In common usage the word market designates a place where certain things are bought and sold. But when we talk about the word market in economics, we extend our concept of market well beyond the idea of a single place to which the householder goes to buy something. For our present purpose, we define a market as an area over which buyers and sellers negotiate the exchange of a well-defined commodity. For a single market to exist it must be possible for buyers and sellers to communicate with each other and to make meaningful deals other the whole market.
Several economists have attempted to define the term market as used in economics. Some of them are as under: –
According to Prof. Chapman: “The term market refers not necessarily to a place but always to a commodity and the buyers and sellers who are in direct competition with one another.”
According to Curnot: “Economists understand by the term market not any particular market-place in which things are bought and sold, but the whole of any region in which buyers and sellers are in such free intercourse with one another that the price of the same goods tends to equality easily and quickly.”
In simple words, the term market refers to a structure in which the buyers and sellers of the commodity remain in close contact.
Features of the market
On the basis above-mentioned definitions we can mention following main features of market:
- Buyers and Seller: Buyers and sellers are also essential for market. Without buyers and sellers the sale-purchase activity cannot be conducted which is essential part of a market.
- Commodity: For the existence of market, a commodity is essential which is to be bought and sold. There cannot be a market without commodity.
- Area: There should be an area in which buyers and sellers of the commodity live in. It is not essential that the buyers and sellers should come to a particular place to transact the business.
- Close Contact: There should be close contact and communication between buyers and sellers. This communication may be established by any method. For example, in olden days this contact and communication was possible only when the buyers and sellers of a particular commodity could come at a particular place. But now with the developed means of communication physical presence of buyers and sellers at one particular place is not essential. They can contact with each other through letters, telegrams, telephones, etc. In the boundary of a market we include only those buyers and sellers who can maintain regular close contacts. For instance, India’s farmers have no close contacts with the consumers of England; hence though they are the buyers and sellers of grains yet do not come under the purview of a market.
There should be some competition among buyers and sellers of the commodity in a market.
Types of Market
A market can be divided on the basis of region (local, state and national market), period (very short period, short period and long period market) and competition. On the basis of competition there can be following types of market:
- Bilateral Monopoly. One buyer and one seller exist in the market.
- Pure Monopoly. One buyer and many sellers.
- Pure Monopoly. One seller and many buyers.
- Two sellers and many buyers.
- A few sellers and many buyers.
- Monopolistic composition. Many buyers and many sellers’ produce producing differentiated products.
- Perfect competition. Many buyers and sellers. Producers producing homogeneous or identical goods.
- Imperfect competition. When competition is not complete and perfect due to one reason or the other, the market will be imperfect competitive market. All other types of market excluding perfect competition come under it. This market is wider than monopolistic competition.