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Demokratiskolan
The Market forces card from MethodKit for Society and Politics
Card 65 of 128 · MethodKit for Society & Politics
  • AreaEconomy & work
  • Centre of gravityCentral government
  • Points of influence3 on the journey
  • Decisive electionThe general election
Economy & work

Market forces

Affecting prices, supply & demand of commodities

Why does the butter suddenly cost ten kronor more? Most often the answer is neither a politician nor a conspiracy, but supply and demand: the market forces. The public sector sets the rules of the game, scrutinises competition and taxes trade, but prices are set freely. To see where policy ends and the market begins is to see your own power as a consumer.

Where does the power lie?1

  • Municipality · market stalls, charges & plans · approx 10 %
  • State · rules, taxes & oversight · approx 50 %
  • EU · free movement & competition · approx 40 %

No level governs the prices: they are set freely on the market. The central government and the EU own the rules of the game, so the general election and the European Parliament election weigh heaviest.

How it works: the breakdown

The municipalityThe local playing field
The regionOn the sidelines
Central governmentThe rules of the game · centre of gravity
Who decides?
The municipal council (kommunfullmäktige) and the committees for planning, environment and technical services.
No formal role in the market's rules of the game.
The Riksdag, Konkurrensverket (the Swedish Competition Authority), Konsumentverket (the Swedish Consumer Agency) and the Swedish Tax Agency (Skatteverket).
What do they decide?
Where shops and market trade may be located, local charges and fees, land for commerce.
No formal role, but the region is one of the county's largest buyers through procurement.
Contract laws, VAT and excise duties, competition rules and consumer protection. Prices, though, are set freely.
Where are decisions made?
In committees and the council. Detailed development plans (detaljplan) govern where commerce can be established.
Not applicable.
In the Riksdag and at the agencies. SCB measures prices every month.
Who pays?
The municipal tax. The municipality's fees must follow the cost-recovery principle.
No part of the bill.
The central government budget. VAT and excise duties are part of almost every price you pay.
Fastest way in?
Municipal election Consultations on plans, citizen's proposals (medborgarförslag) on market trade and establishments.
Regional election The regional election affects the market mostly through procurement.
General election Tip off Konkurrensverket about suspected cartels, report misleading advertising.
EUThe internal market with free movement of goods, services, capital and people is the EU's core, and the competition rules apply directly in Sweden. Influence it in the European Parliament election.

Read the table by column to understand one level, or by row to compare the levels. The green level is the area's centre of gravity.

How it works: follow the decision

The case The price of butter shoots up
  1. EU

    The world market and the internal market

    Milk prices are set in global trade and the EU's agricultural policy affects how much is produced. The internal market means Swedish butter competes with Danish and German in the same chilled cabinet.

  2. State

    The central government taxes but does not set the price

    The Riksdag (Sweden's parliament) decides the VAT on the food but not the price of the pack. Free pricing is the main rule in the Swedish economy: no agency approves the shop's price tag.

    Point of influence

    The general election steers the taxes on what you buy and the rules around the market.

  3. State

    Konkurrensverket scrutinises the game

    If prices rise in step at all the chains at once, it can be down to costs, but also to too weak competition. Konkurrensverket scrutinises markets and investigates suspected cartels.

    Point of influence

    Anyone can tip off Konkurrensverket about suspected price collusion.

  4. State

    Konsumentverket examines the advertising

    Shrunk packaging, missing unit prices and campaigns that are not campaigns: Konsumentverket monitors that marketing and price information do not mislead.

    Point of influence

    Report misleading prices and advertising to Konsumentverket.

  5. Your everyday life

    You vote with the receipt

    You switch brand, switch shop or skip the butter. When many do the same, the market responds: demand is power too, every day and not just every four years.

The journey looks the same in reverse: what has been built came the same way, through the same decisions. Whoever knows where the decisions are made also knows where they can be changed.

Questions to discuss

  1. Which prices in your everyday life have changed the most, and what do you think drove the change?

  2. Where should policy step into pricing, if anywhere: rents, electricity, food, medicines?

  3. How much power do you have as a consumer, and when did you last use it?

  4. What makes a market work better: more rules or more competitors?

  5. Which goods or services do you think should not be governed by market forces at all?

Glossary

Utbud och efterfrågan
The basic mechanism where the price is determined by how much there is and how many want it.
Fri prissättning
The main rule that companies set their own prices, without state approval.
Kartell
Illegal cooperation where companies agree on prices instead of competing.
Inre marknaden
The EU's common market with free movement of goods, services, capital and people.
Jämförpris
The price per kilo or litre that shops must show so that you can compare.

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Footnotes

1) This is an estimate of how decision-making power over the issue is split between the municipality, the region, central government and the EU, based on how responsibility is divided in legislation. A teaching guide, not an exact measurement.