Let us know about the Types of market in this article.
What is the market?
A market is a place where the exchange of goods and services takes place between the buyers and the sellers. It is a system made by the organisation and individual for better business. The market price is dependent on demand and supply. For instance, shops and stores on the streets, e-commerce, etc., are a part of the markets.
Classification of Market
There is a wide range on which a market can be classified or distinguished.
These different types of markets help us to know more about the number of sellers/producers, market barriers, demand and supply, production, market price, sellers to sellers and sellers to consumer relationship, etc.
1. Types of the market based on locations
Markets can be classified based on locations and areas.
- Local markets are the market that works in a limited/local area and try to engage with the nearby customer.
- Owners of this market are individuals who are not working with any big organisation or companies
- They use Limited ways of advertising. For example- billboarding in the area of their radius, Templates, etc.
- For illustration- Retailers, Restaurants, Hotels, etc.
- A market that does not stick to a particular region or location and deals with a broader range of consumers than the local market is called a regional market.
- The products which are sold in this market are similar within the area of the market but may differ from the products which are sold in other areas/regions.
- In this market, services are provided within the state, not outside it.
- For example:- The indigenous books and music market which is mainly found in Rajasthan are not available outside the state.
- When goods and services are supplied across a country, then this type of market is known as the national market.
- For example- foodgrains product, etc.
- When the goods and services are supposed to be supplied in more than one country, then these types of markets are known as Global or International markets.
- For instance- electronic items, minerals, spices, etc.
Those companies who work in the national and international markets spend a huge amount of money on advertisements.
2. Types of the market based on time
There are three types of the market when it is classified based on time.
Very short period market
- In this type of market instant supply is not possible.
- Demand controls the fluctuation in the price of a product.
- Demand is comparatively high.
- For example:- fruit and vegetable market, etc.
Short period market
- A little bit of change in the supply is possible.
- Demand is comparatively less than the previous one.
- It is comparatively longer than the very short period market.
- The period is the largest in this type of market.
- With the help of the production, supply can be adjusted to fulfil the market demand due to the price of the product remaining balanced.
3. Types of the market based on competition
The most important factor on which a market can be classified is the competition.
- Condition of perfect competition arises in the market when there are a large number of small sellers present, who are selling similar types of goods or services and no one is that much capable to capture a big part of the market.
- Due to similar types of products between competitors prices are almost the same and depend only upon supply and demand.
- That’s why this is the most ideal market for the consumer because of the controlled prices.
- Homogeneous products are sold in this type of market.
- Sellers can easily enter and exit the market.
- This is an imaginary/theoretical market.
- Example:- share market, agricultural industry, etc.
The market which does not follow the hypothetical rules of a pure or perfect market is known as an imperfect competition market.
Perfect competition does not exist in this market and this market defines the real state of the international market.
This market can be divided into the following parts:-
- This type of market is a bit similar to the pure competition market due to a large number of sellers and the same type of product, but get highly differentiable by the unique touch/experience made by the seller.
- Production cost is very low and due to his unique efforts, sellers can increase the product price.
- This uniqueness can be of any type. For example- Brand name, celebrity ambassador, style, quality of service, service experience, etc.
- In this market, there is an entry barrier.
- For example:- Restaurant, Hotel, Fashion market, etc.
- In this type of market, there is comparatively less competition as compared to previous markets due to the presence of fewer sellers.
- There is a little bit of Monopoly for some sellers by competing or cooperating.
- Dominating companies control prices and maintain an entry barrier in the market which makes business difficult for small sellers.
- Example:- Automobile, Telecom, Mobile industry, etc.
- When there is a Monopoly of a single organisation or company, who is producing the majority of products for the entire market then this type of market is known as the pure Monopoly market.
- These organisations maintain a huge entry barrier, which helps them to avoid alternative products in the market.
- Profit and losses, demand and supply, production all are in their hands. In simple words:- They are of the market and the market is of them.
- Example:- OYO has a Monopoly in the hotel chain industry in India, etc.
- When two sellers or companies or organizations enjoy the condition of monopoly by sharing a market then this type of market is known as a Duopoly market.
4. Types of the market based on Transaction
Type of market-based on transaction of money is:-
- In this type of market, the product can not be taken on credit transaction made be on spot and delivery is made instantly
- In this type of market, products can be taken on credit and transactions can be made in the future.
- Delivery is not made instantly.
5. Types of the market based on Nature of Product
- Those markets where people can buy or sell physical products such as food grains, vegetables, electric appliances, furniture, etc.
- Those markets where people can buy or sell financial products like stock, money, etc. are known as financial markets.
- Example:-Money market, Share market, etc.
6. Types of markets based on Consumption
- In this type of market, only those products and services are exchanged which are useful for consumers.
- Example:- Milk, food, Household appliances, etc.
- Markets in which only industrial friendly goods and services are exchanged are known as Industrial markets.
- Examples:- Raw material, industrial equipment, etc.
7. Types of the market based on Seller’s position
- Producer and primary seller sells their product to wholesalers in this type of market.
- The product can be of any type either an agricultural product or a freshly made industrial product.
Secondary Market / Wholesale Market
- Wholesalers buy products from producers in high quantities and then sell to retailers into small stocks.
- The consumer will not go directly to the wholesale market if he wants one or two pieces, instead of a bunch.
Tertiary Market / Retail Market
- In this type of market, products are directly sold to consumers by the retailer in small amounts.
8. Types of the market based on Control
- When government organisations take control of different sectors of the market then this type of market is known as a regulated market.
- All the buyers and sellers are bound to follow rules and regulations and if they are denied to follow then they can be punished.
- When a government organisation does not take interest in the buying and selling, market price, and in other market sectors, then this type of market is called a non-regulated market.
Frequently asked questions:-
Q. What are the five common types of market-based competition?
Ans. 5 most common types of the market based on competition are:-
Perfect competition:- Market in which every seller faces the condition of high competition.
Monopolistic competition:- It is comparatively similar to the perfect competition market but differentiated at the point where sellers make a customer-friendly environment by their unique touch in the experience of the product.
Oligopoly:- Competition is less compared to a perfect competition market due to less number of sellers.
Duopoly:- When 2 organisations or companies have a monopoly in the market by competing or cooperating.
Monopoly market:- Market where the monopoly of a single organisation or company takes place.
Q. What are the examples of the equity or financial market, commodity markets, perfect competition market, consumer market, and monopoly markets?
Ans. Examples of the above markets are
- Equity or financial market:- Stock or share market, money market, etc.
- Commodity market:-
- Bullion market (for gold, silver, etc.)
- Agricultural commodity
- Energy market (for crude oil, natural gas, etc.)
- Base metal industry (for brass, copper, zinc, etc.)
- Perfect competition market:- food grain market, beverages market, etc.
- Consumer market:- Food and beverages, retail, and transportation, etc.
- Monopoly market:- Railways, Microsoft, Google, Facebook, etc.
Q. What is the difference between the local market and the national market?
Ans. We can easily find the difference between the local market and national market with the help of their name as the local market allows sellers and companies to advertise and sell their product in local areas with certain boundaries but in the national market companies have no boundary inside a country and they can advertise their product across the whole Nation.
Q. What are the advantages of the local market?
Ans. The local market is very important for the companies and the individual sellers because It helps them to target an audience who are interested in their product.
Some advantages of the local market are:-
- It became easier for local sellers to advertise their products in the local market and drive sales.
- It increased the employment number.
- The high amount of competition can be avoided by cooperating.
Q.What is the difference between the spot market and the futures market and Why is the market important?
Ans. The most common difference between the spot market and futures market is that products can be taken on credit in the spot market and delivery is instant whereas it is not possible in the future market.
The market is crucial because it provides opportunities to exchange goods and services, create employment, and provide economic growth to the nation.
Q.What is the difference between a monopoly market and an oligopoly market?
Ans. The major differences between monopoly market and oligopoly market are:-
- In the Monopoly markets, there is only one organisation or company which dominates the whole market, whereas, in an oligopoly market, more than one company or organisation (maybe 4 or 5) dominates the market by cooperating or competing with each other.
- In the Monopoly market, all the demand and supply, profit and losses, production, etc., are in the hands of the monopoly company, whereas, in an Oligopoly market, everything is conditional upon demand and supply.
An example of monopoly markets or companies is OYO. Examples of oligopoly markets are the automobile industries and Telecom industries.
Q. What are the benefits or advantages of the pure Monopoly market?
Ans. Some advantages of a pure Monopoly market are
- There is no entry barrier, so everyone is free to buy and sell in this type of market.
- The market is controlled only by demand and supply.
- The number of products is high, so there is a variety of products for the customers.
Q. What are the major types of differences between the commodity market and equity market and is it true that the price in the future market is higher as compared to the spot market?
Ans. The most accepted difference between commodity markets and equity markets is that a company or an individual can buy or sell a physical type of goods or products in commodity markets, whereas in equity markets only financial products are bought and sold.
Yes, the price in the future market is indeed comparatively higher than the spot market because this signals that inflation can raise the prices of the product in the future.