How Markets Work

Exam code: 2281

Written by: Ashika|Reviewed by: Caroline Carroll|Updated 2 July 2026

Definition of a market

Definition of a market

A market is any place or process that brings buyers and sellers together to exchange goods and services
- This exchange can happen in a physical location (such as a food market in Jakarta) or through a virtual platform (such as Alibaba or Amazon)

Market vendor handling rambutan in a plastic bag, surrounded by various tropical fruits, including mangoes and bananas, on a sidewalk. — Jakarta food market

Examples of markets

Examples of markets

A product market is one where buyers and sellers meet exchange a physical good
A factor market is one where buyers and sellers meet to exchange factors of production

Type of market	Description	Example
Physical retail market	Buyers and sellers meet face-to-face	A street market in Bangkok selling fruit and clothing
Online market	Buyers and sellers interact via the internet	Shopee – an e-commerce platform used widely in Southeast Asia
Commodity market	Raw materials such as oil, gold or wheat are traded	The Dubai Mercantile Exchange for crude oil
Labour market	Workers offer labour, and employers demand it	The tech recruitment market in Bengaluru, India
Foreign exchange market	Currencies are bought and sold	Forex trading platforms accessed by banks worldwide
Stock market	Shares of companies are bought and sold	The Tokyo Stock Exchange

Roles of buyers and sellers

Roles of buyers and sellers

In any market, both buyers and sellers play essential roles
- In an efficient market, sellers respond to what buyers want, and buyers choose between competing sellers
- This interaction helps determine prices and quantities

Seller hands bag to buyer exchanging money, depicting supply and demand with circular arrows above. Labels: Sellers and Buyers. — The buyer demands and the seller supplies

Buyers

Also known as consumers or demanders
Their choices and preferences determine demand for goods and services
They help to set prices by signalling how much they are willing to pay
- For example: A buyer in Mexico City searching for the best price on mobile phones influences how firms set prices to compete

Sellers

Also known as producers or suppliers
They aim to supply goods or services in order to make a profit
They decide what to produce, how much and at what price based on costs and expected demand
- For example: A coconut farmer in the Philippines choosing whether to sell to local markets or export to Singapore

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