Market Economy Investors
A market economy (also called a free market economy or a free enterprise economy) is an economic system in which the production and distribution of goods and services take place through the mechanism of free markets guided by a free price system.[1][2] In a market economy, businesses and consumers decide of their own volition what they will purchase and produce. Technically this means that the producer gets to decide what to produce, how much to produce, what to charge customers for those goods, what to pay employees, etc., and not the government. These decisions in a free-market economy are influenced by the pressures of competition, supply, and demand. This is often contrasted with a planned economy, in which a central government decides what will be produced and in what quantities.[3]
No pure market economy exists. Thus, almost all economies in the world today are mixed economies which combine varying degrees of market and command economy traits. For example, in the United States there are more market economy traits than in Western European countries.
Market analysis may take two distinct forms. In the first, it is a method used by investors to look at the market and try to determine whether it is going up or down, in order to make investment decisions. In the second, it is a field used by marketers to analyze the target market of their clients and determine the best courses of action to take to improve sales and profitability.
Market analysis as used by investors involves looking at numerical data and attempting to discern patterns or determine probable future movement based on that data. Investors using market analysis will look at how prices within their specific sector are moving, how the market as a whole is tending, and what individual events might affect the prices of stocks and commodities they are trading in. When performing a market analysis, an investor must also consider events such as announced mergers, profit predictions for a coming quarter, and new technological discoveries. Some investors take a primarily mathematical approach to market analysis, looking at reams of historical market data and crunching every number at their disposal through their own algorithms in an attempt to predict the market's future path. Other investors take a more 'gut' approach to market analysis, relying on news sources and rumors surrounding companies' activities to sketch a rough picture of possible market tendency.
From a marketer's perspective, marketing analysis consists of looking at every angle of a market to determine policies that will help a company capture more of a market share and make the share they already control more profitable. The market analysis of customer desire and satisfaction is a large part of marketing. Logit analysis, for example, surveys consumers and looks at needs that have not yet been met to predict how an untried product may perform in a fresh market. For companies innovating a new market, this is a crucial part of market analysis, because producing too many units of a product results in a massive loss, while producing too few results in a loss of customer satisfaction and opens the door to competitors.
Market analysis may also look at the share a company owns of a particular market, with the aim of determining how to acquire a larger share. Unlike logit analysis, this type of market analysis, known as market share analysis, is geared more towards entrenched product lines. The goal of market share analysis is not to determine whether a customer would purchase a product, but rather to examine customer loyalty levels, brand perception, and the overall competitive edge, and to come up with a strategy to draw market share away from competitors and increase one's own share.
A number of software packages exist for many types of market analysis, usually taking the form of spreadsheets with fields for a wide array of data which is then processed and used to give a general analysis. Most marketing firms also include market analysis as part of their core package, with different degrees of depth available determining on the size and needs of the company.
Michael Watts received his doctorate in economics from Louisiana State University in 1978. He is director of the Center for Economic Education and professor of Economics at Purdue University in West Lafayette, Indiana. He also serves as associate editor o f the Journal of Economic Education. Professor Watts has published numerous empirical studies to determine how university and pre-college students learn economics, and to evaluate the effectiveness of educational programs, materials, and instructor s. Those articles have appeared in the Review of Economics and Statistics, the Journal of Economic Education, and other journals. Dr. Watts has also written college and high school textbooks on economics.
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