MARKETS

The term market has come to signify a public place in  which goods and services are bought and sold. It is the act or  technique of buying and selling.
Market defines, “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 paid in other parts.”

Therefore, market in economic sense implies:
1.Presence of buyers and sellers (Producers) of the commodity
2.Establishment of contract between the buyers and sellers
3.Similarity of the product
4.Exchange of commodity for a price

Classification of Markets
1.Markets on the basis of Area
2.Markets on the basis of Time
3.Markets on the basis of ‘Nature of Transactions’
4.Markets on the basis of ‘Regulation’
5.Markets on the basis of ‘Volume of Business’
6.Market on the basis of ‘Position of Sellers’
7.Market on the basis of type of ‘Competition’

1. Markets on the basis of Area
On  the  basis  of  geographical  area  covered,  markets  are  classified into
(a)Local Markets,
(b)Regional Markets,
(c)National Markets, and
(d)International Markets.

2. Markets on the basis of Time
Alfred  Marshall  conceived  the  ‘Time’  element  in marketing and this is classified into
(a)Very short-period market,
(b)Short-period market,
(c)Long-period market, and
(d)Very long-period or Secular market.

3. Markets on the basis of Nature of Transactions
On  the  basis  of  nature  of  transactions,  markets  are  classified into
(a)Spot market; and
(b)Future market.
Spot transaction or spot markets refer to those markets  where goods are physically transacted on the spot, whereas  Future markets related to those transactions which involve  contracts of the future date.

4. Markets on the basis of ‘Regulation’
On the basis  of regulation, markets are classified into
(a)Regulated market
(b)Unregulated market
In the former type of markets transactions are statutorily  regulated so as to put an end to unfair practices.
Such markets may be established for specific products or a  group of products.
Produce and stock exchanges are suitable examples of the  regulated markets.

5. Markets on the basis of ‘Volume of Business’
Based on the volume of business transacted, markets are  classified into Wholesale market and Retail market.
The  wholesale  market  comes  into  existence  when  the  commodities  are  bought  and  sold  in  bulk  or  large  quantities.  The dealers in this market are known as the wholesalers.
The  wholesaler  acts  as  an  intermediary  between  the  producer and the retailer.

Retail  market,  on  the  other  hand  exists  when  the commodities are bought and sold in small quantities.
This is the market for ultimate consumers.

6. Market on the basis of ‘Position of Sellers’
On the basis of the position of the sellers in the chain of  marketing, markets are divided into Primary market, Secondary  market and the Terminal market.
Manufacturers of commodities constitute the primary  market who sell the products to the wholesalers.
The secondary market consists of wholesalers who sell the  products in bulk to the retailers.
Retailers along constitute the terminal markets who sell  the products to the ultimate consumers.

7. Markets on the basis of type of ‘Competition’
Based on the type of competition, markets are classified into
(a)Perfectly Competitive market
(b)Imperfect market
The opposite type of perfect market is ‘Monopoly’.
Under  imperfect  markets,  there  are  many  types,  viz.,  oligopoly, Duopoly, Monopolistic competitions, etc.
We shall study about the types of competition in greater  detail.

Competitions
Competition in business connotes the presence of more  than one seller and one buyer in a particular market.
In competitive markets sellers act independently of other  buyers. It is incompatible with those conditions of market  where there is only one seller or one buyer.
So, the presence of more than one buyer and one seller  is a necessary pre-condition for the existence of competitions.

Types of Competition
1.Perfect Competition and Pure Competition

2.Imperfect Competition
a. Monopolistic Competition
b. Oligopoly Competition  
3.Monopoly Competition

1.PerfectCompetition
A  perfectly  competitive  market is  one  in  which economic forces operate unimpeded Perfect  competition  is  a  firm  behavior  that  occurs  when  many firms produce identical products and entry is easy.
Features of Perfect Competition
1. Large number of buyers and Sellers
2. Homogeneous Products
3. Free entry and exit conditions
4. Perfect knowledge on the part of buyers and sellers
5. Perfect mobility of factors of production
6. Absence of transport cost
7.Absence of Government or artificial restrictions

2. Imperfect Competition

Imperfectly Competitive Firms
 Have some control over price
Price may be greater than the cost of production  Long-run economic profits are possible

Price Policy
Formulating  price policies and setting  the price are  the  most important aspects of managerial decision-making.
Price,  in  fact,  is  the  source  of  revenue  which  the  firms  seeks to maximize.
Again, it is the most important device a firm can use to  expand its market.
If the price is set too high, a seller may price himself out  of the market.
If  it  is  too  low,  his  income  may  not  cover  costs,  or  at  best, fall short of what it could be.

Factors influence Price of a Commodity
1.The demand for a commodity
2.Cost of production
3.Objectives of the firm
4.Competition and
5.Government’s policy

Objectives of Price of a firm
1.Achieving a target rate of return on investment
2.Accomplishing the target rate of growth
3.Maintaining and improving the market share
4.Maintaining the prestige of the firm
5.Enhancing the goodwill of the company
6.Stabilizing the prices

Concept of Price Discrimination
A firm is in a position to fix the price of his product.  He enjoys the control of supply of the product.
A firm is able to charge different price for his products to  the different customers. This is known as price discrimination.
According to Mrs. John Robinson, the act of selling the  same article, produced under single control at different prices  to different buyers is known as price discrimination.
This is also known as differential pricing.

Market Structure and Pricing Decisions
Price Determination Under Perfect Competition  
Price Determination Under Pure Monopoly
Monopoly Pricing and Output Decision in the Long-Run

1. Price Determination Under Perfect Competition
In a perfectly competitive market, commodity prices are  determined by the market forces of demand and supply.
In other words, market prices are determined by the  market demand and market supply, where the market demand  refers to the industry demand as a whole:
The determination of commodity as well as services price  under perfectly-competitive conditions are often analyzed under  three different time periods:
The market period or very short-run;  Short-run; and Long-run.
2. Price Determination Under Pure Monopoly
The term pure monopoly connotes absolute power to  produce and sell a product with no close substitute.
A monopoly market is one in which there is only on seller  of a product having no close substitute.
The cross-elasticity of demand for a monopolist’s product  is either zero or negative. A monopolized industry refers to a  single-firm industry.
3.  Monopoly  Pricing  and  Output  Decision  in  the  Long-Run
The decision rules guiding optimal output and pricing in  the long-run is same as in the short-run.
In the long-run however, a monopolist gets an  opportunity to expand the size of its firm with the aim of  enhancing the long-run profits.
Expansion of the plant size may, however, be subject to  such conditions as:
(a)the market size;
(b)expected economic profit; and, risk of inviting .