Market : Meaning, Definition and Features | Economics

Let us make an in-depth study of Market for a Commodity:- 1. Meaning of Market 2. Definition of Market 3. Features.

Meaning of Market:

In common parlance, by market is meant a place where commodities are bought and sold at retail or wholesale prices.

Thus, a market place is thought to be a place consisting of a number of big and small shops, stalls and even hawkers selling various types of goods.

In Economics however, the term “Market” does not refer to a particular place as such but it refers to a market for a commodity or commodities. It refers to an arrangement whereby buyers and sellers come in close contact with each other directly or indirectly to sell and buy goods.

Further, it follows that for the existence of a market, buyers and sellers need not personally meet each other at a particular place. They may contact each other by any means such as a telephone or telex. Thus, the term “Market” is used in economics in a typical and specialised sense. It does not refer only to a fixed location.

It refers to the whole area of operation of demand and supply. Further, it refers to the conditions and commercial relationships facilitating transactions between buyers and sellers. Therefore, a market signifies any arrangement in which the sale and purchase of goods take place.

Definitions of Market:

1. Cournot’s definition – the French economist Cournot defined a market thus “Economists understand by the ‘Market’ not any particular market place in which things are bought and sold but the whole of any region in which buyers and sellers are in such free intercourse with one another that the prices of the same goods tend to equality, easily and quickly.”

This definition of market brings out the following essential points:

(a) A market may be a region, which may be a district, state, country or even the whole world from which buyers and sellers are drawn and not any particular place where they assemble.

(b) There must be business intercourse among the dealers, i.e., buyers and sellers. They must be in touch with one another, so that they are aware of the prices offered or accepted by other buyers and sellers.

(c) The same price must rule for the same thing at the same time.

Further some more definitions are modern definitions of market are as follows:

2. According to Jevons – “Originally a market was a public place in a town where provision and other objects were exposed for sale, but the word has been generalized so as to mean anybody or persons, who are in intimate business relation and carry on extensive transaction in any commodity.

3. As Chapmen has said – “The term market refers not necessarily to a place but always to commodity or commodities and the buyers and sellers of the same who are in direct competition with each other.”

4. According to Prof. Behham – “We must therefore, define a market as any area over which buyers and sellers are in such close touch with one another either directly or through dealers that the prices obtainable in one part of the market affect the prices in other parts.”

From the above definitions following facts may be noted:

1. The existence of a commodity. For example- The market for gold or silver, cotton, wheat and rice etc. Thus, there will be as many markets as are commodities and if there be several types or variance of a commodity, then each type or variety will have a separate market of its own.

2. That there be buyers and sellers who are in touch with one another either through post, telegraph, telephone or through middlemen.

3. That there is perfect competition among buyers and sellers so that through such competition, the price of the commodity in question is influenced.

Features of Market:

Essential characteristics of a market are as follows:

1. One commodity:

In practical life, a market is understood as a place where commodities are bought and sold at retail or wholesale price, but in economics “Market” does not refer to a particular place as such but it refers to a market for a commodity or commodities i.e., a wheat market, a tea market or a gold market and so on.

2. Area:

In economics, market does not refer only to a fixed location. It refers to the whole area or region of operation of demand and supply

3. Buyers and Sellers:

To create a market for a commodity what we need is only a group of potential sellers and potential buyers. They must be present in the market of course at different places.

4. Perfect Competition:

In the market there must be the existence of perfect competition between buyers and sellers. But the opinion of modern economist is that in the market the situation of imperfect competition also exists, therefore, the existence of both is found.

5. Business relationship between Buyers and Sellers:

For a market, there must exist perfect business relationship between buyers and sellers. They may not be physically present in the market, but the business relationship must be carried on.

6. Perfect Knowledge of the Market:

Buyers and sellers must have perfect knowledge of the market regarding the demand of the customers, regarding their habits, tastes, fashions etc.

7. One Price:

One and only one price be in existence in the market which is possible only through perfect competition and not otherwise.

8. Sound Monetary System:

Sound monetary system should be prevalent in the market, it means money exchange system, if possible, be prevalent in the market.

9. Presence of Speculators:

Presence of seculars is essential just to supply business information’s and prices prevalent in the market.

With all points written above “one price” system is the true test of the economic market.