Lecture 5

Classification or Kinds of Markets

Classification of Markets

 Now we have seen what is a market. Let us

learn more about the classification of
markets. Broadly there are two classifications
of markets – the product market and the
factor market. The factor market refers to the
market for the buying and selling of factors
of production like land, capital, labor, etc.
The other classification of markets are as
follows,
Classification or Kinds of Markets

 The market is classified in to the following

types

 1. According to Period of time

 2. According to Location
 According to Nature of Commodity

 According to Competition
According to Period of Time
 With respect to “ Period of time”, the market
is sub-classified in to the following types

 a. Daily markets

 b. Short run/time markets

 C. long run/time markets

 A. Daily Markets

 Daily markets are considered those markets in

which demand and supply of goods are for only
one day
 In daily or short period market the supply of
goods in almost stable. Because the supply of
goods is stable, therefore the price of goods is
determined according to the demand of the
goods. If the demand diminishes the price will
fall and vice-versa.
 This is when the supply of the goods is fixed, and so
it cannot be changed instantaneously.

 Say for example the market for flowers, vegetables.

Fruits etc. The price of goods will depend on demand.

 For example, Sunday bazar, Friday etc.

 Mostly the fruits and vegetables markets are also

considered daily markets.
Short run/Period Market
 Short period market is that in which slight
variation can be made regarding the demand
for the goods. The demand for the goods can
be increased to some extent and if the
demand diminishes, it can be reduced.
 The market is slightly longer than the

previous one. Here the supply can be slightly

adjusted.
Long run/Period Market
 If the period is longer, supply will be
influenced by the cost of producing
additional output; and the predominant
influence on value will be the forces of
supply. If the demand for goods increases,
there is time to increase the supply. Here the
price is influenced more by supply of the
goods.
 According to Location the Market is sub-
divided in to the following Markets

 Local Markets

 Regional Markets

 National Markets

 International Markets
Local Market

 When the competition between purchaser and

seller is localized and limited at a specific
market then it is called Local Market. In this
market mostly perishable goods are purchased
and sold.
 In such a market the buyers and sellers are
limited to the local region or area. They usually
sell perishable goods of daily use since the
transport of such goods can be expensive.
 For example:
 Sale of vegetable, fish, eggs, milk etc.
 A local market for a product exists when
buyers and sellers of commodity carry on
business in a particular locality or village or
area where the demand and supply
conditions are influenced by local conditions
only. E.g. Perishable goods like milk and
vegetables and bulky articles like bricks and
stones.
Regional Market
  These markets cover a wider are than local
markets like a district, or a cluster of few
smaller states

 Commodities that are demanded and

supplied over a region have regional market.
National Market:

 It is that market in which the demand of the

goods is in the nation as a whole where you are
living.

 This is when the demand for the goods is limited

to one specific country. Or the government may
not allow the trade of such goods outside national
boundaries.

 For example:
 Urdu Books bazar Lahore
International Market

 If the competition of goods is world-wide, the

market will be International. Gold and silver
are examples of commodities that possess an
international market.

 When the demand for the product is

international and the goods are also traded
internationally in bulk quantities, we call it an
international market.
 According to Nature of Commodity, the
market is sub-divided in to

 (i) Mixed market,

 (ii) Specialized market,
 (iii) Sample market, and
 (iv) Marketing by Grades.
Mixed Market
 Mixed market is that market where several
types of goods are purchased and sold
simultaneously. This type of market is mostly
found in villages where almost all goods are
available at one place. This is also called
“General Market”.
Specialized Market:

 Specialized market is that market where only

one kind of goods are sold and purchased.

 For example:
 Gul Haji Plaza in Peshawar specialized for

computer relates appliances

Sample Market

 Sample market is that where goods are

purchased and sold as specimen of any
variety of goods. In this market purchaser
only sees the specimen of goods and places
order for the goods.
 For example:
 Woolen clothes are purchased by seeing only

sample booklets.
Market by Grades

 In this market, goods are purchases and sold

according to grades. It means the goods are
first classified into various grades as per the
quality of the goods. In this market,
purchaser has not to see the variety or quality
of the goods but purchasers are made
according to grades.
On the Basis of Competition

  On the basis of competition market has been

divided under two heads:

 (i) Perfect Market,

 (ii) Imperfect Market.

Perfect Market

 A market is said to be perfect when all the

potential sellers and buyers are promptly
aware of the prices at which transactions take
place and all the offers made by other sellers
and buyers and when any buyer can purchase
from any seller and conversely.
 The prevalence of the same price for the
same commodity or at the same time is the
essential characteristics of a perfect market.
Under such a condition, the price of a
commodity will tend to be the same. Every
quality of the commodity is regarded as a
separate commodity.
Imperfect Market

 A market is said to be imperfect when some

buyers or sellers or both are not aware of the
offers being made by others. Naturally,
therefore, different prices come to prevail for
the same commodity at the same time in an
imperfect market.
 Following are the classification of imperfect
market:
 (i) Monopoly,
 (ii) Duopoly,
 (iii) Oligopoly, and
 (iv) Monopsony.
Monopoly

 In monopoly, there is a single producer or

seller who controls the market. There are no
close substitutes for his product. He controls
the supply and he can fix the price. He is the
firm and he also constitutes the industry.
Thus, under monopoly the distinction
between the firm and industry disappears.
Duopoly

 In doupoly, there are two sellers, selling

either a homogeneous product or a
differentiated product. These two sellers
enjoy a monopoly in the sale of the product
produced by them.
Oligopoly

 The word ‘Oligopoly’ is from the Greek words Olig

meaning ‘a few” and ‘poly’ meaning ‘sellers’. Thus,
in oligopoly there are only a few sellers. They may
be producing and selling either a homogeneous or
a differentiated product. The former is called
perfect oligopoly and the latter imperfect or
differentiated oligopoly.
 For example:
 The manufac­turer of motor cars by Hindustan
Motors (Ambassador car); Premier Automobiles (Fiat
cars) and Standard Motor Company (Standard cars).
 Monopsony

 Monopsony refers to a market situation when

there is a single buyers of a commodity or
service. It applies to any situation in which
there is a ‘monopoly’ element in buying.
On the Other Basis

 Under this type market has been divided as:

 (i) Fair Market,
 (ii) Black Market or Illegal Market.
 (i) Fair Market:
 In this market the goods are purchased and

sold on the price fixed by the government

and no other price can be charged by any
other seller.
 Stay Home, Stay Safe
 (ii) Black Market or Illegal Market:
 In this market the seller charges higher price

than the price fixed by the government. This

price is taken by seller secretly. This is also
known as illegal price or smuggling price.