Markets: A Crucial part of our Economic System

Sebastian CoeEconomics 201 B0Z1Prof: Daniel Bell

I´m here in Chile, I’m Studying business through KYVU.I am acquiring entrepeneural skills, but I don’t haveanything to Sell

After thinking about it, I realize that I like to look atJewlery, especially ethnic items. They are easyTo find here and tourists really like them.

I think I could sell those items too. It could start as a Hobby, in order to apply the skills I am learning in myClasses.

I can aquire earrings for $7.00 and dolls for $3.00 From a local arts and crafts salesperson. NeverthelessI want to sell them for $22.00 and $18.00 each.Sadly for me, no one is willing to buy at those prices.At most someone might pay $7.50 and 3.50. There are Many sellers in the local market, and competition is notPrice-based.

Locallly, I am in a Monopolistic-Competitive Market. Prices areNot perfectly elastic, but in order to compete I would have to buy largeAmounts of products, and sell them within the ranges that the restOf the sellers use. I want to start out small, and this is a barrier for meTo start locally. Also my items would have to have something “special”About them to diffrence myself from the rest.

On the other side of the world, there are consumers withAn even different problem.

“We’d all like to have some southern ChileanJewlery, but we are unwilling and unable, to makeA trip there, and we don’t know anyone who couldBring us some.” We would even pay up to $25 dollars for a pair of earrings.

We would pay $18 for a ChileanDoll, if someone had it for sale.

I would like some South AmericanJewlery to resell here in Japan.

Finally a solution comes up.“Hello everyone, I have a goldenOpportunity to solve these andMany other problems.”

“What is it?”

EBAY!

Ebay creates a market, or a place where buyers or sellers meet, on the internet.Anyone with access to the internet can use ebay. Instead of charging rent forThe use of stores or office space, ebay charges the sellers based on the amountThey sell. Sellers and buyers are happy and increase their utility. Sellers can reach placesThey previously could not have, and they enter a now competetive market. BuyersHave access to all kinds of goods and they must now bid on what they want.The highest amount of money that someone will pay for an item, is the marketPrice. Buyers can compare the itemsTo items they can acquire locallyAnd see if it’s worth getting itFrom somewhere else. In my case, since my items areProduced in a certain area of theWorld, I can charge monopolyPrices. There are no, or very fewCompetitors. Nevertheless, if I Charge too much, buyers mightSubstitute Chilean Jewlery for Jewlery of other kinds.

Markets are crucial to a functioning economy. WithoutA place for buyers and sellers to meet and negociateFreely, the movement of goods and services will be Paralized. Whether it be a fruit market built by the County, a corner where crop pickers meet, or even a Site on the internet, markets are building blocks of theWorld economy.

Since we have a neo-liberal economy, markets should be as free as possible.In a command system, there would be no need for these markets, becauseGovernment planners would make all the decisions about what to produce, Who to produce it for and how much they should get. In our system Government and private market operators limit themselves to insuring thatMarket transactions are done in an honest and orderly way.

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