The nature of markets
So, what is a market?
A market is any effective arrangement for bringing buyers and sellers together, not necessarily face-to-face, to enable trade to take place.
The forces of supply and demand meet and react in a market. Prices are established and buyers and sellers alike give signals. Markets can involve face-to-face dealings between buyers and sellers, or may be postal or even electronic.
The market mechanism brings together two different forces, the power of the consumer and the interests of the supplier. Both want 'the best' from the market, but their 'bests' are different.
Objectives of consumers
Rational consumers want to get the most from their money and a RATIONAL CONSUMER wants the highest quality at the lowest price.
Objectives of producers
Firms want to get the maximum from the resources that they use. In financial terms they want to maximise profit. This means that they may want to sell as low a quality product as they can for as high a price as possible.
The general assumption of economics is that the main objective of private businesses is profit maximisation.