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Types of markets

Markets can be classified on the basis of:
  • Area
  • Time
  • Transaction
  • Volume of business
  • Status of sellers
  • Competition

On the basis of area

On the basis of area, the market can be classified as follows:
  • Local market: A local market for a product exists when buyers and sellers of a commodity carry on business in a particular locality or village or area where the demand and supply conditions are influenced by local factors only.
    Example: Perishable goods like fruits and vegetables and huge commodities as required in construction like bricks and stones.
  • Regional market: Semi-durable commodities that are demanded and supplied over a region have regional market.
  • National market: When commodities are demanded and supplied throughout the country, there is a national market. This is a market for durable goods and industrial items.
    Example: Wheat, rice, cotton, motor bikes.
  • International market: When demand and supply conditions are influenced at the global level, there is an international market.
    Example: Gold, silver, cell phones, handicrafts.

On the basis of time

  • Very short period market: During this period, the supply of goods in the market is given and fixed. The period lasts for a day or two. So, in a very short period, the market supply is perfectly inelastic because skilled labour, capital and organization are fixed. The price of the commodity wholly depends on the demand for the product. Consequently supply of the product in this period cannot be varied in response to changes in demand. For example: market for flowers, milk, vegetables and other perishable products.
  • Short period market: During the short period, the firm can adjust its output to changes in demand with the existing plant and machinery. If demand increases, the firm will increase its output with intensive utilization of plant and machineries. But the time is not sufficient to increase the size of the plant. If the demand declines, the firm will adjust its output with less intensive utilization of its equipments. Only variable factors can be varied and fixed factors remain unaltered. As the time is too short, new firms cannot enter into the industry or the existing one’s cann’t leave the Industry.
  • Long period market: Long period may be defined as the period sufficiently long enough to enable the industry to adjust production and supply completely to a change in demand. The time is adequate to permit new firm to enter into the industry or existing firms to leave the industry. A total adjustment of demand and supply is possible, as all factors of production are variable in long run. The long run normal price is the result of long run demand and supply of the industry.
  • Very long period market: During this period, there will be sufficiently long time to introduce any kind of changes in production system. Over a long period (Secular period), new sources of supply are discovered and new methods of production are perfected. Hence long run prices will be relatively lower. In the very long period, the equality between supply and demand will determine the equilibrium price. Contrary to very short period, in the very long period, supply plays a more role in determining the price.

On the basis of the nature of transaction

  • Spot market: Spot market refers to a market where goods are physically transacted on the spot.
  • Future market: It is a market related to those transactions that involves contract of a future date. Good and services are exchanged at some future date as per the predetermined price.

On the basis of regulation

  • Regulated market: In this market, there a vigil check on the transactions and in case of any fraudulent transaction, stringent measures are taken. The transactions in such a market are statutorily regulated so as to put an end to unfair practices. Such a market may be for specific products or groups of products.
    Example: Stock market.
  • Unregulated market: It is called as free market as there are no restrictions on the transactions.

On the basis of the volume of business

  • Wholesale market: It is a market in which commodities are bought and sold in large quantities. Usually distributors and wholesalers buy in huge quantities and sell to retailers.
  • Retail market: It is a market in which commodities are bought and sold in small quantities. It is a market for ultimate consumers.

On the basis of competition

Types of market structures:
The market structure depends upon the number of sellers in the market. There are different situations in a market. Sometimes, there are large numbers of sellers, sometimes, a few and sometimes, there is only one seller. Based on the number of sellers in a market, the market structure can be classified as follows:
  • Perfect competition: Under this system, many sellers sell identical products to many buyers.
    Example: Food grains, vegetable market
  • Monopoly: It is a type of market in which there is a single seller of a product which has no substitutes.
    Example: Railways, water transport
  • Oligopoly: Under this, there are a few sellers selling homogeneous or similar products to many buyers.
    Example: Cold drinks, pharmaceutical products.
  • Duopoly: This form of market consists of only two sellers selling identical products.
  • Monopolistic competition: In this type of market, a large number of sellers sell differentiated products which are close, but not perfect substitutes, to a large number of buyers.
    Example: Market for soaps and detergents, cosmetics, biscuits, ice- creams

Classification of market on the basis of competition

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Distinguishing features of the market forms


Perfect competition





Number of sellers




A few


Homogenous products

No substitutes

Close but not perfect substitutes


Entry and exit

Free entry / exit


Free Entry and Exit


Control over price


Absolute control

Some extent


Demand curve


Negative slope

Small Negative slope

Kinked curve

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