Classification of Market of Goods: 5 Categories | Economics

The following points highlight the five main categories for classification of market.

1. On the Basis of Place or Area:

Under this area following markets have been included:

(i) Local market,

(ii) Regional market,

(iii) National market,

(iv) International market.

(i) Local Market:

When the competition between purchaser and seller is localised and limited at a specific market then it is called Local Market. In this market mostly perishable goods are purchased and sold.

For example:

Sale of vegetable, fish, eggs, milk etc.

(ii) Regional Market:

In this market sale and purchase of articles is localised to state only and not outside the state.

(iii) National Market:

It is that market in which the demand of the goods is in the nation as a whole where you are living.

For example:

Hindi book in India can have national market. Outside India you may not have market of Hindi books.

(iv) 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.

2. On the Basis of Time:

On the basis of time Marshall has divided market as under:

(i) Daily or Very short Period Market,

(ii) Short Period Market,

(iii) Long Period Market,

(iv) Secular Market.

(i) Daily or Very Short Period Market:

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.

For example:

The demand of fish or eggs etc.

(ii) Short 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.

For example:

The demand of fish or milk or eggs.

(iii) Long 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.

(iv) Secular Period:

The secular period is very long. According to Marshall, it is a period of more than ten years in which changes in demand fully adjust themselves to supply. Since it is not possible to estimate the changes in demand due to changes in techniques of production, population, raw-materials i.e., over a very long period therefore Marshall did not analyse pricing under the secular period. Here the supply has upper hand in the determination of price.

3. On the Basis of Competition:

On the basis of competition market has been divided under two heads:

(i) Perfect Market,

(ii) Imperfect Market.

(i) 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.

(ii) 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.

(i) 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.

In this, the average revenue curve or the demand curve always slopes downwards to the right. Here, there is no need to differentiate products because no close substitutes are available. It is one homogeneous product and completely under the control of the monopolist.

(ii) 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.

(iii) 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).

(iv) 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.

For example:

When consumers of a certain commodity are organised or when a certain individual happens to have a taste for some commodity which no one else requires. Professor Liebhafsky has defined monopsony as “the case of a single buyer who is not in competition with any other buyers for the output which he seeks to purchase, and as a situation in which entry into the market by other buyers is impossible.”

The analysis of monopsony pricing is similar to that under monopoly pricing. Just as a monopolist is able to influence the price of the product by the amount he offers for sale, similarly, the monopsonist is able to influence the supply price of his purchases by the amount he buys.

Again, the monopolist aims at the maximisation of his profit while the monopsonist aims at the maximisation of his surplus. The monopolist equates his marginal cost with his marginal revenue to maximise his profit. The monopsonist regulates his purchase in such a way that marginal cost equals marginal utility whereby his consumer’s surplus is the maximum.

4. On the Basis of Function:

On the basis of function market has been divided under four heads:

They are:

(i) Mixed market,

(ii) Specialized market,

(iii) Sample market, and

(iv) Marketing by Grades.

(i) 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”.

(ii) Specialised Market:

Specialised market is that market where only one kind of goods are sold and purchased.

For example:

Only wheat market or clothes market. This type of market is mostly found in Metropolitan Town.

(iii) 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.

(iv) Marketing 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.

5. 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.

(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.