In this video, you'll learn about how the markets operate and who is the players in the market. First one, market is where economic agents actually come together in terms of determining price and quantity. So two important things, the decision that being decided is price and quantity.
Who is playing a role in this? That comes buyers and sellers. Buyers are actually demanding the good. So buyers demand the goods.
That's where the demand comes from. whereas sellers supply the goods. Now, most of the times we make an assumption in the market that the product sold in the market is standardized code.
Standardized means like when you say a product like a farm good, let's say apples or oranges, call it as standardized. That means seller has no specific mark on it. Whoever is producing the product should be about the same.
Second thing that we assume is competitive markets. But in reality, not necessarily the markets are always competitive or most of the times the markets are not competitive. You want to differentiate that based on the level of competition in the market. When you say perfectly competitive market, in this case, there are many, many buyers and many, many sellers in the market. Each has only a small impact on the market price and output.
That means if a small, if a farmer. or if a seller, if a buyer wants to make a choice, that choice may not necessarily influencing the things that is being determined, which is price and output. That's what comes perfectly competitive market. Simple thing, whether you decide one day to buy Apple or not, is not going to change the price of Apple in the market.
Second thing, imperfect market. In this case, what happens is, either buyer or a seller can actually influence the market. price based on their actions. That means if they are not purchasing or if they're not selling, they have influence, that means it's going to change the price. Example, you can call it as monopoly if there is a single seller.
Oligopoly means a few sellers still influencing each of them have impact on the price. Or it could be monopsony. That means if there is only one buyer, everyone is selling to him or her.
In that particular case, they can clearly influence the price in the market, such as... One employer in a particular case, okay, so one person employing everybody in the market, then he will have some say on what is the wage rate he wants to pay. Market power, okay, so whatever is the buyer or seller has the ability, the degree of ability to change the price of the good or service in the market can be known as market power.
So if a buyer has a market power, he may actually tries to drive the prices down. compared to competitive market. If seller has a market power such as monopoly, he may be actually trying to drive the prices up as compared to purely competitive market.