Economics: Market: Meaning, Definition and Structure of Market

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Meaning

A market is a place where two parties can gather to facilitate the exchange of goods and services or place where people meet in order to buy or sell things.

Definition

“Market refers to the arrangement in a given area where buyers and sellers come in contact with each other directly or indirectly to buy or sell goods”.

From the above definition we come to know about the following features of market:

  • Commodity, i.e., there must be a commodity which is being demanded and sold.

  • Buyers and sellers, i.e., there must be buyers and sellers of the commodity.

  • Communication, i.e., there must be communication between buyers and sellers.

Structure of Market

Market Structure

Market Structure

Monopoly Market

The word monopoly has been derived from the combination of two words i.e., mono means single and poly means seller. Monopoly refers to a market situation in which there is only one seller of a unique commodity. He faces no competition as he has no close substitute in the market.

Features

  • A single firm: As he is a single producer of the commodity, he has no competitors in the market.

  • No close substitute: Substitute means a product of similar quality & utility. There is no close substitute in monopoly market.

  • Price maker: Monopolist being a single seller decides the price as per his required profit margin of a commodity.

  • No entry of new firm: It is not possible for others to enter as all the resources required for producing a specific commodity are already occupied by the monopolist. The aim of the monopolist is to maximize profit.

Perfectly Competitive Market

It is a situation where there are large numbers of buyers and sellers of homogenous product in the market. There exist a tough competition among sellers as they sell homogenous product.

Definition

“A perfectly competitive market is characterized by a large number of buyers and suppliers as well as companies that sell homogenous products 7 services”.

Features

  • 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.

  • Homogenous Product: Under perfect competition only a single product is sold So the product is a perfect substitute.

  • Free entry and exit: There are no restrictions on entry and exit of new firms or existing firms respectively in the perfectly competitive market.

  • Price takers: The sellers are price takers due to existence of large number of sellers of same product.

  • Perfect knowledge: Under perfect competition sellers and buyers have perfect knowledge about the product.

  • No restrictions on factors of production: 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 or saleable lots, markets are classified into:

Classification of Markets

Classification of Markets

Wholesale Markets

A wholesaler is a distributor or a middleman between manufacturer and retailer. Wholesaler purchases goods from manufacturer and sell it to retailer. When in a market goods are transacted in big lots is called a wholesale market.

Retail Markets

Retailer is a person who buys goods from wholesaler and sells it to consumers for final consumption. When in a market goods are transacted in small lots directly to consumers is called retail market.

Channel of Distribution

Channel of Distribution

Channel of Distribution

This channel of distribution is known as Orthodox or Traditional Channel of distribution. Near 50% to 60% of Indian market use this channel of distribution. It gives a place utility to consumers.

Online Market

When consumers directly buy goods or services from a seller without an intermediary over the internet it is known as online market or online shopping. It is also called as electronic commerce. Online stores are usually available 24 hours a day, and many consumers have internet access both at work and at home so they can, rather than visiting any store or shop, they prefer to purchase through internet only. This mode of shopping has gained importance in recent years only due to exposure to technology in the market.

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