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This padlet provides indepth information and analysis on markets as it relates to economics within Canada specifically. It provides definitions of the term "markets" and illustrates "real world" examples of various markets such as the labour and housing market. Additionally it highlights market behaviours and factors that impact market stability. Lastly, it outlines the current state of those markets and the forecast for the future of the Canadian market as a whole.

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What It Means in Economics, Types, and Common Features

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What It Means in Economics, Types, and Common Features

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This article breaks down and explains the concept of a “market” as it relates to economics from definitions, to various types, structures, dynamics, participants, efficiency, and regulation. Essentially markets are places – physical or virtual – where buyers and sellers engage to buy and sell goods and services. Various types include product markets, black markets, auction markets, labor markets, and financial markets. Market dynamics refer to various factors that can impact or change markets such as supply and demand, competition, government policy…etc. Participants relate to all and any person or groups of people that interact with the market and efficiency relates to the strength of markets. Lastly market regulation relates to government interventions that are generally done to uphold the stability of the market through fair competitions, protection to consumers, and addressing market failures.

I selected this article specifically because I felt it gave a thorough, but manageable breakdown of what markets are and how they relate to the economy. I feel the entire article has useful information, but one piece of information that I found stood out was the light shed on black markets and how they fit in the overall economy.

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What Is a Market?

A market is a place where parties can gather to facilitate the exchange of goods and services. The parties involved are usually buyers and sellers. The market may be physical like a retail outlet, where people meet face-to-face, or virtual like an online market, where there is no direct physical contact between buyers and sellers.

Key Takeaways

Understanding Markets

Technically speaking, a market is any place where two or more parties can meet to engage in an economic transaction-even those that don't involve legal tender. A market transaction may involve goods, services, information, currency, or any combination of these that pass from one party to another. In short, markets are arenas in which buyers and sellers can gather and interact.

In general, while only two parties are needed to make a trade, at minimum a third party is needed to introduce competition and bring balance to the market. As such, a market in a state of perfect competition, among other things, is necessarily characterized by a high number of active buyers and sellers.

Beyond that broad definition, the term "market" encompasses a variety of things, depending on the context. For instance, it may refer to the place where securities are traded-the stock market. Alternatively, the term may also be used to describe a collection of people who wish to buy a specific product or service in a specific place, such as the Brooklyn housing market. Or it could refer to an industry or business sector, such as the global diamond market.

Whatever the context, the market establishes the prices for goods and other services. These rates are determined by supply and demand. Supply is created by the sellers, while demand is generated by buyers. Markets try to find some balance in price when supply and demand are themselves in balance. But that balance can in itself be disrupted by factors other than price including incomes, expectations, technology, the cost of production, and the number of buyers and sellers participating.

Markets may be represented by physical locations where transactions are made. These include retail stores and other similar businesses that sell individual items to wholesale markets selling goods to distributors. Or they may be virtual. Internet-based stores and auction sites such as Amazon and eBay are examples of markets where transactions can take place entirely online and the parties involved never connect physically.

Markets may emerge organically or as a means of enabling ownership rights over goods, services, and information. When on a national or other more specific regional level, markets may often be categorized as "developed" markets or "developing" markets, depending on many factors, including income levels and the nation or region's openness to foreign trade.

Types of Markets

Markets vary widely for a number of reasons, including the kinds of products sold, location, duration, size, and constituency of the customer base, size, legality, and many other factors. Aside from the two most common markets-physical and virtual-there are other kinds of markets where parties can gather to execute their transactions.

Underground Market

An underground market refers to an illegal market where transactions occur without the knowledge of the government or other regulatory agencies. Many illegal markets exist in order to circumvent existing tax laws. This is why many involve cash-only transactions or non-traceable forms of currency, making them harder to track.

Many illegal markets exist in countries with planned or command economies-wherein the government controls the production and distribution of goods and services-and in countries that are economically developing. When there is a shortage of certain goods and services in the economy, members of the illegal market step in and fill the void.

Illegal markets can also exist in developed economies. These shadow markets, as they're also known, become prevalent when prices control the sale of certain products or services, especially when demand is high. Ticket scalping is one example of an illegal or shadow market. When demand for concert or theater tickets is high, scalpers will step in, buy up a bunch, and sell them at inflated prices on the underground market.

Auction Market

An auction market brings many people together for the sale and purchase of specific lots of goods. The buyers or bidders try to top each other for the purchase price. The items up for sale end up going to the highest bidder.

The most common auction markets involve livestock, foreclosed homes, and art and antiques. Many operate online now. For example, the U.S. Treasury sells its bonds, notes, and bills via regular auctions.

Financial Market

The blanket term "financial market" refers to any place where securities, currencies, bonds, and other securities are traded between two parties. These markets are the basis of capitalist societies, and they provide capital formation and liquidity for businesses. They can be physical or virtual.

The financial market includes the stock exchanges such as the New York Stock Exchange, Nasdaq, the LSE, and the TMX Group. Other kinds of financial markets include the bond market and the foreign exchange market, where people trade currencies.

Regulating Markets

Other than underground markets, most markets are subject to rules and regulations set by a regional or governing body that determines the market's nature. This may be the case when the regulation is as wide-reaching and as widely recognized as an international trade agreement, or as local and temporary as a pop-up street market where vendors maintain order and rules among themselves.

How Do Markets Work?

Markets are arenas in which buyers and sellers can gather and interact. A market in a state of perfect competition is necessarily characterized by a high number of active buyers and sellers. The market establishes the prices for goods and other services. These rates are determined by supply and demand. Supply is created by the sellers, while demand is generated by buyers. Markets try to find some balance in price when supply and demand are themselves in balance.

What Is a Black Market?

A black market refers to an illegal exchange or marketplace where transactions occur without the knowledge or oversight of officials or regulatory agencies. They tend to spring up when there is a shortage of certain goods and services in the economy, or supply and prices are state-controlled. Transactions tend to be undocumented and cash-only, all the better to be untraceable.

How Are Markets Regulated?

Most markets are subject to rules and regulations set by a regional or governing body that determines the market's nature. They can be international, national, or local authorities.

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A market is a place where parties can gather to facilitate the exchange of goods and services. The parties involved are usually buyers and sellers. The market may be physical like a retail outlet, where people meet face-to-face, or virtual like an online market, where there is no direct physical contact between buyers and sellers.

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Framework for Market Operations and Liquidity Provision

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Framework for Market Operations and Liquidity Provision

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Essentially this article explains in detail how the Bank of Canada manages the supply of money in the Canadian economic markets. Additionally, it elaborates further on how they ensure security when it comes to loans for businesses and individuals while still supporting economic growth and keeping a cautious eye on inflation. Through the buying and selling of government securities the Bank of Canada oversees how much money is available to loan out via market operations. Their operating framework is designed through their monetary policy to control inflation and provision of liquidity to financial markets to ensure there is enough money available for loans.

I selected this article because I felt it paired well with my first choice in explaining the impact of banks on markets specifically in Canada and the role they play in the big picture of the Canadian economy. I feel the market operation framework is the most valuable piece of information that stands out and is the most useful because it gives the reader a deep understanding of the way cashflow is controlled by the banks of Canada.

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Framework for market operations and liquidity provision

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Learn about the Bank's policies for financial market operations and tools for providing liquidity to the financial system. This includes routine and emergency liquidity tools provided as part of the Bank's role as lender of last resort.

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Canadian economic outlook for 2024: Shifting into neutral

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Canadian economic outlook for 2024: Shifting into neutral

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This article provides a detailed overview of the Canadian economic forecast for 2024 addressing particular problem markets that have impacted the Canadian economy since COVID. It emphasises that there will be a shift into neither growth or decline and uses the term “neutral” to describe the balance between stable growth and uncertainties that lie ahead. It breaks down the impact of COVID on global economic shifts and notes various factors that contribute to the now assumed “neutral” position such as stabilized commodity prices, consumer spending patterns, and labor market. It dives deeper into sectoral analysis outlining how manufacturing and export industries are improving as well as the housing market caused by affordability concerns. Additionally it explains business investments contributing to economic growth through digital transformation. However, it concludes with uncertainties caused by geopolitical tensions, supply chain disruptions, and global trade pattern changes.

I selected this article because I felt it was a great “real world” example of how markets are currently performing in the Canadian economy. Additionally, the way it dives into sectoral analysis of the behaviour of various markets provide an educational application of the articles provided above thus flowing the information about markets in a structured  manner.

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While the Canadian economy should benefit from a more predictable environment in 2024, high interest rates will weigh against vigorous growth.

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The market expects a soft landing. There are reasons to be skeptical

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The market expects a soft landing. There are reasons to be skeptical

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This article provides a deeper look into the economic state of the current Canadian market and why civilians should be weary going into the 2024 year. It starts by outlining the “soft landing concept” which refers to a gradual decline in various threats that have been impacting the economy and then it digs into why individuals should still be cautious. Although there are many positive forecasts for the economy (as seen in the previous article shared) the global economic uncertainty due to policy changes and market volatility - which refers to the fluctuation of financial asset prices such as stocks, bonds, and commodities – are causes for concern looking at the year ahead.

I selected this article because I felt as with the 3rd article, it provided a great current real world example of the behaviours of markets within the economy specifically market volatility. The detailed outline of market volatility I felt specifically made the article stand out as it describes market behaviour.

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So it's official. Investor sentiment in the U.S. stock market has finally reached "euphoria," according to Citigroup's widely followed Levkovich Index. The index uses 11 different inputs to gauge how people in the market are feeling, and those indicators say investors are now a giddy crew.

What does this mean for sober, serious investors like you and me? The good folks at Citi warn that the index isn't a short-term market-timing tool. Just because many investors are feeling unusually positive, and just because they might be unduly optimistic, doesn't mean the market is going to immediately snap back to reality.

Once the U.S. stock market enters the euphoric zone, it has historically remained there for an average of 26 weeks before falling back to Earth, according to Citi. However, on some occasions - such as the 1990s tech bubble or the COVID-19 frenzy - the market has floated in euphoric territory for more than a year before reverting to normalcy.

Be that as it may, the core message of the Citi index seems clear: After a rip-roaring year in which U.S. stocks surged by more than 25 per cent and global stocks soared more than 20 per cent, we should now brace ourselves for a bumpier ride ahead.

It's not that the North American economy is crumbling. But it is sending a flurry of mixed signals.

On Friday, for instance, Canada reported that unemployment jumped in March. Conversely, the United States published numbers showing job growth that vastly exceeded expectations.

Interpreting this can be difficult. From an investor's perspective, the bad-news Canadian job numbers may be good news, since they suggest the Bank of Canada will soon start cutting interest rates to bring relief to a struggling economy.

On the other hand, the strong U.S. job numbers are a mixed bag for markets, because galloping growth in employment presumably feeds inflation. The strength of the job market suggests the Federal Reserve will have to keep interest rates higher for longer to avoid overheating the economy.

Making this picture even murkier are worries about the quality of the data itself. One continuing puzzle has been the big gap between how the U.S. economy looks when viewed from two competing perspectives: gross domestic product (GDP) and gross domestic income (GDI).

In theory, these two ways of measuring output should give exactly the same result. GDP gauges the size of the economy by measuring how much everyone has spent. GDI gauges the size of the economy by measuring how much everyone has earned.

The two measures have historically diverged only slightly, for technical reasons to do with data collection, but recently that close relationship has broken down.

Over the past year or so, the twin gauges have gone their separate ways. "Whereas GDP claims that the second half of 2023 was a period of remarkable growth, GDI thinks the economy utterly stagnated," writes Eric Lascelles, chief economist at RBC Global Asset Management.

Which one of these indicators is right? Nobody knows, but the discrepancy offers good motivation to keep your eye on other signals. Three in particular are keeping me up at night.

The first is the number of temporary workers in the economy. In the past, a substantial fall in temp staff has provided one of the most reliable early warning signs of a U.S. recession ahead.

Will it do so again? Over the past two years, U.S. companies have shed about 400,000 temporary workers. A decline of that magnitude typically happens only before a downturn.

A second indicator to monitor is the year-over-year change in how much banks are lending to commercial and industrial borrowers. The volume of these loans usually grows in a healthy economy. It shrinks only during recessions or their aftermath.

It's remarkable, therefore, that the volume of U.S. commercial and industrial loans began to contract late last year. This does not fit with the widespread notion that the U.S. economy is booming.

A final area to watch is delinquency rates on consumer loans. The Federal Reserve Bank of New York tracks this data and recently found that delinquency rates on credit cards have climbed past prepandemic levels for most age groups. Much the same is true of auto loans, where delinquency rates "have pushed past pre-pandemic levels and the worsening appears to be broad based," according to researchers.

Could the U.S. consumer finally be tapped out? That's tough to say, but the rise in delinquency rates adds to the evidence that the stock of excess savings accumulated during the pandemic is now close to exhausted.

To be sure, none of these downbeat numbers have to portend disaster. It's easy to point to other numbers - such as the booming job numbers on Friday - as evidence that the U.S. economy is doing just fine.

However, the collective message of all these indicators is that investors should not expect a repeat of the past year's big gains. The falling number of temp workers, the decline in commercial loans, the growing delinquency rates on consumer credit and the discrepancy between GDP and GDI suggest a gap is growing between the euphoria on Wall Street and the more complicated reality on Main Street.

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The market expects a soft landing. There are reasons to be skeptical

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The North American economy is not crumbling, but it is sending a flurry of mixed signals

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Why Canadian markets are strong — despite global inflation

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Why Canadian markets are strong — despite global inflation

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This video from 2022 outlines the strength of the Canadian economic market during the global inflation crisis potentially leading to a recession. Peter Armstrong explains how Canadians have benefited from surging energy prices leading to economic stability during a time where the world was facing catastrophic inflation. Concluding with the explanation of how inflation changes the buying behaviour of consumers which leads to the motive behind banks desire to avoid inflation spikes as much as possible.

I selected this video because I felt it provided a great contrast to how the Canadian market dropped drastically in 2023. Thus providing a great educational “real world” example of the behaviour of markets and how they relate and impact eachother.

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Why Canadian markets are strong — despite global inflation

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Canada’s economy in 2024: 4 things to watch

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Canada’s economy in 2024: 4 things to watch

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This video breaks down the forecast of the Canadian economic market and what factors will impact it the most in 2024. Starting off with inflation neutralising due to the Bank of Canada increasing interest rates and global gas prices coming down due to supply and demand factors. In an attempt to combat inflation the Bank of Canada increased interest rates due to change in monetary policy changes. However, it is forecasted that the interest rates will come down again once the economy begins to stabilize. Due to to inflation and interest rate spikes the economy has and will slow down further. Mortgage renewals could potentially send the market to plummet further thus proving a real threat potentially leading to a full recession. Thus concluding in uncertainty of the market.

This video drastically contrasts the video above thus providing a clear understanding of how the Canadian market has changed since 2022 and what the forecast is for the future.

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Canada’s economy in 2024: 4 things to watch

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Canada housing market 2024: What to expect with interest rate cuts in the forecast

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Canada housing market 2024: What to expect with interest rate cuts in the forecast

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Leading onto the videos mentioned this one specifically outlines the housing market and it’s forecast for 2024. Outlining the demand for the drop of interest rates for the upcoming mortgage renewal season and revealing what impact and influence the Bank of Canada has on the housing market specifically.

As with the other videos, I felt this revealed the housing market and how it operates within the Canadian market, but I specifically felt it was an ideal option given it bringing in other topics such as supply and demand which is the driving force of economic markets across the world.

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Canada housing market 2024: What to expect with interest rate cuts in the forecast

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Looking for a job in 2024? What to know heading into a competitive Canadian labour market

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Looking for a job in 2024? What to know heading into a competitive Canadian labour market

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This video outlines how the Canadian labour market, at one time one of the strongest markets in the world, but now impacted heavily by the lasting effects of COVID and economic crisis caused by inflation, geopolitical tensions, and flatlined GDP. The video provides further insight into the current state of the Canadian Labour market and gives advice to individuals facing job security threat.

As with the other videos, I felt this revealed the labour market and how it operates within the Canadian market as a whole as well as how other markets have impacted it specifically in the financial space.

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Looking for a job in 2024? What to know heading into a competitive Canadian labour market

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This picture is from a sign in a grocery store revealing the increase of basic commodity items in the food market which shows where the current market is looking like for Canada.

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This image is a graph of the annual change in consumer price index which is a measure of the change in prices for goods and services over time. It outlines the inflation by category from October 2022 – October 2023.

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What did you learn about your topic that surprised you the most?

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What did you learn about your topic that surprised you the most?

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Learning about how the Bank of Canada controls cash flow and monitors loan capabilities was rather fascinating to me. Seeing that in a real world setting regarding the current state of inflation and interest rates connected was a big eye opener.

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Provide a real-life example of how this topic is relevant or interesting for you.

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Provide a real-life example of how this topic is relevant or interesting for you.

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Markets relate to all operations of business and have an impact on everyday life. The struggle I faced in finding employment over the past 8 months is a direct example of how the current state of the labor market has impacted my living situation.

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If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?

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If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?

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The most important thing I would pass on is the understanding of how our buying behaviour effects the entire economy through supply and demand, therefore I would advise caution on how they decide to spend their money.