Cambridge International as and a level Economics Ebook

price mechanism
underpins each of these particular 
events. It does so within the context of a 
market
. In terms 
of these headlines, the markets involved are:
■ 
the global market for cotton
■ 
the market for rice in Pakistan
■ 
the market for imported instant coff ee in India
■ 
a specialist tea market in a region of China.
Price mechanism: 
the means of allocating resources in a 
market economy.
Market: 
where buyers and sellers get together to trade.
KEY TERMS
Th
ese are just a few examples of markets. In practice there are 
many thousands covering not just products, but also a whole 
range of services, currencies, metals, stocks and shares.
To many people a market is something that happens 
in a town or city centre once or twice a week. Th
is market 
is made up of a number of trading stalls selling a range of 
products: food – such as fruit, vegetables, meat and fi sh; 
clothing; and a wide selection of other items. Economists, 
however, take a broader view of the word ‘market’. Th
e 
core of any market is trade – somebody has something 
to sell and somebody else has to want to buy the product 
that is off ered. So, whenever people come together for the 
purposes of exchange or trade, we have a market.
For example, economists talk about the housing 
market, where people rent, buy and sell houses. Look in the 
newspapers or in the windows of property agents’ offi
ces 
and you will see evidence of this market. Th
ey also refer to 
the labour market, where individuals’ services are ‘bought 
and sold’ – anyone who has a part-time or full-time job 
participates in the labour market as a seller of labour.
Television newsreaders oft en refer to the stock market, 
where shares are bought and sold, and the foreign exchange 
market, where currencies are bought and sold. A very 
interesting example of a market is that of the Internet. A huge 
range of products are traded by companies and individuals 
and unlike many other markets, individual buyers are in 
a strong position because they can search the Internet to 
compare prices and get the best price for the goods they want.
Th
ese examples indicate to an economist that a market 
does not have to have a physical presence as the typical 
town or street market might have. It is simply a term used 
to describe the process through which products that are 
similar are bought and sold.