free market

Examples of free market in the following topics:

• The Function and Nature of Markets

  • In a free market, the price and quantity of an item are determined by the supply and demand for that item.
  • A market economy is an economy in which decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.
  • A free market is a market structure that is not controlled by a designated authority.
  • Free markets may have different structures: perfect competition, oligopolies, monopolistic competition, and monopolies are all types of markets that may exist in a capitalist economy.
  • In a free market, the price and quantity of an item is determined by the supply and demand for that item.

• Drivers of Market Interest Rates

  • A market interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender in the market.
  • In a free market there will be a positive interest rate.
  • There is a market for investments which ultimately includes the money market, bond market, stock market, and currency market as well as retail financial institutions like banks.
  • Exactly how these markets function are sometimes complicated.
  • where in is the nominal interest rate on a given investment, ir is the risk-free return to capital, pe = inflationary expectations, i*n = the nominal interest rate on a short-term risk-free liquid bond (such as U.S.

• The Relationship Between Risk and Return and the Security Market Line

  • Systematic risk arises from market structure or dynamics, which produce shocks or uncertainty faced by all agents in the market.
  • The expected return of an asset is equal to the risk free rate plus the excess return of the market above the risk-free rate, adjusted for the asset's overall sensitivity to market fluctuations or its beta.
  • Mathematically, the capital asset pricing model can be written as: E(Ri) = Rf + β(E(Rm) - Rf), where R is the return, E(R) is the expected return, i denotes any asset, f is the risk-free asset, and m is the market.
  • The market risk premium is determined from the slope of the SML.
  • The intercept is the nominal risk-free rate available for the market, while the slope is the market premium, E(Rm)− Rf.

• What Are Markets

  • The Market is a Place: The market can also be thought of as a place or as a geographical area within which trading occurs.
  • International markets, American markets, a shopping center, and even the site of a single retail store can be called a market.
  • The terms buyer's market and seller's market describe different conditions of bargaining strength.
  • Finally, the extent of personal freedom and government control produces free market systems, socialistic systems, and other systems of trade and commerce.
  • The primary types of markets are consumer markets, industrial markets, institutional markets, and reseller markets.

• Direct Marketing

  • Direct marketing allows businesses and nonprofit organizations to advertise and market directly to customers via a variety of print and electronic mediums.
  • Direct marketing campaigns focus on the consumer, statistical data generated via outreach and the accountability of the marketer.
  • Direct marketing has cleared the way for a number of competitors to enter markets on a global level and has increased product offerings to fill niche markets.
  • Toll-free 1-800 numbers, loyalty marketing programs, magazine subscription cards, mail order catalogues, and credit card rewards programs laid the foundation for direct marketing's success.
  • Questions can be answered through toll-free numbers, FAQ pages on websites or via email.

• Encouraging Product Trials

  • Running a product trial is a common promotional tactic used by brands looking to enter a new market, release a new product, or increase existing sales.
  • Product trials are useful when companies need to adjust parts of their marketing communications strategy to successfully target a market segment.
  • Perks such as free shipping and handling and future coupons can all drive consumers toward making a purchase after the end of the free trial period.
  • Promote the product trial online via websites, social media, and paid and non-paid search marketing programs.
  • Companies offer free samples to encourage consumers to participate in product trials.

• Characteristics of Pure Competition

  • The idealized purely competitive market insures that no buyer or seller has any market power or ability to influence the price.
  • The sellers in a purely competitive market are price takers.
  • The conditions that ensure no seller has any market pose are:
  • Sellers cannot charge a price above the market price because sellers see all other goods in the market as perfect substitutes.
  • They can buy those goods at the market price.

• Defining the Security Market Line

  • The security market line graphs the systematic, non-diversifiable risk (stated in terms of beta) versus the return of the whole market at a particular time, and shows all risky marketable securities.
  • The Y-intercept of the SML is equal to the risk-free interest rate.
  • Recall that the risk-free interest rate is the theoretical rate of return of an investment with no risk of financial loss.
  • When used in portfolio management, the SML represents the investment's opportunity cost -- i.e., investing in a combination of the market portfolio and the risk-free asset.
  • The y-intercept of this line is the risk-free rate (the ROI of an investment with beta value of 0), and the slope is the premium that the market charges for risk.

• Mass marketing, direct marketing, and Internet marketing

  • Mass marketing is distinguished from direct marketing in terms of the distance between the manufacturer and the ultimate user of the product.
  • Mass marketing is characterized as having wide separation and indirect communication.
  • This type of marketing is experiencing tremendous growth.
  • Apparently, marketers have tired of the waste associated with mass marketing and customers want more personal attention.
  • A modified type of direct marketing is represented by companies that allow ordering of product by calling a toll-free number or mailing in an order card as part of an advertisement.

• The Importance of Market Segmentation

  • Segmenting example: Kellogg's Frosties are marketed to children, while Kellogg's Crunchy Nut Cornflakes are marketed to adults.
  • While there may be theoretically 'ideal' market segments, in reality, every organization engaged in a market will develop different ways of imagining market segments, and create product differentiation strategies to exploit these segments.
  • The problem is not competition; the problem is the acknowledgment that people within markets are different and that successful marketers must respond to these differences.
  • Rather, one or more target markets (segments) must be selected.
  • The free bowling appeals more to their target audience of adults than it does to children.