How Are Markets & Industries Defined in Economics?
Markets and industries are two central concepts in economics. "Markets" refer not to physical places, but to groups of buyers and sellers of particular goods and services, while "industries" refer to the firms and activities involved in producing a particular class of good.
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Industry
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"Industry" refers to a set of activities and firms engaged in providing a specific type of good or service. Examples include the insurance industry, the aviation industry or the construction industry.
Markets
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Economists use the term "markets" to refer to the mechanism that brings together the buyers of specific goods and services and the industries that produce and sell them. Examples include the market for computers, for automobiles, or for medical services.
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Considerations
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Industries are generally defined by their specific product or service (for example, computers, insurance), but economists disagree as to how broad or narrow the categories should be. For example, some economists might refer to a manufacturing industry, while others would refer to specific manufacturing activities, such as steel, plastics or microchips.
Features
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In capitalist economies, competitive markets consist of many buyers and sellers, so that no individual buyer or seller exercises disproportionate influence over the price of a product.
Benefits
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As with markets, when industries include multiple firms or producers of the product in question, competition among producers keeps consumer prices low.
Misconceptions
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In economics, market does not refer to a physical location. However, supermarkets and outdoor farmers markets illustrate the principle of the market as a mechanism that brings together buyers and sellers.
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References
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