ECONOMICS

MARKET
“An arrangement whereby buyers & sellers come in close contact in
close contact with each other directly or indirectly to sell & buy goods in
described as market.”

•Not refer to a fixed location.

Refers to whole area of operation of demand & supply.

•Refers to the conditions & commercial relationship facilitating transaction

between buyers & sellers.

•To create a market for a commodity.

•Physically identifiable market.

•Existence of different prices for a specific commodity means existence of

different market.
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Product market- Each commodity has it’s market.

Factor market- Market for factor of production.

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CLASSIFICATION OF
MARKET
AREA WISE TIME ELEMENT COMPETITION

Very short
Local Perfect
Pd
Market Competition
Market

Regional Short Period

Monopoly
Market Market

National Long Period

Oligopoly
Market Market

Very Long
World Monopolistic
Pd
Market Competition
Market
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Area Wise
•Local Market
- Pertaining to local area.
- Commodity bought & sold at one place.
- Narrow geographical coverage.
- Pertain to particular place—village, town, or, city.

2.Regional Market

3.National Market

4.World Market

Time Element
1.Very Short Period Market
Impossible to change stock of a commodity even by a
single unit.
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2. Short Period Market
- Possible to change/expand output by a
firm to some extent.
- Change in input.
- Plant size remain fixed.
- firm is under position to change supply according to
changing demand.

3.Long Period Market

- Period sufficient to change production scale.
- Change in plant size.
- Time sufficient enough to change supply, or, plant,
according to change in demand conditions

4. Very Long Period Market

- Secular time period, which runs over a series of decade
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Competition

1.Perfect Competition
- Single market price prevails for a commodity.
- It is determined by forces of total demand & total supply in the
market.
- No individual is in position to influence the price.

Condition / Characteristics of Perfect Competition-:

•Large no. of sellers.

•Large no. of buyers.
•Product Homogeneity.
•Free entry & Free exit of firm.
•Perfect knowledge of market condition- Market price , supply source, qty.
•Perfect mobility of factors of production.
•Govt Non- Intervention
•Absence of Transport cost element.
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2. Monopoly
- Just opposite of perfect competition.
- Firm itself a industry.
- Its output consist the total market supply.
- Strong hold over price determination.

Condition / Characteristics of Monopoly-:

•Complete negation of competition.

•One seller but many buyers.
•Monopoly firm is industry
•Many entry barriers.
•Firm is price maker
•No closely competitive substitutes for the product.
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Types of Monopoly-:
1a. Pure Monopoly
- Single Firm
- No substitutes
- Posses absolute power
- Not even remote substitute
- Rare to exist

1b. Imperfect Monopoly

- Single Firm but alternative close substitute
- Threat of competition.
- Refer to as limited or relative monopoly.

•Legal, Natural , Technological & Joint Monopoly

•Simple Monopoly & Discriminating Monopoly.
•Private Monopoly & Public/ Social Monopoly
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3.Imperfect competition
a. Oligopoly – “Competition among few”
- Few sellers ( > 2).
- Homogeneous product or product differentiation in a given line
of production.
- Firms have high degree of interdependence in their business
policies in fixing price and determining output.
- Fear of retaliation by rivals- competition is there.
- Advertising & selling cost have strategic importance to
Oligopoly firm

b. Monopolistic competition
- Large no. of sellers
- Large no. of buyers.
- Product differentiation is there.
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- Each seller re -sorts to advertising and sales promotion efforts.
Thus, selling cost are a unique feature of monopolistic
competition.

It has 2 aspects –

•Price competition – i.e. compete in price determination

•Non- price competition – seller competes through product

improvement and advertising sales
promotions.