Meaning and Classification of Market

Meaning of Market

In everyday language, a "market" is a physical place — a vegetable market, a cloth market, a fish market — where buyers and sellers gather. In economics, the term means something considerably wider. A market does not require a single physical location at all; it exists wherever buyers and sellers of a commodity or service are in contact with one another — directly, face to face, or indirectly, through telephone, post, an agent, or the internet — such that a price can be settled and the good can change hands. The share market, the foreign-exchange market, and an online marketplace for a product sold across the whole country are all "markets" in this economic sense, even though no buyer and seller in them may ever meet in person.

For a market to exist, in the economic sense, certain elements must be present:

1. A commodity or service that is being bought and sold.
2. Buyers and sellers dealing in that commodity, however many or few.
3. An area or extent — which may be a single street or the entire globe — over which the buyers and sellers of that commodity are spread.
4. Contact between buyers and sellers, direct or indirect, that allows a transaction to be settled.
5. A price at which the commodity is exchanged, arrived at through the interaction of demand and supply, or (as later sections show) set by whichever side of the market holds the greater power to influence it.

Classification of Markets on the Basis of Area

Markets differ enormously in how widely they are spread geographically:

• Local Market — buyers and sellers are confined to a single town, city, or locality; typically for perishable goods (vegetables, fresh milk, flowers) that cannot be transported far, or for services that must be delivered in person (a local barber, a local tutor).
• Regional / State Market — the market extends across a wider region or an entire state, usually for goods that can withstand somewhat longer transport and storage, such as regional handicrafts or state-specific agricultural produce.
• National Market — the market covers the whole country, made possible by developed transport, communication, and banking networks; most manufactured consumer goods (branded soaps, packaged foods, electronics) are sold in a genuinely national market in modern India.
• International / World Market — the market spans across national borders; commodities that are durable, easily transportable, and in demand worldwide (crude oil, gold, wheat, cotton, and increasingly software services) trade in a true world market, with a single broadly-common price adjusted for transport and tariffs.

Classification of Markets on the Basis of Time — Marshall's Classification

Alfred Marshall classified markets by how much time sellers have to adjust their supply in response to a change in demand — because the same market behaves quite differently depending on how much time producers are given to react:

1. Very Short Period (Market Period) — the period is so short that supply is completely fixed; a producer cannot add to it at all, however high the price rises (a fisherman's catch already brought to shore, or a farmer's harvested but perishable vegetables). Price in the market period is determined almost entirely by demand, since supply cannot respond.
2. Short Period — the period is long enough for a producer to increase output somewhat by using the existing plant and equipment more intensively (more labour, more raw material, extra shifts), but not long enough to install new plant or machinery. Supply is only partially adjustable — the fixed factors (plant, machinery, factory building) stay fixed, while variable factors (labour, raw material) can change.
3. Long Period — the period is long enough for a producer to change all factors of production, including plant and machinery — new factories can be built, old ones expanded or shut. Supply can now adjust fully to demand, and price tends to settle closer to the average cost of production.
4. Very Long Period (Secular Period) — a period stretching over many years or decades, long enough for even deeper changes — population growth, changes in technology, shifts in the availability of natural resources, and long-run changes in consumer tastes — to alter both demand and supply. This period is used to study long-run trends rather than the determination of a single equilibrium price.

Classification of Markets on the Basis of Competition …