The Market

The market

One of the central conflicts in political economy is, of course, the role and functioning of the market economy in society. It is here where the broad range of paradigmatic assumptions collides, and on particular issues, individuals and groups with widely differing views will find common intellectual and practical political cause. In the political world, the fulcrum is on the ownership of capital surplus and production.

In the context of political economy, capitalism takes on a very broad meaning: the focus of the state on the maintaining and creating of capital and the means of its utilization. Many paradigms use the word in a much narrower context to mean private ownership and the self-justifying results of market operation, and deny that any other use of the word is appropriate. However, the vast majority of governing and major opposition parties in the industrialized world see the maintaining of capital capability as an area for legitimate state interest, and therefore maintain that government intervention in the market to prevent its disintegration, and even to promote certain aspects of its advancement is a proper use of state power.

Socialism, viewed as a system of political economy, states that the forms of production (on which labour is dependent to sell to) should be maintained, or overseen, by political power, and generally state power, in order to give their benefits to the many rather than the few.

Communism sees the necessity of social control over all surplus generating activity. Communist parties exist in most industrialized nations, while communist revolutionary movements are more common in less industrialized ones. Within the paradigm of communism there are a host of particular theories. Not all Marxist theories are communist, and not all communists are necessarily Marxist in their orientation.

There are Four types of markets:

1) MONOPOLY MARKET (mУ™Ð²Ð‚™nap(У™)li): Exclusive possession or control of the trade in a commodity, service, etc.; the condition of having no competitor in one's trade or business; a situation in which one supplier or producer controls more than a specified fraction of the market.(single producer or seller who has a total control over market)

2) DUOPOLY MARKET (dju’apәli): A condition in which there are only two suppliers of a certain commodity, service, etc.; The domination of a particular market by two firms; control or domination by two people or groups; two suppliers, firms, etc., controlling a particular market. (Slightley different to Monopoly markt but has some comman aspects Ex: Supream & Yellow Label OR Pepsi & Coke).

3) OLIGOPOLY MARKET (oli’gop(ә)li): A state of limited competition, in a market having a small number of producers or sellers.

4) COMPATATIVE MARKET: Assumptions: Perfact compation ==в-Ñ"Many sellers & Many Buyers ==в-Ñ"Market forces of demand & supply will determine the price ==в-Ñ"Buyer, seller, consumer, & producer has Perfect knowledge ==в-Ñ"All the products are homogeneous products.

Market Economy:

A market economy (free market economy and free enterprise economy) is an economic system in which the production and distribution of goods and services takes place through the mechanism of free markets guided by a free price system rather than by the state in a planned economy. In a market economy businesses and consumers decide what they will produce and purchase, as a opposed to a planned economy where the government decides what is to be produced and in what quantities.

A market economy has no central coordinator guiding its operation, yet theoretically self-organization emerges amidst the complex interplay of supply and demand and price regarding a multitude of goods and services. Supporters of a market economy generally hold that individuals pursuing their self-interest through trade have the incidental effect of bringing about a spontaneous order that is effective in supplying the greatest abundance of goods for society and in the most efficient manner. Adam Smith says that the individual who:

"intends only his own gain is led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest [an individual] frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the [common] good." (Wealth of Nations)

The economists' model of a free market is one in which there is no governmental intervention or other coercion. The theoretical model of a large-scale free market economy does not occur legally, however the underground economy may be seen as an actualized free market economy.

Definition in Points==в-Ñ"MARKET ECONOMY:

1) Critical role of relative price (with the exchange of goods & services). There are three types of prices:

a) Nominal Price: price of per unit in at any point in time (Ex: Price of Sugar in 1980 OR 2006)

b) Real Price: A compared price over a period of time. (like price of sugar 1980 compared