Classification of Markets
Market is of various kinds. They are classified:
The market is classified not only on its geographical spread, but also on the nature of the goods exchanged.
i. Local market arises when products or services are sold and bought in the place of their production. In such markets, the products exchanged are mostly perishable and semi-durable in nature: For example, Vegetable, fruits etc.
ii. Provincial market arises when products or services are sold and bought in a restricted circle. For example, provincial newspaper.
iii. National market arises when products and services are sold and bought throughout a country. For example, Nation-wide market for tea, coffee, cement, electrical goods, some printed books etc.
iv. International market arises when products and services are sold and bought at the world level. For example, petrol, gold etc.
Alfred Marshall classifies market on the basis of time. The ‘time’ here refers to the nature of the factors, such as fixed factors and variable factors, used in the production process, and how the supply of the products meets with varying demand situations in the determination of price of the products.
It occurs when with the available time, the quantum supplied of a product cannot be increased (or decreased). Here, the supply curve is vertical; it is inelastic. In this market, the demand force is more active than the supply force in the determination of the price. For example, given an inelastic supply for food, an increase in its demand, as for example, during a flood situation, raises the price of food.
It occurs when the quantum supplied of a product can be increased (or decreased) to some extent. Here, the supply curve is a little more elastic. In this period, some factors continue to be fixed and they work a little more intensively to meet an increased demand.
It occurs when the quantum supplied of a product can be increased (or decreased) to a larger extent. Here the supply curve is very much elastic. Thus, to meet an increase in demand, the quantum of all the factors becomes variable. There are no fixed factors here. Therefore, there is a possibility for larger changes in supply. The price of the product cannot be as high as in the case of short run.
It occurs when the entire economy undergoes a drastic change. Newer technologies are introduced and most modern products are produced. Several newer methods of production are adopted in the production process, with improvements taking place in technology. For example, the entry of pen-drive has driven out compact disc (CD); as CD has replaced floppies which once replaced tape cassettes.
Whole-sale market is for bulk selling and buying of goods (Clothing, Grocery etc.). The price is likely to be low compared to retail market.
Retail market is for selling or buying of commodities in small quantities (Clothing, Vegetable etc).
i. Perfect competition market
ii. Imperfect competition market which comprises monopoly market, monopolistic competition market, duopoly market, oligopoly market etc.
Firm: A firm refers to a single production unit in an industry, producing a large or a small quantum of a commodity or service, and selling it at a price in the market. Its main objective is to earn a profit. There may be other objectives as described by managerial and behavioral theories of the firm.
Industry: An industry refers to a group of firms producing the same product or service in an economy. For example, a group of firms producing cement is called a cement industry.