Classification of Markets

Because markets differ enormously in size, duration, competitive structure, and the nature of the deal struck, commerce classifies them along several independent dimensions. A single real-world market can fall into more than one category at once — for example, the retail market for rice in a town is a local, short-period, imperfectly competitive, spot, retail market, all at the same time, because each classification looks at a different feature of the same market.

(a) Classification by area (geographical extent)

• Local market — buyers and sellers are confined to a small area, typically because the product is perishable, bulky relative to its value, or has only local demand (fresh vegetables, local newspapers, local labour for domestic help).
• National market — the product is bought and sold throughout a country; transport, storage, and standardisation make this possible (branded packaged foods, domestic airline tickets, national newspapers).
• International (world) market — buyers and sellers are spread across countries; the product is traded globally, often through export-import channels, international exchanges, or global e-commerce (crude oil, gold, tea, cotton, software services).

(b) Classification by time

• Very short-period (market-period) market — supply is completely fixed because there is no time to produce more; price is decided almost entirely by demand (a day's catch of fresh fish, a day's harvest of a perishable flower).
• Short-period market — supply can be adjusted somewhat by using existing capacity more intensively (extra shifts, overtime), but new capacity cannot be built in time.
• Long-period market — supply can be fully adjusted, including building new factories or plantations, so supply responds more completely to price and demand over time.
• Secular (very long-period) market — covers a span so long that even the whole scale, technology, and character of the industry may change (decades-long shifts, such as the gradual move from print to digital media).

(c) Classification by nature of competition

(d) Classification by nature of transaction

• Spot market — goods are exchanged and payment/delivery is settled immediately or within a very short period, at the price ruling at that moment.
• Forward market — a contract is entered into today for delivery and payment at a specified future date, at a price agreed upon now; this is common in commodities and currencies as a way of managing price risk.

(e) Classification by volume of business

• Wholesale market — transactions are in bulk, typically between producers/importers and retailers or large institutional buyers, at prices lower per unit because of the volume involved.
• Retail market — transactions are in small quantities, directly to the final consumer, usually at a higher per-unit price that covers the retailer's own margin and services. …