A market is one of the many varieties of systems, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers, it can be said that a market is the process by which the prices of goods and services are established. Markets facilitate enable the distribution and resource allocation in a society. Markets allow any trade-able item to be priced. A market emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights of services and goods. Markets supplant gift economies and are held in place through rules and customs, such as a booth fee, competitive pricing, source of goods for sale. Markets can differ by products or factors sold, product differentiation, place in which exchanges are carried, buyers targeted, selling process, government regulation, subsidies, minimum wages, price ceilings, legality of exchange, intensity of speculation, concentration, exchange asymmetry, relative prices and geographic extension.
The geographic boundaries of a market may vary for example the food market in a single building, the real estate market in a local city, the consumer market in an entire country, or the economy of an international trade bloc where the same rules apply throughout. Markets can be worldwide, see for example the global diamond trade. National economies can be classified as developed markets or developing markets. In mainstream economics, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods and information; the exchange of goods or services, with or without money, is a transaction. Market participants consist of all the buyers and sellers of a good who influence its price, a major topic of study of economics and has given rise to several theories and models concerning the basic market forces of supply and demand. A major topic of debate is how much a given market can be considered to be a "free market", free from government intervention. Microeconomics traditionally focuses on the study of market structure and the efficiency of market equilibrium.
However, it is not always clear how the allocation of resources can be improved since there is always the possibility of government failure. A market is one of the many varieties of systems, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers, it can be said that a market is the process by which the prices of goods and services are established. Markets enables the distribution and allocation of resources in a society. Markets allow any trade-able item to be priced. A market sometimes emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights of services and goods. Markets of varying types can spontaneously arise whenever a party has interest in a good or service that some other party can provide. Hence there can be a market for cigarettes in correctional facilities, another for chewing gum in a playground, yet another for contracts for the future delivery of a commodity.
There can be black markets, where a good is exchanged illegally, for example markets for goods under a command economy despite pressure to repress them and virtual markets, such as eBay, in which buyers and sellers do not physically interact during negotiation. A market can be organized as an auction, as a private electronic market, as a commodity wholesale market, as a shopping center, as a complex institution such as a stock market and as an informal discussion between two individuals. Markets vary in form, scale and types of participants as well as the types of goods and services traded; the following is a non exhaustive list: Food retail markets: farmers' markets, fish markets, wet markets and grocery stores Retail marketplaces: public markets, market squares, Main Streets, High Streets, souqs, night markets, shopping strip malls and shopping malls Big-box stores: supermarkets and discount stores Ad hoc auction markets: process of buying and selling goods or services by offering them up for bid, taking bids and selling the item to the highest bidder Used goods markets such as flea markets Temporary markets such as fairs Physical wholesale markets: sale of goods or merchandise to retailers.
Market capitalization is the market value of a publicly traded company's outstanding shares. Market capitalization is equal to the share price multiplied by the number of shares outstanding; as outstanding stock is bought and sold in public markets, capitalization could be used as an indicator of public opinion of a company's net worth and is a determining factor in some forms of stock valuation. Market cap reflects only the equity value of a company, it is important to note that a firm's choice of capital structure has a significant impact on how the total value of a company is allocated between equity and debt. A more comprehensive measure is enterprise value, which gives effect to outstanding debt, preferred stock, other factors. For insurance firms, a value called. Market capitalization is used by the investment community in ranking the size of companies, as opposed to sales or total asset figures, it is used in ranking the relative size of stock exchanges, being a measure of the sum of the market capitalizations of all companies listed on each stock exchange.
In performing such rankings, the market capitalizations are calculated at some significant date, such as June 30 or December 31. The total capitalization of stock markets or economic regions may be compared with other economic indicators; the total market capitalization of all publicly traded companies in the world was US$51.2 trillion in January 2007 and rose as high as US$57.5 trillion in May 2008 before dropping below US$50 trillion in August 2008 and above US$40 trillion in September 2008. In 2014 and 2015, global market capitalization was US$68 trillion and US$67 trillion, respectively. Market cap is given by the formula MC = N × P, where MC is the market capitalization, N is the number of shares outstanding, P is the closing price per share. For example, if a company has 4 million shares outstanding and the closing price per share is $20, its market capitalization is $80 million. If the closing price per share rises to $21, the market cap becomes $84 million. If it drops to $19 per share, the market cap falls to $76 million.
This is in contrast to mercantile pricing where purchase price, average price and sale price may differ due to transaction costs. Not all of the outstanding shares trade on the open market; the number of shares trading on the open market is called the float. It is equal to or less than N; the free-float market cap uses just the floating number of shares in the calculation resulting in a smaller number. Traditionally, companies were divided into large-cap, mid-cap, small-cap; the terms mega-cap and micro-cap have since come into common use, nano-cap is sometimes heard. Different numbers are used by different indexes; the cutoffs may be defined as percentiles rather than in nominal dollars. The definitions expressed in nominal dollars need to be adjusted over decades due to inflation, population change, overall market valuation, market caps are to be different country to country. List of corporations by market capitalization List of finance topics List of stock exchanges London Stock Exchange Market price Market trend Middle-market company NASDAQ New York Stock Exchange Public float Shares authorized Treasury stock How to Value Assets – from the Washington State government web site Year-end market capitalization by country – World Bank, 1988–2010
In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys services; the measure of inflation is the inflation rate, the annualized percentage change in a general price index the consumer price index, over time. The opposite of inflation is deflation. Inflation affects economies in various negative ways; the negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future. Positive effects include reducing unemployment due to nominal wage rigidity, allowing the central bank more leeway in carrying out monetary policy, encouraging loans and investment instead of money hoarding, avoiding the inefficiencies associated with deflation.
Economists believe that the high rates of inflation and hyperinflation are caused by an excessive growth of the money supply. Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth. Today, most economists favor a steady rate of inflation. Low inflation reduces the severity of economic recessions by enabling the labor market to adjust more in a downturn, reduces the risk that a liquidity trap prevents monetary policy from stabilizing the economy; the task of keeping the rate of inflation low and stable is given to monetary authorities. These monetary authorities are the central banks that control monetary policy through the setting of interest rates, through open market operations, through the setting of banking reserve requirements.
Rapid increases in the quantity of money or in the overall money supply have occurred in many different societies throughout history, changing with different forms of money used. For instance, when gold was used as currency, the government could collect gold coins, melt them down, mix them with other metals such as silver, copper, or lead, reissue them at the same nominal value. By diluting the gold with other metals, the government could issue more coins without increasing the amount of gold used to make them; when the cost of each coin is lowered in this way, the government profits from an increase in seigniorage. This practice would increase the money supply but at the same time the relative value of each coin would be lowered; as the relative value of the coins becomes lower, consumers would need to give more coins in exchange for the same goods and services as before. These goods and services would experience a price increase. Song Dynasty China introduced the practice of printing paper money to create fiat currency.
During the Mongol Yuan Dynasty, the government spent a great deal of money fighting costly wars, reacted by printing more money, leading to inflation. Fearing the inflation that plagued the Yuan dynasty, the Ming Dynasty rejected the use of paper money, reverted to using copper coins. Large infusions of gold or silver into an economy led to inflation. From the second half of the 15th century to the first half of the 17th, Western Europe experienced a major inflationary cycle referred to as the "price revolution", with prices on average rising sixfold over 150 years; this was caused by the sudden influx of gold and silver from the New World into Habsburg Spain. The silver spread throughout a cash-starved Europe and caused widespread inflation. Demographic factors contributed to upward pressure on prices, with European population growth after depopulation caused by the Black Death pandemic. By the nineteenth century, economists categorized three separate factors that cause a rise or fall in the price of goods: a change in the value or production costs of the good, a change in the price of money, a fluctuation in the commodity price of the metallic content in the currency, currency depreciation resulting from an increased supply of currency relative to the quantity of redeemable metal backing the currency.
Following the proliferation of private banknote currency printed during the American Civil War, the term "inflation" started to appear as a direct reference to the currency depreciation that occurred as the quantity of redeemable banknotes outstripped the quantity of metal available for their redemption. At that time, the term inflation referred to the devaluation of the currency, not to a rise in the price of goods; this relationship between the over-supply of banknotes and a resulting depreciation in their value was noted by earlier classical economists such as David Hume and David Ricardo, who would go on to examine and debate what effect a currency devaluation has on the price of goods. The adoption of fiat currency by many countries, from the 18th century onwards, made much larger variations in the supply of money possible. Rapid increases in the money supply have taken place a number of times in countries experiencing political crises, produ
Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. Growth is calculated in real terms - i.e. inflation-adjusted terms – to eliminate the distorting effect of inflation on the price of goods produced. Measurement of economic growth uses national income accounting. Since economic growth is measured as the annual percent change of gross domestic product, it has all the advantages and drawbacks of that measure; the economic growth rates of nations are compared using the ratio of the GDP to population or per-capita income. The "rate of economic growth" refers to the geometric annual rate of growth in GDP between the first and the last year over a period of time; this growth rate is the trend in the average level of GDP over the period, which ignores the fluctuations in the GDP around this trend. An increase in economic growth caused by more efficient use of inputs is referred to as intensive growth.
GDP growth caused only by increases in the amount of inputs available for use is called extensive growth. Development of new goods and services creates economic growth; the economic growth rate is calculated from data on GDP estimated by countries' statistical agencies. The rate of growth of GDP per capita is calculated from data on GDP and people for the initial and final periods included in the analysis of the analyst. In national income accounting, per capita output can be calculated using the following factors: output per unit of labor input, hours worked, the percentage of the working age population working and the proportion of the working-age population to the total population. "The rate of change of GDP/population is the sum of the rates of change of these four variables plus their cross products."Economists distinguish between short-run economic changes in production and long-run economic growth. Short-run variation in economic growth is termed the business cycle. Economists attribute the ups and downs in the business cycle to fluctuations in aggregate demand.
In contrast, economic growth is concerned with the long-run trend in production due to structural causes such as technological growth and factor accumulation. Increases in labor productivity have been the most important source of real per capita economic growth. "In a famous estimate, MIT Professor Robert Solow concluded that technological progress has accounted for 80 percent of the long-term rise in U. S. per capita income, with increased investment in capital explaining only the remaining 20 percent."Increases in productivity lower the real cost of goods. Over the 20th century the real price of many goods fell by over 90%. Economic growth has traditionally been attributed to the accumulation of human and physical capital and the increase in productivity and creation of new goods arising from technological innovation. Further division of labour is fundamental to rising productivity. Before industrialization technological progress resulted in an increase in the population, kept in check by food supply and other resources, which acted to limit per capita income, a condition known as the Malthusian trap.
The rapid economic growth that occurred during the Industrial Revolution was remarkable because it was in excess of population growth, providing an escape from the Malthusian trap. Countries that industrialized saw their population growth slow down, a phenomenon known as the demographic transition. Increases in productivity are the major factor responsible for per capita economic growth – this has been evident since the mid-19th century. Most of the economic growth in the 20th century was due to increased output per unit of labor, materials and land; the balance of the growth in output has come from using more inputs. Both of these changes increase output; the increased output included more of the same goods produced and new goods and services. During the Industrial Revolution, mechanization began to replace hand methods in manufacturing, new processes streamlined production of chemicals, iron and other products. Machine tools made the economical production of metal parts possible, so that parts could be interchangeable.
See: Interchangeable parts. During the Second Industrial Revolution, a major factor of productivity growth was the substitution of inanimate power for human and animal labor. There was a great increase in power as steam powered electricity generation and internal combustion supplanted limited wind and water power. Since that replacement, the great expansion of total power was driven by continuous improvements in energy conversion efficiency. Other major historical sources of productivity were automation, transportation infrastructures, new materials and power, which includes steam and internal combustion engines and electricity. Other productivity improvements included mechanized agriculture and scientific agriculture including chemical fertilizers and livestock and poultry management, the Green Revolution. Interchangeable parts made with machine tools powered by electric motors evolved into mass production, universally used today. Great sources of productivity improvement in the late 19th century were railroads, steam ships, horse-pulled reapers and combine harvesters, steam-powered factories.
The invention of processes for making cheap steel were important for many forms
Standard & Poor's
Standard & Poor's Financial Services LLC is an American financial services company. It is a division of S&P Global that publishes financial research and analysis on stocks and commodities. S&P is known for its stock market indices such as the U. S.-based S&P 500, the Canadian S&P/TSX, the Australian S&P/ASX 200. S&P is considered one of the Big Three credit-rating agencies, which include Moody's Investors Service and Fitch Ratings, its head office is located on 55 Water Street in Lower Manhattan, New York City. The company traces its history back to 1860, with the publication by Henry Varnum Poor of History of Railroads and Canals in the United States; this book compiled comprehensive information about the financial and operational state of U. S. railroad companies. In 1868, Henry Varnum Poor established H. V. and H. W. Poor Co. with his son, Henry William Poor, published two annually updated hardback guidebooks, Poor's Manual of the Railroads of the United States and Poor's Directory of Railway Officials.
In 1906, Luther Lee Blake founded the Standard Statistics Bureau, with the view to providing financial information on non-railroad companies. Instead of an annually published book, Standard Statistics would use 5-by-7-inch cards, allowing for more frequent updates. In 1941, Paul Talbot Babson purchased Poor's Publishing and merged it with Standard Statistics to become Standard & Poor's Corp. In 1966, the company was acquired by The McGraw-Hill Companies, extending McGraw-Hill into the field of financial information services; as a credit-rating agency, the company issues credit ratings for the debt of public and private companies, other public borrowers such as governments and governmental entities. It is one of several CRAs that have been designated a nationally recognized statistical rating organization by the U. S. Securities and Exchange Commission. S&P issues both short-term and long-term credit ratings. Below is a partial list; the company rates borrowers on a scale from AAA to D. Intermediate ratings are offered at each level between AA and CCC.
For some borrowers, the company may offer guidance as to whether it is to be upgraded, downgraded or uncertain. Investment Grade AAA: An obligor rated'AAA' has strong capacity to meet its financial commitments.'AAA' is the highest issuer credit rating assigned by Standard & Poor's. AA: An obligor rated'AA' has strong capacity to meet its financial commitments, it differs from the highest-rated obligors only to a small degree. Includes: AA+: equivalent to Moody's Aa1 AA: equivalent to Aa2 AA−: equivalent to Aa3 A: An obligor rated'A' has strong capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories. A+: equivalent to A1 A: equivalent to A2 BBB: An obligor rated'BBB' has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more to lead to a weakened capacity of the obligor to meet its financial commitments.
Non-Investment Grade BB: An obligor rated'BB' is less vulnerable in the near term than other lower-rated obligors. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions, which could lead to the obligor's inadequate capacity to meet its financial commitments. B: An obligor rated'B' is more vulnerable than the obligors rated'BB', but the obligor has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will impair the obligor's capacity or willingness to meet its financial commitments. CCC: An obligor rated'CCC' is vulnerable, is dependent upon favorable business and economic conditions to meet its financial commitments. CC: An obligor rated'CC' is highly vulnerable. C: vulnerable in bankruptcy or in arrears but still continuing to pay out on obligations R: An obligor rated'R' is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others.
SD: has selectively defaulted on some obligations D: has defaulted on obligations and S&P believes that it will default on most or all obligations NR: not rated The company rates specific issues on a scale from A-1 to D. Within the A-1 category it can be designated with a plus sign; this indicates that the issuer's commitment to meet its obligation is strong. Country risk and currency of repayment of the obligor to meet the issue obligation are factored into the credit analysis and reflected in the issue rating. A-1: obligor's capacity to meet its financial commitment on the obligation is strong A-2: is susceptible to adverse economic conditions however the obligor's capacity to meet its financial commitment on the obligation is satisfactory A-3: adverse economic conditions are to weaken the obligor's capacity to meet its financial commitment on the obligation B: has significant speculative characteristics; the obligor has the capacity to meet its financial obligation but faces major ongoing uncertainties that could impact its financial commitment on the obligation C: vulnerable to nonpayment and is dependent upon favorable business and economic conditions for the obligor to meet its financial commitment on the obligation D: is in payment default.
Economic value is a measure of the benefit provided by a good or service to an economic agent. It is measured relative to units of currency, the interpretation is therefore "what is the maximum amount of money a specific actor is willing and able to pay for the good or service"? Among the competing schools of economic theory there are differing theories of value. Economic value is not the same as market price, nor is economic value the same thing as market value. If a consumer is willing to buy a good, it implies that the customer places a higher value on the good than the market price; the difference between the value to the consumer and the market price is called "consumer surplus". It is easy to see situations where the actual value is larger than the market price: purchase of drinking water is one example; the economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, extend that definition to goods which can be exchanged.
From this analysis came the concepts value in value in exchange. Value is linked to price through the mechanism of exchange; when an economist observes an exchange, two important value functions are revealed: those of the buyer and seller. Just as the buyer reveals what he is willing to pay for a certain amount of a good, so too does the seller reveal what it costs him to give up the good. Additional information about market value is obtained by the rate at which transactions occur, telling observers the extent to which the purchase of the good has value over time. Said another way, value is how much a desired object or condition is worth relative to other objects or conditions. Economic values are expressed as "how much" of one desirable condition or commodity will, or would be given up in exchange for some other desired condition or commodity. Among the competing schools of economic theory there are differing metrics for value assessment and the metrics are the subject of a theory of value.
Value theories are a large part of the differences and disagreements between the various schools of economic theory. In neoclassical economics, the value of an object or service is seen as nothing but the price it would bring in an open and competitive market; this is determined by the demand for the object relative to supply in a competitive market. Many neoclassical economic theories equate the value of a commodity with its price, whether the market is competitive or not; as such, everything is seen as a commodity and if there is no market to set a price there is no economic value. In classical economics, the value of an object or condition is the amount of discomfort/labor saved through the consumption or use of an object or condition. Though exchange value is recognized, economic value is not, in theory, dependent on the existence of a market and price and value are not seen as equal; this is complicated, however, by the efforts of classical economists to connect price and labor value. Karl Marx, for one, saw exchange value as the "form of appearance" of value, which implies that, although value is separate from exchange value, it is meaningless without the act of exchange, i.e. without a market.
In this tradition, Steve Keen makes the claim that "value" refers to "the innate worth of a commodity, which determines the normal ratio at which two commodities exchange." To Keen and the tradition of David Ricardo, this corresponds to the classical concept of long-run cost-determined prices, what Adam Smith called "natural prices" and Karl Marx called "prices of production." It is part of a cost-of-production theory of price. Ricardo, but not Keen, used a "labor theory of price" in which a commodity's "innate worth" was the amount of labor needed to produce it. "The value of a thing in any given time and place", according to Henry George, "is the largest amount of exertion that anyone will render in exchange for it. But as men always seek to gratify their desires with the least exertion this is the lowest amount for which a similar thing can otherwise be obtained."In another classical tradition, Marx distinguished between the "value in use", labor cost which he calls "value", "exchange value".
By most interpretations of his labor theory of value, like Ricardo, developed a "labor theory of price" where the point of analyzing value was to allow the calculation of relative prices. Others see values as part of his sociopolitical interpretation and critique of capitalism and other societies, deny that it was intended to serve as a category of economics. According to a third interpretation, Marx aimed for a theory of the dynamics of price formation, but did not complete it. In 1860, John Ruskin published a critique of the economic concept of value from a moral point of view, he entitled the volume Unto This Last, his central point was this: "It is impossible to conclude, of any given mass of acquired wealth by the fact of its existence, whether it signifies good or evil to the nation in the midst of which it exists. Its real value depends on the moral sign attached to it, just as as that of a mathematical quantity depends on the algebraic sign attached to it. Any given accumulation of commercial wealth may be indicative, on the one hand, of faithful industries, progressive energies, productive ingenuities: or, on the other, it may be indicative of mortal luxury, merciless tyranny, ruinous chicanery."
Gandhi was inspired by Ruskin's book and published a paraphrase of it in 1908. Economists su