Categories
Economics

Market Structure

In a physical sense, a market means a fixed place where people meet to buy and sell goods; that is, a market place.

In economics, a market can be defined as any arrangement, system or organization whereby buyers and sellers of goods are services are brought into contact with one another for the purpose of transacting business or for the purpose of buying and selling.

TYPES OF MARKET

  1. Market based on types of commodities
  2. Consumer goods market: It is made up of buyer and sellers of consumer goods
  3. Labour market: It is made up of workers and employers and deals with the recruitment of unskilled, semi-skilled, skilled and professional workers.
  • Capital Market and Money Market: The capital market is a financial market which deals in long-term loans.  The money market deals in short-term loans.
  1. Stock-Exchange Market: It consists of buyers and sellers of second-hand securities.
  2. Foreign Exchange Market: This is a market that deals with foreign exchange transaction.
  3. Market Based on the Channel of Distribution
  4. Wholesale market
  5. Retail market
  6. Types of market according to Price
  7. Perfect market
  8. Imperfect market

PERFECT MARKET

A perfect market is a market structure in which prices are determined by the forces of demand and supply.

CONDITIONS NECESSARY FOR A PERFECT MARKET

  1. Homogeneous commodity and existence of close substitutes: The commodities bought and sold must be homogeneous; that is identical.  They must be of the same size, shape, colour, etc.
  2. Large buyer and sellers: There is a large number of buyers and sellers, each of whom has no control over the prevailing prices
  3. Free entry and exit: In this type of market, there is no barrier to entry and exit from the industry.  There is no form of restriction.
  4. No preferential treatment: All buyers must be treated equally.
  5. Perfect knowledge: There must be a perfect information or knowledge about the price of the good or services.
  6. Uniformity of prices: Each perfect competitor is a price taker
  7. In a perfect market there are no transport costs.
  8. Portable goods: The goods to be sold must be easy to carry from the place to place
  9. Easy transfer of factors of production
  10. At equilibrium price the marginal cost (MC) equal marginal revenue (MR)

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