In economics, a financial market refers to a media that allows people to buy, sell, create and exchange financial securities such as share and bonds, commodities such as basic agricultural goods and precious metals, and other fungible items of value at low transaction costs and at prices that reflect the efficient-market. Both general markets where many commodities are traded and specialized markets where only one commodity is traded exist in financial market. Markets work by placing many interested buyers and sellers in one media, thus making it easier for them to find each other. The financial markets can be divided into different types such as capital markets, commodity markets, money markets, insurance market and foreign exchange market. A saver refers to the one who deposit their money in bank, invest in company share and pays premium to an insurance company with objective to earn interest, dividend and profit. They aim Continue reading
Economics Concepts
Different Market Structures and Pricing Strategies
In the world of business and economics, marketing structures are considered to be the structures that assist with connecting buyers, sellers, products and services to one another. Some of the elements that market structures connect and work with are production levels, different forms of competition, different forms of products and services, ease of entry and exit from the marketplace, buyers, sellers, and even the agreement between particular agents. Depending on what type of market structure a company is either choosing to use, or is forced to use, will determine what type of pricing strategy they are going to need to utilize. To look further into the different pricing strategies, there needs to be an understanding of the basic market structures, which are perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect Competition Perfect competition occurs when there are many buyers and sellers, no particular barriers to entry or exit, and also Continue reading
Role of Government in Economic Development
Any country’s the prosperity and obstacles of economic growth results from activities of government. That means, government plays important role in economic activities. In free market economies government plays important activities. It has to perform role to prevent market failure. As we know that market does not yield economically efficient outcome every time as the result market fails to operate. In free market economy government has designed activities to stimulate and assist private enterprise and to regulate or control business practices so that their operations are consistent with the public interest. There are various forms of government regulation especially to regulate the activities of private firms. Industrial products are subject to Operating Regulations, governing plant and pollutant emission, product packaging and labeling, worker safety and health etc. Banks and Financial Institutions are subject to Financial Regulations, both the government as well as the control made by the Central Bank for Continue reading
Market Failure and Government Intervention
Market failure refers to a market that fails to provide efficient outcomes for the society. In other words, market works efficiently only when there exist perfect competition or when exclusion principle could be applied in the free market. Exclusion principle requires that, those who do not pay for as goods should be excluded from its consumption and those who derive any benefit from goods should bear its cost. In free market economy the main responsibility of the government is to prevent the market from failure. Market failure can be summarized in two ways: Market failures due to incentive or incentive failure Market failures due to structure or structure failure 1. Market failure due to incentive or incentive failure The market failure due to the presence of externalities is known as incentive failure. The free market mechanism does not function effectively when exclusion principle is not applicable. Exclusion principle requires that, Continue reading
Sovereign Wealth Funds (SWFs) – Meaning, Types, Benefits and Risks
Sovereign Wealth Funds (SWFs), investment vehicles of Governments are increasingly seen in action through acquisition of either natural resources like oil and gas fields or equity holdings in MNCs. While the reasons for establishing a SWF may vary from commercial to strategic ones, SWFs’ influence on the countries and corporate is substantial. Since they mostly stay invested for a long-term they do not pose threat of pulling out in the short term and creating huge volatility in the financial markets. Since their investment corpus run to billions, by staying invested for a long time, they have a stabilizing effect on the capital market even during crashes and short term fluctuations. However, regulations and guidelines of the SWF also needs to be put in place in order to avoid it from exercising any soft control or strategic moves that may affect the sovereignty of the country allowing investments. Sovereign Wealth Funds Continue reading
Oligopolistic Market – Meaning, Definition, Classification and Characteristics
An oligopoly is defined as a market structure wherein industries are dominated or handled by “few” firms. Oligopolistic market structure dominates the market structures available, accounting half of the total outputs in the world. Industries which adapt to these vary from manufacturers of automobiles to breakfast cereal or even television broadcasting to airlines. In the words of Robert Y. Awh, “Oligopoly is that market structure in which a few sellers who clearly recognize their mutual interdependence produce the bulk of the market output”. Oligopoly differs from other market categories in that, under monopoly we have only one seller, under perfect competition we have many sellers, under monopolistic competition we has a sufficiently large group of small monopolists whereas under oligopoly we have a few sellers constituting a small group. In an Oligopolistic market the firms may be producing either homogeneous or differentiated products. Besides, the element of Continue reading