Meaning of Market

A market is a structure where a good or service is bought and sold between buyers and sellers at a fixed price. In the past, markets generated through basic trading practices in which items were exchanged directly, for instance trading apples for a sack of grain. With increasing sophistication of societies, money was coined which streamlined exchange, and markets became even more defined. A lot has changed since then; markets today are much more complex and are shaped by factors such as technology, globalisation and government policies.

A market can be considered as a setting or structure in which there is an interaction of buyers and sellers in relation to the purchase, sale or exchange of goods and services. These interactions require some sort of monetary transaction where the commodity in question is purchased. The notion of a market extends beyond physical scope and can be established in online spaces or even exist abstractly for stock markets.

To put it simply, a market is created where demand exists for a certain supply. With competition and customer preference taken into consideration, it serves as a channel through which prices are established and changes are made. Markets can be divided into three types based on the geographical area they cover:

1. Local Market
2. National Market
3. International Market

1. Local Market

A market limited to a specific location is called a local market. Locally produced and sold goods that spoil or perish quickly, such as milk, leafy greens, vegetables, and fruits, can be considered local markets.

Additionally, the market for low-value but heavy goods like bricks, stones, and sand is limited to one place. Transporting such goods over long distances can result in transportation costs exceeding the production cost. Therefore, these goods are consumed where they are found or produced, and their market is considered a local market.

2. National Market

A national market is a market for goods limited within a country's borders. These goods are usually durable, can be transported from one part of the country to another without hindrance, and do not experience significant price differences.

Industrial goods required by everyone, such as paints, paper, matches, tea leaves, salt, and books, have national markets.

3. International Market

A market for commodities that are consumed in other nations and are not restricted to a single nation's borders is known as an international market.

International markets exist for:

• Metal products such as gold, silver, copper, and iron
• Heavy machinery, motorcycles, computers, cell phones, cameras, radios, etc.

Other Classifications of Markets

Markets can also be divided into:

1. Factor Markets
2. Product Markets
3. Financial Markets

1. Factor Market

The buying and selling of factors of production, such as labor and capital, takes place in factor markets. The labor market is also an example of a factor market.

2. Product Market

Product markets involve the buying and selling of produced or finished goods.

3. Financial Market

A financial market is where financial assets are bought and sold.

• Money Markets – Short-term financial assets (maturity of less than one year) are bought and sold.
• Capital Markets – Long-term financial assets (maturity of more than one year) are bought and sold.

Market Structures

There are various bases for distinguishing between different market structures. These include:

• The number of producers/sellers and consumers
• The type of goods traded
• The extent of free information flow

Markets Based on Competition

Markets have different forms based on competition. Based on competition, market structures can be divided into:

1. Perfect Competition
2. Imperfect Competition
   • Monopolistic Competition
   • Oligopoly
3. Monopoly

Among the various market forms classified based on competition, perfect competition and monopoly are two extreme forms.