In Economics, market is defined as a set of buyers and sellers who are geographically separated from each other, but are still able to communicate to finalise the transaction of a product.The market for a product can be local, regional, national or international.
A market can have a number of interconnected characteristics, including level of competition, number of sellers and buyers, types of products, and barriers to entry and exit. This interlinked characteristics are combined to form a market structure.
Markets can be classified on many different ways like, area, time, transactions, regulations, volume of business, nature of goods, nature of competition, demand and supply conditions.
Classification on the basis of Area
Using area, we can categorise markets into local markets, regional markets, national markets or international markets.
Local markets confine to locality mostly dealing in perishable and semi perishable goods like fish, flowers, vegetables, eggs, milk and consumer products.
Regional markets covers a wider area, May be a district, a state or inter state dealing in both durable and non durable and industrial products and agricultural produce, like spices, live stock, textile or electronics etc.
In case of national markets the area covered are national boundaries dealing in durable and non durable consumer goods, industrial goods, metals, forest products, agricultural produce.
In case of international markets, the movement of goods is widespread throughout the world, making it a single market. Goods like Minerals, Ores, Coal, Oil, Spices, Industrial Machinery or Equipment are transported around the whole world today. With the advancement of technologies in transport, storage and packaging, it has become possible to transport even the most perishable good all around the world, not only durable products.
Classification on the basis of Time
On the basis of time markets can be classified into four different types.
Very Short Term Markets
The markets where goods of daily requirements are exchanged, mostly highly perishable goods like vegetables, meat, fruits, milk etc. are called Very Short Term Markets. The prices of the Short term goods are determined by the pressures of demand, as supply can not be increased instantly.
Short Term Markets
In these markets, commodities are perishable but can be traded for a much longer period than Very Short Term Markets. The commodities are like food grains and oil seeds etc.
Long Term Markets
In long term markets, adequate time can be found for supply of products according to demand. New machines and equipment can be installed for additional production to meet demand. Supply can be increased or decreased according to demand situation. These markets can be for machinery or manufactured products.
Very Long Term Markets
In such types of markets, products can get adequate time to use new technology in production process and bring new changes in the products. In such types of markets they are able to produce goods according to changing needs, interest, fashion etc. of customers.
Classification on the basis of Transaction / Delivery
On the basis of the nature of transaction, markets can be classified as Spot Market & Future Market.
The market where delivery or handing of goods are made immediately after the sales is called a Spot Market. In such markets, price of product is paid immediately at the spot and ownership of the product is transferred to the buyer at the same time.
In this type of market contract is signed for the sale of products in future between the buyer and the seller, but no delivery of the product is made. In this market, buyer and seller sign a contract for buying and selling products at a certain price or on a condition to determine the price in the future.
Classification on the basis of Volume
On basis of volume of the business, type and size, markets can be classified in Wholesale or Retail Markets
The market, which deals with a large amount of goods is known as a Wholesale Market. This market purchases goods from the producers or manufacturers and sells them to retailers at wholesale prices. The products are not sold to the ultimate consumer. But, if consumers want to buy in large quantities, they can buy from the wholesaler.
The market that sells small quantities of products directly to the ultimate consumer is called a Retail Market. The retail sellers sell the products to the consumers after adding their commission to the wholesale price of the products.
Classification on the basis of Control / Regulation
On the basis of control, law, rules and regulations, market can be classified into Regulated Market and Non Regulated Market.
If trade associations, municipality or government controls buying or selling price of products or if the business dealings take place as some per set of rules and regulations regarding, quality, price, sources or distribution etc. then it is called a Regulated Market. Such markets must follow the established rules, regulations, and legal process and provisions. Otherwise the businessmen are fined or punished.
Non Regulated Market
If the market is freely functioning and is not under control of any government body or any organisation, it is called a Non Regulated Market. In such markets, price is determined through interaction between buyers and sellers. This market has to follow no rules, regulations and legal provisions, even if there are any, they can be amended as per the requirements of parties of exchange.
Classification on the basis of Status / Position of Sellers
On the basis of seller's position, markets can be divided into Primary Market, Secondary Market, Terminal Market.
In Primary Market, producers sell primary goods such as agricultural products, food grains, livestock, raw materials etc. to wholesalers or commission agents.
Secondary Market consists of the wholesalers who sell products or goods to retailers, after getting them directly from the producers or manufacturers.
In this type of market retailers, sell products to the final consumers.
Classification on the basis of Product
On the basis of products or nature of products, markets can be classified in the following three categories.
The market where consumers and industrial commodities like cloths, rice, machines, equipment, tea, soaps, fruits, vegetables are bought and sold is called the commodity market. Consumer goods and industrial goods are available in this type of market.
Capital / Financial Market
The markets where financial instruments are available, such as deposit of cash, provision of loans, buying and selling of shares, debentures and securities etc. is known as Capital Market. It can further be divided into "Money Market" and "Securities / Stock Market". It also provides short term and long term loans to individuals and organisations.
If the physical goods are not transferred but services are purchased and sold, then it is known as the Services Market. Organisations like electricity boards, telecommunication companies, water supply department etc. are included in this type of market.
Classification on the basis of Competition
On the basis of the competition in production, distribution and demand and supply of the goods and products market can be divided into three different kinds.
A market, where the number of buyers and sellers are large, similar prices for same or homogeneous products is determined from free interactions between the buyers and sellers. Perfect competition takes place between sellers as well as the buyers. Free entry and exit of buyers and sellers are permitted. The maximum output which an individual firm can produce is relatively small as compared to the total demand of the product, so that a firm cannot cannot affect the price by varying it's supply output. With many firms and homogeneous products under perfect competition, no individual is in a position to influence the price of the product and therefore the demand curve facing it will be a horizontal straight line at this level of the prevailing price in the market. Perfect Markets are rarely found in practice.
In Imperfect Markets, products can be similar but not identical. Customers may have to pay different prices for similar kinds of products, as post sale services, packaging, credit facility, discounts etc. can account for product differentiation and price discrimination. Most of the transactions take place in Imperfect Markets.
If there is full control of any producer or seller over the market, then such markets are called Monopoly Markets, the producer determines the prices of it's products in his own will. In such markets, there is no competition, the price is determined by the interest of sellers. such type of markets ca only exist in limited or small areas.