MARKET

What is a Market?
Meaning:
A market is in general may be described as a place or geographical area where buyers and
sellers meet and function goods or services are offered for sale and transfer of title of ownership
occurs.

Definition:
Clark and Clark defines market as ‘An area in which the forces leading to exchange of title to a
particular product operate, and towards which tend to travel’

Economics point of view:

It is “an aggregate of the potential buyers for a product or service”.

ORIGIN OF THE WORD:

The term market is derived from the Latin word ‘Mercatus’ which means to trade. It also means
merchandise, wears, traffic or a place of business. This has different meaning that the word is
used differently in different context. So the common use of the term may imply any of the
following:

 A place where market is held

 An assembly of people
 An area of operation
 An organization which facilitates exchange of commodities
 An act of buying and selling
 An assemblage of commercial activities.
Thus, markets help to complete the process of exchange leading to satisfaction of needs
of the participants.

Divergent views on Markets: (Scope of Market):

Economic point of view:

Market implies set of conditions and forces which determines prices.(viz.,a commodity is sold
and purchased at competitive prices.) In a nutshell, meeting of buyers and sellers, price
determination and transfer of title are essential activities.

Management point of view:

It is a social institution performing the work of middlemen, transport agencies, warehousing etc.,
Societal point of view:
Markets are places where exploitation and non-ethical activities begin. It is an institution
that paves the way for social injustice of different patterns like aggressive selling methods,
unethical trade practices. However it should be remembered that markets are primarily
responsible for increasing the quality of life of people without which the present stage of
development would not have been achieved.

Classification of markets:
Markets are classified under the following categories:
1. On geographical or area basis:
a. Family market: These markets existed during village economy and are extinct now.
b. Local market: These markets existed during town economy. They are gradually
appearing due to innovations and development in transport and communication.
They however still exist in village but are too few in numbers.
c. National market: the size and growth of industrialisation has widened with markets
on a national level. Most of the products today have acquired national market.
d. World market or International market: They came into existence with the growth of
international transport and communication.
e. Urban and rural market: On the basis of location markets are also classified into
urban and rural markets. Urban markets are those located in cities or towns primarily
catering to the needs of consumers. On the contrary rural markets are located in
villages.

2. On economic basis:
a. Perfect market: It is purely an economic term and does not exist in reality. Such
markets are economically possible only where demand and supply are in perfect
harmony.
b. Imperfect market: This refers to a market where some kind of mal adjustment in
demand and supply is experienced. Every market is in a way, imperfect.

3. On time basis:
a. Very short period market: It means the existence of the market for a day and at a
particular place. It started in a village economy but exist even today.
b. Short period market: The market is otherwise known as a weekly market or a fair. It
is a centre for local trade which was very prominent in village economy where
perishable and consumable were traded. Such markets are in exist even today in
remote villages.
c. Long period market: This market is meant for selling durables the above two markets
are primarily meant for perishable commodities. It is the long period market which
paves the way for present ‘retail market’.

4. On the basis of business:

a. Wholesale market: It is a market where wholesale is the supplier and retailers are the
buyers. Here goods are bought and sold in bulk quantities.
 b. Retail market: This market is the last link in the claim of distribution. It directly deals
with the consumers and hence sometime referred to as a consumer market. Here
goods are sold in small quantities preferably to the ultimate consumers.
5. On the basis of importance:
a. Primary market: It is a market where agricultural products are sold. Primary markets
are mostly found in villages. The products in the market are brought by the producers
or traders. It also includes the products of mines.
b. Secondary market: Generally semi-manufactured or partly manufactured goodds
are sold in these markets.
c. Terminal market: It is the market where the final product is sold to ultimate
consumers either as raw products or in value added forms.

6. On the basis of goods:

a. Commodity market: It is a market in which different kinds of commodities are sold.
Commodity market is further divided in to;
i. Product exchange: In such markets only certain commodities are sold and bought.
Product exchanges are set up by buyer and sellers of particular commodity. They are
also known as commodity exchange. These markets are regulated and controlled by
certain rules.
ii. Manufactured goods market: In this market manufactured goods are sold.
iii. Bullion market: This market deals in valuable metals like gold and silver.

b. Capital market: This is the second type of market classified on the basis of goods. This
market is further divided into these types.
i. Money market: Here money is bought and sold that is money is lent and borrowed.
This market is termed as money market or capital market on the basis of the period
for which money is borrowed. Short term borrowing is undertaken in the money
market and long-term borrowing in capital market.
ii. Foreign exchange market: In these markets currencies of different countries are
purchased and sold. This market plays an important role in international trade.
iii. Stock or security market: It is also known as stock exchange. This market came
into being along with the organization of joint stock companies.

7. On the basis of regulations:

a. Regulated market: These markets are regulated by statutory measures. Eg.,
Product exchange, stock exchanges.
b. Unregulated or free market: These markets are uncontrolled. They are left free and
mostly operate according to demand and supply.

8. On the basis of the nature of transaction:

a. Spot market: It is a part of organized market such as a commodity exchange. In a
spot market physical delivery of goods take place immediately.
b. Future market: It is the counter part of spot market. In such markets no physical
delivery of goods takes place and future contracts are made for sale or purchase.
NEEDS OF MARKET:

 Markets are primarily economic institution. It is through these institutions that the
demand and supply forces are being adjusted by price mechanism.
 The survival of many firms and further expansion of production base depend
upon the development of markets.
 Markets are also social institutions providing multitude of goods and services so
that quality of life of the society will improve. Thus market has social
responsibility which will become a legitimate pressure on the market place.
 Market being a unified institution of demand and supply it has to ensure smooth
flow of goods and services.
 Markets are also capable of influencing the cultural heritage and attempt to make
changes.
 The new generation is ascertained to new methods of life and newer ways to
achieve its ends.