What is Market?
Market means an arrangement that bring buyers and sellers of product and resources together. The buyers and sellers can come together by any means of communication. They can come face to face as in a shop. They can communicate on telephone or by correspondence. In a market, the prices of goods and services tend towards equality through the continuous negotiations of buyers and sellers.
Types of Markets
The real world consists of almost infinite variety of markets; however, the markets are classified into five major categories according to the number of sellers. They are:
- Prefect market
- Monopolistic Competition
1. Perfect Market
- The product price is uniform in all the market.
- The number of sellers and buyers are very large.
- Buyers and sellers have perfect information about prices and the products.
- Any new firm can easily enter the market.
- Perfect market is not influenced by the single buyer or seller.
- Every firm has a small share of sales in the market.
- The product of all the firms are identical in all respects (homogeneous).
- There is single seller in the market.
- There is no close substitutes of the firm’s product.
- The seller has considerable control over prices.
- New firms are not easily enter in this market.
3. Monopolistic Competition
It is a blend of prefect competition and monopoly. In monopolistic competitive market, the following features must exist:
- The number of sellers is large and each seller acts independently.
- The product is differentiated from seller to seller.
- There is free entry and exist of firm.
- Sellers are able to exercise some control over price.
- In order to differentiate their products, the firm have to spend on advertisement and other non-price competition. This is called selling cost.
Oligopoly is an industry in which:
- The number of firms is relatively small.
- New firms are not easily enter in this market. These barriers can be moderate or high.
- The products may be homogeneous or may be differentiated.
- Oligopolies are able to exercise some control over price.
- The firm are mutually independently. Their actions affect each other.
Duopoly is like oligopoly except that there are only two sellers in the market. There are barriers to entry of new firms. Duopolies are able to exercise some control over price.