Examples of Market Limits

The idea of market limits is generally approached from two different areas, with a completely different use in each case: the marketing uses it as one more dimension of the way of approaching a commercial project to take it to the maximum of its economic potential, while economic science (accompanied by sociology or anthropology) uses it in the framework of the reflection on compared economic systems , generally associated with the theory of externalities.

Marketing and its market limits

The scope of marketing, understands the market as the universe of users who want the product in question, but also extends it to the entire group of individuals to whom the strategies will target, in such a way that the main function of marketing will be Expand the market that the product demands.

However, it is clear that the selection of margins Market expansion does not respond to the simple will of the marketer, but rather obeys some restrictions that do not depend on him: this is where the notion of limits appears.

In fact, we are talking about territorial issues (basically the distance of the eventual user from the product), consumer-related issues (demographic, socio-cultural or ethnic characteristics) and characteristics of the product (physical or use, in some cases they can be modified) . It is from these limitations that the range of action of marketing is limited.

The market economy It seems to be the only way to organize the decisions of the millions of inhabitants of the world in an effective way, but many economists focus on the problems that this generates: the questions that the market cannot solve by itself is what is called market limit.

The theory of externalities It is the one that decided to think about the effects that occur in economic transactions but that are not reflected in the price of it, since it does not have a direct implication in any of the intervening parties: the implications will come for a third party, which may be the total community.

Many alternatives They were proposed by various economists to resolve these externalities, showing that the market seems unable to resolve them by itself: this highlights once again the existence of market limits.

Here are some examples of market limits in the economic sense.

Examples of market limits

  1. Countries that have public education, generally primary or secondary, believe that the market is not a fair allocator of the right to receive an education, but that it would exacerbate socioeconomic differences from childhood.
  2. Pollution cases are a market limit, since it does not represent any economic damage in itself to the issuer, and therefore it has no incentive not to produce it if it is cheaper to do so.
  3. To make furniture, it is common to cut down trees. However, logging cannot be thought of as a coordination of individual actions, since the nature that has no intervention in that transaction is affected.
  4. Health is a good that cannot be traded in the market, and how much individuals will be able to hire prepaid medical coverage companies. However, exposure to contagion and social sensitivity usually make health freely accessible.
  5. The existence of monopolies and oligopolies is a case of market limits, because if they offer an indispensable product they will be in an extremely advantageous situation.
  6. It does not occur to any country in the world to enable the free sale of drugs, despite the fact that the market could regulate them through supply and demand. The psychoactive dependence of addicts to it means that mechanisms must exist beyond the market to limit them.
  7. The sale of arms is not usually signed solely by the market, but must have a permit that proves some skills of the buyer: it is clear that this is not in the interest of arms sellers, but of the state on behalf of society as a whole.
  8. The productive structure of the countries means that it can be a very great detriment for the local population to open the economy to all the imports that want to arrive. Although in many cases it is done, the exposure to unemployment and poverty means that it can be considered a limitation of the market.