

By calling the demand and supplies, there are things that can related and can have effect
during the circumstances of supply demand. There are several factors that can affect the demand
for an item, namely:
 a. The price of the item itself is also the opposite.
If the price of an item is getting cheaper, then the demand for that item increases.
Vice versa. This brings us to the law of demand, which states "If the price of an
item rises, ceteris paribus , then the amount the goods requested will be reduced,
and vice versa".
b. Per capita income level
The Per capita income level can reflect purchasing power. The higher the level of
income, the stronger purchasing power, so that the demand for goods increases.
c. Taste or habit.
d. Total Population.
e. Prices of other related goods

And also there are several factors that affect the supply of an item, namely :
a) Price of the item itself.
b) Prices of other related goods.
c) Factor price.
d) Production cost.
e) Production technology.
f) Number of traders.
g) Company goals.
h) Government policy.

The market is really wide and cannot be explained at once. On this paper I only able
explain mostly thing that are likely to be explain such as the history, the defenition, the type of
the market, the supply and demand of the market, and etc.

And I can conlude that, the market a place or remarkably a situation when the buyers and
the sellers meet at one place to do the transaction. And simply, when only two parties met at one
place and there’s no transaction being processed, then it is not a market.

There are a lot type of market that can be found in this world. But in this paper I only
able to explain some of it such as perfect competition market, monopolistic competition market,
monopoly market and ogliopoly market. This 4 type of market have it own cause that make them
exist.

And also to make the market being develop, it need a research. There are two type of data
that involved in market research such as ; primary information, and secondary information.

And last, in market there are supply and demand, which make the transaction begun. In
market we know that there’s two things that are important to be involved with. That is the supply
and demand. The demand defenition is a request of an services and goods that has been
requested/buyed by consumers in a possibilties of prices, places, and times. While the supply is
the amount of services and goods that has already served and ready to get by selllers in some
different level of prices, places, and times.

And in the end of the day, the market, marketplaces, and marketing will always and
forever will be the most important part of economical circle. Because without it existence, the
economic will not exist and the bargain also not exist in the term of ecomonic situatuion.
DIRECTORY
https://economictimes.indiatimes.com/definition/markets

http://www.businessdictionary.com/definition/market.html

https://managementhelp.org/marketing/competitors.html

https://managementhelp.org/marketing/index.html

https://managementhelp.org/marketing/market-research.html

https://www.tutor2u.net/economics/reference/key-summary-on-market-structures

https://www.investopedia.com/ask/answers/020615/what-history-market-economy.asp

http://www.oecd.org/daf/competition/Marketdefinition2012.pdf

https://core.ac.uk/download/pdf/7044026.pdf

https://www.tcd.ie/Economics/assets/pdf/MScEPS/UnderstandingMkts/EC8005%20-
%20L8%20-%20Market%20Structure.pdf

https://www.researchgate.net/publication/313966591_Market_Structure_The_Analysis_of_Mark
ets_and_Competition