Market – Meaning & Basis of Classification

Business decisions on price, output and promotion depend on the type of market in which the firm operates.

1. Meaning of Market

In Economics, market does not only mean a physical place.

Market is a system of arrangements where buyers and sellers of a commodity or service come into contact (directly or indirectly) to determine price and quantity transacted.

Key points:

• Need buyers, sellers, and a commodity.
• Contact can be face-to-face or through phone, internet, platforms.
• Important feature is interaction and price determination, not location.

2. Basis of Classification of Markets

Markets can be classified on various bases:

1. On the Basis of Area

• Local Market – confined to a town/city (e.g., vegetable market).
• Regional Market – covers a region or state.
• National Market – operates at country level (e.g., automobiles).
• International / Global Market – goods traded across countries (e.g., crude oil, IT services).

2. On the Basis of Time

• Very short period market – supply fixed (fish auction, flowers).
• Short period market – supply can change slightly.
• Long period market – supply can be fully adjusted with plant changes.

3. On the Basis of Nature of Competition

• Perfect Competition
• Monopoly
• Monopolistic Competition
• Oligopoly
• Duopoly

(Explained in later chapters.)

4. On the Basis of Regulation

• Regulated Market – controlled by government/authority (e.g., APMC markets).
• Unregulated Market – no formal regulation.

5. On the Basis of Legality

• Legal Market – trading allowed by law.
• Illegal Market – black markets, smuggling, etc.

Loading comparison…

3. Importance of Market Classification for Business

• Helps firm choose pricing strategy.
• Guides product differentiation and promotion.
• Helps decide location of plant, warehouse, store.
• Useful in forecasting demand and competition.

4. Quick Revision Points

• Market = system of buyers + sellers + communication + price.
• Classified by area, time, competition, regulation, legality.
• Classification helps in real business decisions on price, output, promotion.

5. Quiz Time 🎯

Loading quiz…