Market: Meaning and Structure of Market, Online Market or Online Shopping (For CBSE, ICSE, IAS, NET, NRA 2022)

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Meaning of Market

  • “Market refers to the arrangement in a given area whereby buyers and sellers come in contact with each other directly or indirectly, to buy or sell goods.”
  • Such as Big Bazaars, Chandni Chowk in Delhi, Fashion Street in Mumbai and many more. Market should not be limited to a particular place. In economics Market can exist even without personal contact of buyers and sellers.
  • Buyers and sellers can carry on their transaction indirectly, through agents, telephone, mobile or internet. Whatever way the buyers and sellers interact, they do so to exchange goods and services for money. In the process, the price and quantity of the goods and services traded are also determined.

Structure of Market

By “structure of market” we mean nature of the product, number of sellers and buyers in the market etc.

On this basis we can give two extreme forms of market:

  • Monopoly market
  • Perfectly Competitive market

Monopoly Market

The word “Monopoly” has been derived from the two Greek words ‘Monos’ and ‘Polus’ means single seller. Monopoly is a market structure in which there is a single firm producing all the output and there is no close substitute of product sold by the monopolist, thereby ruling out any sort of competition. In this market the seller does not face any competition because there are no other sellers of the product he is selling. The seller is in a position to charge a high price of his product depending upon the response of the consumers.

Features of Monopoly

  • A single firm: The monopolist is the only producer of the good. He has got no competitor. He is the only one who rules the market with his commodity.
  • No close substitute of the commodity: There are no close substitutes of the commodity produced by the monopolist. “Close substitute” means another similar product having same use. The monopolist produces all the output in a particular market.
  • Price maker: The monopolist being the sole seller of the commodity in the market decides the price of the commodity as there is no one to challenge his price. The monopolist is a ‘price-maker’ . It does not mean that monopolist can fix both price and the quantity demanded. If he fixes a high price, less quantity of the commodity will be demanded.
  • No Entry of New Firm: It is not possible for new firms to enter in the market and compete with the single seller. Being the single seller or firm, there is no difference between firm and industry under monopoly. The aim of the monopolist is to maximize profit.

Perfectly Competitive Market or Perfect Competition

The other extreme situation of monopoly market is called perfectly competitive market or perfect competition.

Feature of Perfect Competition

  • Large number of sellers and buyers: As against monopoly market, a competitive market has large number of sellers selling the commodity to a large number of buyers.
  • Homogeneous product: Under perfect competition only a single product is sold. This means all the sellers sell the same type of product to buyers. So, the product is a perfect substitute.
  • Free entry and exit: Under perfect competition there is no bar on any new firm or producer to enter the market to sell or produce the product. Similarly, if any existing seller wants to exit then he is free to do so.

Every seller wants to earn maximum profit:

  • The government՚s role is to provide protection to sellers and do not interfere in business.
  • Under perfect competition sellers and buyers have perfect knowledge about the product.
  • There is no bar on factors of production such as labour etc. to move from one production unit to another to do work.

Classification of Markets on the Basis of Channels of Distribution or Saleable Lots

On the basis of channels or saleable lots, markets are classified into:

Wholesale Markets

When in a market goods are transacted in big lots it is called a wholesale market. Wholesalers usually do not sell goods in small lots. They usually sell to the retailers. The wholesaler is the essential link between manufacturers and end consumers. It is the presence of wholesalers that manufacturers are in comfort zone as they can sell their products in large quantities and focus on business and production.

Retail Markets

  • Retail consists of the sale of physical goods or merchandise from a fixed location, such as a departmental store, shopkeeper in small or individual lots for direct consumption by the purchaser. In retail markets, goods are sold in small lots. Retailers normally sell to the ultimate consumers.
  • Manufacturer ⇾ Wholesaler ⇾ Retailer ⇾ Consumers
  • In the channel of distribution of goods and services the position of a retailer is most important as it is indirect contact with the final consumers.

Online Market or Online Shopping

It is an innovative process whereby consumers directly buy goods or services from a seller without an intermediary service over the internet. It is also known as electronic commerce. Now a days, online shopping has become popular, shopping has evolved with the growth of technology. In this shopping one can use a credit card or debit card to make payments, however some systems enable users to create accounts and pay by alternative means, such as:

Online Market or Online Shopping
  • Billing to mobile phones and landlines
  • Cash on delivery
  • Cheques
  • Debit card
  • Postal money order

Once payment has been accepted the goods or services can be delivered through downloading, distribution, in-store picking etc.

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