Scribd
Upload
67 views12 pages

Week 3 Introduction To Markets

The document provides an introduction to markets, defining them as the interaction between buyers and sellers to exchange commodities, and describes the key components of markets including producers, processors, traders, and consumers linked in a market chain. It also discusses the importance of well-functioning and integrated markets for improving livelihoods, especially for the poor, and the role of market information in market efficiency.

Uploaded by

Geraldine Madrigal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
67 views12 pages

Week 3 Introduction To Markets

The document provides an introduction to markets, defining them as the interaction between buyers and sellers to exchange commodities, and describes the key components of markets including producers, processors, traders, and consumers linked in a market chain. It also discusses the importance of well-functioning and integrated markets for improving livelihoods, especially for the poor, and the role of market information in market efficiency.

Uploaded by

Geraldine Madrigal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 12

ENTREPRENEURSHIP

Introduction to Markets

Geraldine D.Madrigal
Why are markets important?
Markets are a part of everyone’s lives
Most people – especially the poor – rely on markets to
provide food, essential goods and services
Markets also provide access to paid work and
mechanisms for selling commodities and services
Strengthening markets can improve everyone’s lives
and livelihoods
Harming markets can have serious negative impacts,
particularly on the poor
Important to understand markets, so we know if our
programs are strengthening or harming markets
What is a market?
Markets are composed of:
 Buyers
 Sellers
 Institutions and infrastructure
 Others behind the scenes: importers, processors, storage
owners, wholesalers, credit suppliers, government officials
and policies
Markets are where buyers and sellers come together to
obtain information and exchange commodities.
A commodity is something tangible, that has value and can
be exchanged.
A market chain includes all levels of the market and
actors that have a role in the distribution and transformation
of the commodity.
Custome
r

Retailer

Wholesale
r

Processor In a Market Chain


commodities flow
Farmer from producers to
consumers
Types of Markets
Along a market chain, each trader buys and sells at different
prices.

Source: FEWs (2008) Market Analysis and Assessment. Lesson 1, p. 5


The Market Chain
& Business Support Services

Consumption

Retailing

Trading Research
Transportation
Processing
Govt. policy regulation

Communications
Trading
Production input supply
- -
Post-harvest
handling Tech. & business training & assistance

Production Financial services


Market information and intelligence
Commodity Supply Chain

Intermediary
“wholesale” prices
Farmgate Retail
paid between
prices* prices
brokers,
aggregators,
wholesalers

*USDA refers to wholesale prices as “producer prices.”


USDA does not require the collection of farmgate prices.
Market Definitions

Source: FEWs (2008) Market Analysis and Assessment. Lesson 1, p. 12


Market Characteristics and Efficiency
 A market is said to be functioning well when goods flow
into the market in times of deficit and out in times of
surplus, via private trading.
 A market is said to be functioning inefficiently when the
costs of moving commodities in and out of markets are
greater than the marginal profit received to do so.

 Relative functioning of a market depends on:


Number, size, independence of buyers and sellers
Formation of prices
Availability of information on prices and costs
Ease of entry and exit
Reliability of contract enforcement
Integration across markets
Institutional framework (infrastructure, government policies,
etc)
Market Integration
 Markets are integrated when price shocks from one
geographic market are transmitted to other markets through
the trading of goods.
 When markets are integrated, the supply of food adjusts
spatially to meet demands.
 In integrated markets, an increase in prices due to a large
local purchase of food would signal traders to bring in
more supply, bringing prices back down.
 If market integration is poor due to weak information and
infrastructure and high transport and marketing costs,
supply will not flow into the market, increasing prices for
the population. In such cases, the local procurement of food
can have significant effects on local prices.
Market Information
What is market information?
Who does market information help?
What effect does market information have on
market efficiency and market integration?
Why is market information important to LRP
projects?
References
Barrett, C. and E. Lentz (2010). Draft AEM 6940
MIFIRA Lecture Notes: Lecture 4.
CRS (2009). Linking Farmers to Markets. Module 1:
Marketing Basics. Draft.
FEWs Net (2008) “Market Assessment and Analysis:
Learners Notes.” FAO.

You might also like