Auction Market Definition – An Overview

The markets are the places where people and institutions meet to buy, sell, or trade the objects on which they depend. A market is a collective collection of human associations, processes, systems or infrastructures through which various parties engage in commerce. Most markets are based on bartering, which involves exchange between buyers and sellers for money. Although markets vary greatly depending on culture, economy and technology, there are some characteristics of all markets. Markets do not, as economists believe, function on a self-sufficient basis, but they do allow for the effective operation of the economy.


Economists define a market as a set of interacting institutions in which goods and services are exchanged as means of production and as an expression of social wealth. In the broadest sense, a market is a place where goods and services can be bought and sold, a transaction in which one party purchases from another, and a third party disposes of the purchased item. Markets, therefore, do not function on a purely logical matter; a market can take on many different forms depending on culture, society, economy and technology. Markets do have underlying assumptions and values, both implied and explicit, and the definition of a market also depends on these assumptions. If the underlying assumptions or values are inaccurate then the definition of a market also will be inaccurate.

A market may assume various forms according to culture, society, economy and technology. For example, a market for land may refer to the buying and selling of property, including raw land, construction materials and the legal rights to use and access the land. Another example is the market for goods. The term may apply to the purchasing and selling of specific items like commodities, such as oil, gold, silver, wheat, and other such goods. A market for intellectual property may define the buying and selling of patents, copyrights, designs and other inventions.

In the context of the financial markets, the term refers to the process by which traders or companies actually sell or buy physical goods, including bank notes, bonds, shares and equities. It is believed that markets, as they are understood today, did not exist until the eighteenth century, but were widespread and common among European aristocrats during the Industrial Revolution. Later during the nineteenth century, during the First World War, markets became a venue for trade and investment in order to equip European soldiers with armaments. They were also used to exchange currencies during the war.

Another important idea about the definition of markets is that they occur between demand and supply, and prices and wages reflect supply and demand. This concept is intimately connected with the modern economic theory of supply and demand and is called the theory of elasticity. This approach has been important in economics since the mid-Keynesian era, and it is the deviation of prices from their initial level in an economy. Elasticity is considered to be a very important feature of markets, because when demand and supply are in equilibrium, price level set points will not change. However, there may be fluctuations on an irregular basis, and the size of the fluctuations and the frequency with which they occur can vary widely according to different economic theories.

On the other hand, in the context of the financial markets, the definition of market relates to the buying and selling of securities. Securities in this case are futures contracts for goods, options on currencies, bonds, stocks, derivatives and mortgage obligations. In the real time, all these products are bought and sold at auction market, where buyers and sellers determine the prices of the securities in the open market. The main purpose of the auction market is to allow buyers and sellers to compete for the goods, and determine whether they are going to be able to obtain the securities at a specific price later on.

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