Firms vs. Markets

Firms and markets are two ways economic activities are organized. Firms are businesses or organizations that produce goods or services, using resources like labor and materials. They make decisions internally about what to produce and how to do it. Markets, on the other hand, are platforms—physical or virtual—where buyers and sellers interact to exchange goods, services, or resources. While firms focus on internal coordination, markets facilitate the wider allocation of resources across multiple firms and consumers. Essentially, firms produce, and markets match supply with demand, working together to organize economic activity efficiently.