The popular meaning of the term ‘market’ refers to the place where goods are bought and sold against the price consideration between the buyers and the sellers. But from the point of view of Economics, the market refers not to a place but to a commodity car commodities and buyers and sellers, who are in direct competition with one another.
Again, the modern concept of Market in the world of business includes not only the buyers, sellers, and the commodities but also the potentialities and prospects of buyer-seller meet. In essence, a market is commodity-oriented as well as service-oriented.
As per the definition given by Cournot, following are the essentials of a market:
i. Products which are dealt with
ii. Presence of buyers and sellers
iii. A place, whether a certain region, country, or the whole world
iv. A type of interaction between buyers and sellers, so that the same price prevails for same products at the same time
Classification of Markets:
Businessmen and economists differ in their approaches to the classification of markets.
Taking all the viewpoints, we can identify the following types or classification of market:
1. Geographical area:
From the viewpoint of area covered a market can be local, regional and international. A local market has a very limited area and generally for perishable daily necessary goods like fish, vegetables etc. A regional market covers a particular region of a country.
Such regional classification is found in a large country. India, for example, is divided into four regions, east, west, north and south, for all practical purposes. A national market covers the entire area of a country. An international market means extension of market in other countries.
2. Unit of sale:
Market is commonly classified on the basis of unit of sale. For example, wholesale market and retail market. The unit of sale in wholesale market is big, while in retail market it is small and sometimes very small. The price of the same commodity differs in wholesale and retail markets.
Economists classify markets from the viewpoint of time and as such there are four types of markets:
(a) Very short-period:
This is a market for perishable goods and the goods have to be sold out by the sellers in a short time. The supply cannot be adjusted with the demand,
This is a market for goods with a limited stock. The supply can be adjusted with the demand to some extent but not fully,
In such a market the supply can be adjusted with the demand by changing the scale of production.
(d) Very long-period:
In such a market, the length of the period is so long that very big changes take place to affect the supply and the demand, e.g. change in technique of production, change in population, change in tastes etc.
4. Nature and degree of competition:
In a free economy country there is a competition in the market which may be either perfect or imperfect and accordingly we get perfect and imperfect markets.
A market is perfect when sane conditions are satisfied, e.g:
(a) There are large number of sellers and buyers;
(b) The products of the sellers are identical;
(c) Each buyer and each seller has perfect knowledge of the market;
(d) Each seller has equal access to the factors of production; etc.
When one or more of the conditions are absent the market is imperfect.
Market can be further classified according to the degree of imperfection. The worst situation is when there is a monopoly (one seller) or a monopsony (one buyer).
5. Methods of transactions:
Generally in a market there are ‘spot’ transactions. The main characteristic of a spot transaction is that the goods exist aid the buyers and the sellers do the transactions on the basis of sane agreed terms and conditions. A market where spot transactions take place is called an ordinary market. But there are some organised markets where ‘futures’ transactions also take place.
Under futures transactions goods do not exist but transactions are made by samples and by descriptions or by both. Goods which satisfy some conditions can be brought under organised markets. There are different types of organised markets like money market, commodity market and capital market.
6. Position of sellers:
Markets can be further classified according to the position of sellers. Accordingly we find primary, secondary and terminal markets. The agricultural or industrial goods are sold by the producers to some middlemen like wholesalers.
This is the primary market. In the secondary market the middlemen like the wholesalers sell the goods to another group of middlemen called the retailers. Ultimately the goods are sold in the terminal market to the actual consumers.