Redistribution in the Family or Community

Redistribution is evident in our society. Family, as the smallest unit of society, performs simple redistribution. The
mother or father, as the head of the household, collects a part of his or her children’s income and allocates it to
food and pending bills. This serves as the basis for sustained community efforts under a political leader.

Market
A market is a place or medium where buyers and sellers interact to transact economic goods and services. The
meaning of market is not limited to a certain place, location, or geographic area; rather, it focuses on people who
are willing and capable of buying or selling goods and services.

In a capitalist economy, markets answer the three basic economic problems of: what to produce, how to produce,
and for whom to produce.

Market Structures
Market structure is the classification of a market with regard to key characteristics, such as number of sellers and
buyers, entry barriers to the market, the control and determinant of pricing, and types of products in the market.

 A pure competition market is a market structure characterized by a large number of sellers and buyers,
homogenous products, and complete freedom of entry and exit of market players.
 A monopoly is a market structure characterized by a single seller of a well-defined product for which
there is no available substitute and high barriers of entry of other market players. The seller has complete
control of the pricing of goods and services.
 Amonopolistic competition is a market structure characterized by a large number of independent sellers,
each producing a differentiated product in the market with a low barrier to entry of other players.
 An oligopoly is a market in which only few sellers comprise the entire industry with a relatively larger
number of buyers. Sellers, therefore, have the power over the price of products.
 Amonopsony is a market in which there is only one buyer.

Market Transactions
A market transaction is the exchange of goods and services through a market where buyers and sellers agree on
the price and quantity of goods and services to be bought and sold in a specific place and time.

Market transactions taking place in the economy could be a tool in:

 measuring the total output of the economy or the Gross Domestic Product (GDP) of the country thereby
becoming one indicator of growth and development of a society, and
 providing the basic data that are used by economic planners and forecasters.

Types of Markets
There are different types of markets. Each one has unique characteristics and functions.

Physical Markets

This is a set up where buyers can physically meet the sellers and purchase the desired merchandise from them in
exchange for money.

Examples: shopping malls, department stores, retail stores

Non-Physical Markets or Virtual Markets

In such markets, buyers purchase goods and services through the internet. The buyers and sellers do not meet or
interact physically, but transact online instead.
Examples: Rediff shopping, eBay, Amazon

Auction Market

In an auction market, the seller sells his or her goods to the highest bidder.

Market for Intermediate Goods

Such markets sell raw materials (goods) required for the final production of other goods.

Black Market

This is a setup where illegal goods like drugs and weapons are sold.

Knowledge Market

This is a setup that deals with the exchange of information and knowledge-based products.

Financial Market

This market deals with the exchange of liquid assets (money). Financial markets can be further categorized into the
following types:

 stock market–a form of market where sellers and buyers exchange shares
 bond market–a marketplace where buyers and sellers are engaged in the exchange of debt securities,
usually in the form of bonds.
 foreign exchange market–a market where parties are involved in the trading of currency; In this market,
also called currency market, one party exchanges one country’s currency with an equivalent quantity of
another.
 predictive market–a setup where the exchange of good or service takes place for future use

Keypoints

 A market exists whenever there is an interaction between buyers and sellers.

 Market structures are mechanisms of the economy to answer the basic economic problems of
production, distribution, and consumption.
 Market equilibrium became the balancing force between demand and supply of goods in the market.
 A market transaction occurs because of the exchanges of goods and services between consumers and
producers.

Markets and State

 A market is a place where buyers and sellers transact economic goods and services. It is also a mechanism
used by society for allocating and distributing the goods and services produced.
 A state is a group of people, more or less numerous, with a definite geographical area, with defined
territorial boundaries, independent of external control, and ruled by a government through laws where
inhabitants have to conform by force in the common interest. In economics, a state is always referred to
as the government.
 The market, as a mechanism used by different economic institutions in the distribution of goods and
services that the economy produced, always relies on the very mechanism it uses−the price of the
products. Meanwhile, the state uses its inherent power and authority in allocating goods and services.

The Dividing Line Between Markets and States

 In the Philippines, some products are purely market-driven. with some products, the government can
intervene in production and pricing. An example of this are utilities and selected essential services.
  In a global perspective, model market economies such as the United States and Singapore are
characterized by freedom of choice and enterprise, private ownership of all economic resources, a
prevalence of competition, and the presence of market mechanism. While in a state-driven economy
like China, the government largely controls the industry.

The two mechanisms significantly differ in the way they allocate goods. In a market economy, those who can
afford the price of the product have more, while a state-run economy has a principle of having something
according to the need.

Competing Models of Economic Organization and Their Impacts on Global Community

Market Economy Model

The market economy model of Taiwan, Korea, and Singapore prevails in the production of goods, competitiveness,
flexibility, and high growth rates that are manifested in the economy. A high level of inequality prevails, resulting
to a high incidence of poverty among people, a problem in the environment, and vulnerability to financial crisis.

State Capitalist Model

The state capitalist model of Russia and China shows the power of government in the production of goods but with
passivity in social and environmental issues. High and steady growth rate evident but a high level of inequality is
also manifested.

Central Planning Model

The central planning model of North Korea dominates the entire economic activity of production as well as the
social context. This model wants to create a classless society. In the long run, it is counter-productive, and lower
growth rate or even economic stagnation occurs.

Social Market Economic Model

The social market economic model of most European countries depends heavily on the role of the market in the
distribution and allocation of products. The economy and the government is very active in providing social welfare
to the people. This leads to equality and harmony among people and government, but a high level of taxation is
evident.

Let us analyze these four competing economic models and their impacts on the global community. It is notable
that the government, private corporations, and multinational companies have to join hands in uplifting the lives of
the people, protecting and preserving the environment, and creating a caring society so that this world would be a
better place to live in.

Keypoints

 Economic institutions evolve to distribute efficiently and allocate goods and service to members of
society.
 A market is a place where buyers and sellers transact commercial goods and services. It is also a
mechanism used by society for allocating and distributing the goods and services produced.
 The state, always referred to as the government, is a group of persons, more or less numerous, with a
definite geographical area, defined territorial boundaries, independent of external control, and ruled by a
government through laws where inhabitants have to conform by force.
 In the Philippines, some products are purely market-driven. In some, the government can intervene in
production and pricing.
 In the United States, the model market economy is characterized by freedom of choice and enterprise,
private ownership of all economic resources and prevalence of competition, while in China, the
government largely controls the industry.
 The four competing economic models that greatly affect the global community are market economy
model, state capitalist model, central planning model, and social market economic model.