Exploring the Different Types of Markets and Their Features
The area or a region where the buyers and the sellers meet for the exchange of goods and services in return for some money is known as a market.
The forces of demand and supply in the market are responsible for deciding the cost and the price of different products and services.
In terms of Economics, markets can exist even if there is no buyer or seller.
“Market can be defined as an arrangement where the sellers and the buyers maintain a contact either directly or indirectly in order to sell or buy goods and services”.
Above statement proves that face to face contact between the buyer and the seller is not necessary.
For example, the share market.
In this market, the internet is used to carry on the transactions. There is no direct contact between the buyer and the seller.
Before deciding the different types of markets that you want to deal in, you should consider the threats and opportunities present in various markets. You can use SWOT analysis which will help in developing a solid business strategy by considering of the strengths, weaknesses, opportunities and threats that you might face in the market.
DIFFERENT TYPES OF MARKET
Following chart depicts the different types of market
The market is broadly classified on the basis of:
When it comes to place, the market is further classified as:
- REGIONAL OR LOCAL MARKET
- NATIONAL MARKET
- INTERNATIONAL MARKET
The regional market is also known as the local market. In this market, the competition between the buyer and the seller is restricted. It is limited to a definite market. The goods bought and sold in this type of market is mostly perishable in nature.
Example: the sale of milk, eggs, vegetables etc.
The market which operates within the borders of a specific country and is governed by its rules and regulations is known as the national market. It is also known as a countrywide market. The demand for the goods produced by an organization is in the country as a whole in which the producer is living.
Example: Books written in Hindi have a national market.
This market is also known as the global market. In this type of market, goods and services are bought and sold worldwide.
Example: silver and gold.
On the basis of time, the market is further classified as:
- VERY SHORT PERIOD MARKET
- SHORT PERIOD MARKET
- LONG PERIOD MARKET
- VERY LONG PERIOD MARKET
Very short period market:
This market is also known as a daily market. The supply of goods in this type of market is constant. As the supply is stable, the prices of the goods are fixed by considering the demand for the goods in the market. In case demand reduces, the price will decrease and vice- versa.
Example: perishable goods like meat, fruits, milk etc.
Short- period market:
Where the demand of the goods can be varied, that market is known as short- period market. To adjust the demand, more time is given. Demand plays an important role to determine the prices of the products.
Example: ornament market and share market.
Long- period market:
In this market, supply is determined by the cost of manufacturing each additional output. If demand increases, supply can be increased with time. Price of the goods is influenced by the supply.
Very- long period market:
This market is also known as a secular period market. According to Marshall, the secular period consists of 10 years or more. When there is any change in the demand for a product, it automatically gets adjusted to the supply. Under the secular period, often prices cannot be analyzed properly.
On the basis of competition, the market can be classified as:
- PERFECT MARKET
- IMPERFECT MARKET
When the buyers and the sellers are aware of the prices prevailing in the market it is known as a perfect market. They have complete knowledge about a specific product. All the firms sell identical products and they are the price takers. One main feature of this type of market is that the price is the same for the same commodity.
When the sellers and the buyers are not aware of the offers prevailing in the market it is known as an imperfect market. Hence, the prices of all the same products are different at the same time.
The imperfect market is further classified into:
In this form, the market is controlled by a single seller or manufacturer. The supply is controlled by the same person and he can fix the price on his own. The products produced have no close substitutes. There is only one homogeneous product which falls under the control of the monopolist.
In this form of market, there are two sellers. They either sell a differentiated product or a homogeneous one. Both the sellers enjoy a monopoly.
The word oligopoly is derived from a Greek word where Olig means ‘a few’ and poly means ‘sellers’. In this form of market, the sellers are few. If the sellers are selling a homogeneous product, it is known as perfect oligopoly and if the sellers are selling a differentiated product, it is known as an imperfect oligopoly.
When a product or a service has only one buyer, the market is known as a monopsony. There is a ‘monopoly’ element in buying.
According to Professor Liebhafsky, monopoly is:
“the case of a single buyer who is not in competition with any other buyers for the output which he seeks to purchase, and as a situation in which entry into the market by other buyers is impossible.”