What are the similarities and differences of stock exchange market and a local market?

Answer 1

This question have some areas of Finance and Economics in it. I feel that there can be many answer to this question , depending on what perspectives you choose. In it's raw meaning, a market can mean a place where buyers and sellers meet face to face to engage in a transaction to purchase and sell products or services. In Economics, however a market is a place where transactions takes place, or an exchange of goods take place. It's important to understand that the meaning of market signifies a group of people who wants to demand or buy something, and another group of people who are willing to supple or sell something. Of course, the product that individuals are selling or buying can vary and it's value or price of the product can vary as well. In a normal market for example, there are goods like clothes or food. On the other hand, there is also the labour market, where the workers ( you and I ) are the sellers as we are selling 'ourselves', while the buyers are the firms or organizations who 'purchase' us. In the stock exchange market or financial market, there exists buyers and sellers as well. But it is more appropriate to use the term borrowers and lenders. The important thing in a market is that both groups have different needs which they can meet and satisfy their needs. In the stock exchange market, there are a group of people which have excess funds from their savings. While another group of people, the companies, need to have funds for expansion or growth. To create efficiency in resource allocation, a market is hence needed. Hence the stock exchange market enables the companies to offer financial products like shares or bonds, which is purchased by consumers like us. What is essentially happening is consumers like us who have excess funds will exchange our funds to some product by the firm, and the firm will use the fund for expansion or growth. Whether we are talking about the raw market meaning or a Stock Market, what's happening is that a market allows the needs of groups of people to be satisfied with an exchange or transaction. Without the market, resources will not be efficiently allocated. The similarities of a stock market with a market, is that the exchange still takes place between the buyer and seller. There are still transactions. It aims to allocate resources efficiently, means it takes resources from those not in need of it and transfer it to those in need of it. Some of the difference is that the products sold are very different. In the Stock Exchange Market, the products are very different than the normal market hence some call it financial products. Another difference is that the stock exchange market is considered to be a larger scope than a market. In a stock exchange market, it's likely to be international, meaning individuals can purchase the products from different countries, and firms can sell the products from different countries. ( this means that firms can list their companies in different stock exchange market, not necessarilly the local ones ).