Market Forces That Drive an Economy

Ask any investor, and he/she will clearly explain to you about the market forces that move any economy. These forces are similar for most economies, with changes in a few factors. For better knowledge about market trends and anticipatory movements, any new age investor should understand the market and what pushes it forward. So before learning those stock prices, first analyze these forces.

Supply and Demand

One of the fundamental forces which guide a market through time are the forces of supply and demand. These forces are the deciding factors for competition in any market. Supply is unique as it shares an inverse relationship with the price of a product. If the supply for a particular good increase, then its price is bound to fall. For example, if there are a massive number of qualified applicants in the field of content writing, then the starting salaries will reduce.

On the other hand, demand shares a direct relationship with the price of a product, if the demand increases, then the price increases, and so on. It’s primary market concepts which are bound to happen at any point.

The Government

The government is another major influencer and driving force for most of the markets. Being the ones who regulate fiscal and other such policies, governments generally own the competitive markets. Since governments are the only ones with the power to control these prices, they are a significant force that either pulls or pushes the economy.

New Entrants

New Entrants

Markets are not a place for a particular set of players. Instead, they are a place where anybody and everybody can enter. Markets provide bright entrance gates to various firms, especially when it comes to a situation where a particular firm enjoys a monopoly. New firms can enter and exit the market, but their survival depends on numerous factors such as quality, demand, and so on. These new entrants can either get destroyed entirely or will be the one who destroys competition.

Competition

 
Competition between firms and organizations are unique features belonging to particular markets. Competition can be useful, and sometimes competition can be the end for firms. The rivalry between firms depending upon their products provide incentives for firms to raise their standard and quality so that consumers may still prefer them. To stay alive during the competition, firms engage in several methods like reducing prices, improving quality, branding, etc.

International Affairs

An economy’s growth and the value of its currency depends on the flow of transactions and funds between countries. This constitutes and regulates a large part of our economy. If money is being brought in to the country, then that means a bright day for the economy, whereas as if money is being flown out, then that forms a weak economy.