Market
1st year POE - Principles of Economics Notes
Market
In ordinary language market means a place where things are bought and
sold, but in Economics the market does not mean a particular place or
bazar, it only means a commodity and a group of buyers and sellers of
the same. Thus we speak of cotton market or share market etc. Same are
willing to buy and others are willing to sell. The buyers and sellers
can with one another by verbal, by letter, telephone, internet etc but
place does not matter.
Classification of Market
Categories of market are:
1. Perfect market
2. Imperfect market
Again categories are classified into:
Market on the Basis of Time
On the basis of time market could be classified into the following kinds:
1. Day–to-Day Market
This type of market is concerned with goods that are perishable like
milk, fish, vegetable, fruits etc. The price in this market is
determined by the demand of the market. If the demand expands the period
is short that the supply can’t be increased immediately at all,
therefore the price will increase similarly if demand decrease the time
is so short that the surplus supply can’t be stored due to the
perishability of the goods, obviously the price will decrease.
2. Short Period Market
It is the market when time allows supply to adjust with the demand of
the market to the extent of available size of the firm or producing
units. For example: If market demand is so goods per day and particular
firm of the same goods could produce max: 100 units by using its full
production capacity .If demand increases from 50 to 75 units the firm
can supply utilising the unused capacity, but if demand becomes 120 it
can’t be satisfied by existing production capacity because total size
of firm is 100 units per day.
3. Long Period Market
When the period is so long that the supply can adjust with the demand
of the market by changing the size of the firm. If the demand of the
market increases immediately the prices will also increase. This
increase of price will expand the margin of profits of the producers
therefore the firm can increase the production through employing more
labor, more machines , raw material etc. By increasing supply reduces
the increased prices and they come again on the previous point.
Similarly if demand falls the price also decrease and producers curtail
their production due to decrease in margin of profits. As consequence
of curtail in production the depressed price goes up again on the
previous point.
Market on the Basis of Location
Markets can be classified on the basis of location.
1. Local Market
If the goods are sold and purchased in a limited area is called local
market. For example: If the goods produced in Karachi are sold in
Landhi or Malir, it will be the example of local market. Local market
generally is concerned with the perishable good like milk, fish, bricks
etc.
2. National Market
This is the kind of the market which covers the whole of the country.
For example: the textiles of Karachi are sold in all the four provinces
of Pakistan. Similarly sports goods produced in Sialkot are supplied
in whole the country.
3. International Market
When the goods produced locally are sold in all the countries of the
world is called International market. For example: the cars produced in
Japan are sold in whole of the world. The buyers and sellers from all
over the world compete with one another therefore prices are influenced
by the world environment.
Market on the Basis of Nature of Goods
1. General Market
Market is said to be general where not a specific but general goods are
sold and purchased. For example: if cloth, pots, shoes, vegetable,
fruit are sold at a time it will be called general market.
2. Specialised Market
In this market special or specific goods are brought to sale in this
kind of the market. For example: grains are sold in grain market
similarly fruits are sold and purchased in fruit market. These markets
provide facility to the buyers that they could purchase goods of their
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