The nature of the market

Published on July 31, 2018   19 min

Other Talks in the Series: Introduction to Microeconomics

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Hi, I'm Dr. Sangaralingam Ramesh. In this talk, we're going to be discussing "The Nature of the Market" in the context of microeconomics, seeking to answer the question, what is the market? Because the market is central to buying and selling of goods and services.
So, in the context of what is a market, by 1900, it was being found that demand for goods and services was more than just simple purchasing power. And in this case, we can refer to purchasing power as the ability of consumers' income adjusted for inflation for changes in the price level to buy certain goods and services. And another concept of the market was very relevant to neoclassical economics of the time, and still is, is the ability of the market to automatically adjust. In other words, demand to equate with supply to reach a harmonious equilibrium. A third idea, which was around in the context of the market, was that the cost of production of a good was the principal determinant of the price of the good at least in the long run when the firm was able to change both the quantity of labor used in production and the quantity of capital used in production.
So, in the context of a market, marketing by firms developed in different periods and in different times. We start with the production era, which began in the mid-19th century to the beginning of the Great Depression in the 1930s. The production era was characterized by an increase in production of different types of goods and an expansion of the market. The production era was followed by the sales era in the beginning of the 1930s and the start of the Great Depression. And the sales era was replaced by the marketing era of the 1950s, where there was a more sophisticated orientation towards the customer from the perspective of the firm. As technology improved, the marketing era gave way to the Internet era in the 1980s and the early 1990s. So, from this breakdown of the development of marketing, we could see that the market expanded based on improvements in technology from solely being based on production to the Internet era, where there was more technology available for marketing goods and services globally, and therefore, different ways of selling goods.