Market Indicators in the Economy

To study the interaction between the household sector and companies, the household sector and the government, as well as with other economic actors, it has been explained using a circular flow diagram. However, we can also use other methods to explain the interactions among them, namely by using the market method.

In simple terms, a market can be defined as a place where sellers and buyers meet. The term market in economics does not only refer to a place, such as a wholesale market, traditional market, etc. The term market in a broader sense can be described as the interaction between demand and supply conducted by economic actors. Economic markets are grouped into 3 categories, which are as follows.

1. Goods and Services Market

Companies are the parties that provide various goods and services needed by consumers. Meanwhile, the household sector, government, and foreign entities act as consumers. For example, a textile company can produce various patterns of fabric, clothing, t-shirts, jackets, carpets, shoes, etc. The buyers are the public as the household sector, the government, and some foreign citizens (foreign sector), who import these goods.

In the goods and services market, there are also transactions of buying and selling between companies. For instance, a textile company purchases thread and buttons from another company. Meanwhile, company A supplies zippers to various ready-made clothing companies.

2. Labor Market

The household sector is the party that provides labor. The demand for labor comes from companies, the government, and foreign entities. Nowadays, the labor market has become an international economic market. Labor is not only physical capability but also skills, expertise, and mentality. Therefore, labor is divided into 3 groups as follows.

• Educated labor is labor that has high skills and education, enabling them to master expertise in certain fields. Examples include economists, accountants, doctors, lecturers, engineers, etc.
• Skilled labor is labor that possesses a skill or expertise acquired through education or work experience. Examples include babysitters, mechanics, carpenters, etc.
• Unskilled labor is labor that relies solely on physical ability, where they do not have an educational background or have low education, thus lacking expertise in a particular job field. Examples include construction workers or port workers.

It is important to note that the total labor supply to the economy is highly dependent on the decisions made by the household sector. These decisions can include when to enter the workforce, what hours they should work, etc.

3. Money Market (Capital Market)

In established households, the allocation of income is not only for consumption but also for saving and speculation in the money market (financial market). In the economic market (money market), households can buy shares or bonds from companies or the government. This means that the household sector offers funds to those in need, namely companies and the government, with the hope of earning income in the form of dividends or interest. When a company declares itself to be publicly listed, it means it can request funds from the household sector, the government, or the foreign sector.

Shares are financial instruments that entitle their owners to receive a portion of the company's profits. The portion of profits paid by the company to its owners each period is called dividends. The rise and fall of share values are greatly influenced by the company's performance. Meanwhile, bonds are debt securities issued by companies/governments when borrowing money.