What is a Market?

A market is a set of conditions in which buyers and sellers meet each other for the purpose of exchange of goods and services for money.

The two parties involved in a transaction are called seller and buyer. The seller sells goods and services to the buyer in exchange of money. There has to be more than one buyer and seller for the market to be competitive.

Elements of Market:
The essentials of a market are:

• Presence of goods and services to be exchanged.
• Existence of one or more buyers and sellers.
• A place or a region where buyers and sellers of a good get in close touch with each other.  

Market Model:
Markets are classified according to the number of firms in the market and by the commodity to be exchanged. The economists on the basis of variation in the features of market describe four market models:

•  Perfect Competition. (It is an economic model that describes a hypothetical market form in which no producer or consumer has the market power to influence prices.i.e. Price Taker.)
• Pure Monopoly. (It is a market structure in which one firm makes up the entire market. In a monopoly market, the seller decides the price of the product or service.i.e. Price Maker.)
• Monopolistic Competition. (It is a market in which there are relatively large number of small firms which produce or sell similar but not identical commodities the customers.)
• Oligopoly. (It is market structure where supply is controlled by a few firms which are large in relation to the market size.) 

In the analysis of each market model, it is examined as to what determines the equilibrium price, output and profit levels for the individual firm and for the industry.


Types of Markets:

• Physical Markets - Physical market is a set up where buyers can physically meet the sellers and purchase the desired merchandise from them in exchange of money. Shopping malls, department stores, retail stores are examples of physical markets.
• Non Physical Markets/Virtual markets - In such markets, buyers purchase goods and services through internet. In such a market the buyers and sellers do not meet or interact physically, instead the transaction is done through internet. Examples - Rediff shopping, eBay etc.
• Auction Market - In an auction market the seller sells his goods to one who is the highest bidder.
• Market for Intermediate Goods - Such markets sell raw materials (goods) required for the final production of other goods.
• Black Market - A black market is a setup where illegal goods like drugs and weapons are sold.
• Knowledge Market - Knowledge market is a set up which deals in the exchange of information and knowledge based products.
• Financial Market - Market dealing with the exchange of liquid assets (money) is called a financial market.

Financial markets are of following types:

1. Stock Market - A form of market where sellers and buyers exchange shares is called a stock market.
2. Bond Market - A market place where buyers and sellers are engaged in the exchange of debt securities, usually in the form of bonds is called a bond market. A bond is a contract signed by both the parties where one party promises to return money with interest at fixed intervals.
3. Foreign Exchange Market - In such type of market, parties are involved in trading of currency. In a foreign exchange market (also called currency market), one party exchanges one country’s currency with equivalent quantity of another currency.
4. Predictive Markets - Predictive market is a set up where exchange of good or service takes place for future. The buyer benefits when the market goes up and is at a loss when the market crashes.

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