A set up where two or more parties engaged in exchange of goods, services and information is called a market.
In economics, the term market refers to the shops for one commodity or a set of commodities. For example a market for rice, a market for cloth, a market for electronics goods, etc.,
Two classification of Markets. They are
✓The product market
✓The factor market
Other classification of Markets
✓On the Basis of Geographic Location
✓On the Basis of Time
✓On the Basis of Nature of Transaction
✓On the Basis of Regulation
✓On the Basis of Nature of Competition
On the Basis of Geographic Location
In such a market the buyers and sellers are limited to the local region or area. They usually sell perishable goods of daily use since the transportation of such goods can be expensive.
These markets cover a wider are than local markets like a district, or a cluster of few smaller states.
This is when the demand for the good is limited to one specific country. Or the government may not allow the trade of such goods outside national boundaries.
When the demand for the product is international and the goods are also traded internationally in bulk quantities, we call it as an international market.
On the Basis of Time
Very Short Period Market
This is when the supply of the goods is fixed, and so it cannot be changed instantaneously. Say for example the market for flowers, vegetables, fruits etc. The price of goods will depend on demand.
Short Period Market
The market is slightly longer than the previous one. Here the supply can be slightly adjusted.
Long Period Market
Here the supply can be changed easily by scaling production. So it can change according to the demand of the market. So the market will determine its equilibrium price in time.
On the Basis of Nature of Transaction
This is where spot transactions occur, that is the money is paid immediately. There is no system of credit.
This is where the transactions are credit transactions. There is a promise to pay the consideration sometime in the future.
On the Basis of Regulation
In such a market there is some oversight by appropriate government authorities. This is to ensure there are no unfair trade practices in the market. Such markets may refer to a product or even a group of products. For example, the stock market is a highly regulated market.
This is an absolutely free market. There is no oversight or regulation, the market forces decide everything.
On the Basis of Nature of Competition
Monopoly refers to a market structure in which there is a single producer or seller that has a control on the entire market. This single seller deals in the products that have no close substitutes.
The term monopolistic competition was given by Prof Edward H. Chamberlin of Harvard University in 1933 in his book Theory of Monopolistic competition.
The term monopolistic competition represents the combination of monopoly and perfect competition. Monopolistic competition refers to a market situation in which there are a large number of buyers and sellers of products. However, the product of each seller is different in one aspect or the other.
The term oligopoly has been derived from two Greek words, Oligoi means few and poly means control. Therefore, oligopoly refers to a market form in which there are few sellers dealing either in homogeneous or differentiated products.