Different Types of Markets in Economics

Explore various types of markets in economics, from perfect competition to monopolies labour markets to online marketplaces. The study of these markets to understand how they function and impact the allocation of resources in an economy. The article discusses different types of markets as per different criteria, including product offered, buyer, competition, and geography. Learn the concept of economic activity, stages, types, and examples and understand the production of wealth through economic activity.

In market economics, different types of markets exist, depending on the competition and the industry. Before we move ahead, let us understand what is Market. 

The market is defined as one of the various systems, institutions, procedures, social relations, and infrastructures in which the parties participate in the exchange. Markets are critical as they determine the type of economy.

While it is possible to exchange goods and services through barter, most markets rely on sellers offering their goods or services (including labor) in exchange for buyers’ money. In simpler words, a market establishes the prices of goods and services in an economy.

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In this blog, we will cover the different types of markets on different criteria. Let us explore – 

Content

• Types of Markets According to Product’s Nature
• Types of Markets According to Their Geographical Area
• Market Types According to Buyer’s Nature
• Market Types Depending On The Competition

Types of Markets According to Product’s Nature 

This first classification differentiates the markets based on the characteristics of the goods exchanged, which can be perishable, durable, industrial, or a service.

• Perishable Goods Market – Perishable goods are items that can be destroyed in a specific period. Therefore, this type of market encompasses the potential buyers of goods that can go bad in a short period, such as food products, drugs, or cosmetics.
• Durable Goods Market – The durable goods market incorporates continuous use of the goods before they are destroyed, such as a car, an appliance, or a garment.
• Consumer Goods – Consumer goods are tangible commodities to meet the end user’s requirements. They are also referred to as final goods or end products, which users can find stocked on store shelves.
• Industrial Goods Market – Industrial goods are based on the demand for the consumer goods they help to produce. They are used to produce other goods, such as raw materials and manufactured products. Industrial goods are classified as –
  • Production goods – Production goods are used to produce a final consumer good or product.
  • Support goods – Support goods help in the production process of consumer goods.
• Services Market – Unlike goods, services are intangible and cannot be manufactured but provided, such as health, education, transportation, etc.

Types of Markets According to Their Geographical Area

In this case, the variable used to classify the markets is the geographic location of the consumers, which allows us to distinguish between local, regional, national, international, and global markets.

• Local Market – It is the smallest geographical area. This type of market encompasses consumers from a municipal or provincial level. One example is a small bakery that sells its products just in Noida.
• Regional Market – The regional market is broader than the previous one. For example, suppose the abovementioned bakery begins to carry out works and services in other districts of Uttar Pradesh or the national capital region. In that case, it receives the status of being a regional market player.
• National Market – As its name suggests, the potential buyers of this type of market are spread throughout the country. A reasonably clear example would be IRCTC, which provides ticketing, catering, and tourism services for the Indian Railways.
• International Market – The international market arises when a company extends its activity to various countries. Potential buyers can have different nationalities. MNCs are the best examples of such market systems.
• Global Market – Global market is the result of globalization. Companies that carry out commercial operations worldwide are a part of the global market system. The Internet has played a decisive role in consolidating global markets and reaching buyers across different countries and continents.

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Market Types According to Buyer’s Nature 

Not all buyers of goods and services are the same, which allows us to differentiate between four other types of markets based on buyer behavior –

• Consumer Market – The consumer market represents all buyers who seek to acquire the goods and services that are sold in the market to satisfy a need, so they are called consumers because they are the ones who use and consume the products. It could be a person who buys a bottle of pure water to quench his thirst.
• Labor Market – The labor market is where labor supply and demand converge. The labor supply consists of the set of workers willing to work and the demand for work from the set of companies or employers that hire them.
• Government Buyer Market – The government buyer market encompasses all government institutions that purchase goods and services to provide public services, such as healthcare, or that will be used for public investment, such as asphalt used in road infrastructure.
• Reseller Market – The reseller market includes all companies that buy products not to consume them but to resell them at a higher price than they bought and, thus, make a profit. We can take as an example any supermarket that buys products from industrial companies to resell them to the final consumer.
• Industrial Buyers Market – The industrial buyer market is formed by all companies that buy productive resources to carry out their production process. It could be a company that buys leather to produce shoes, bags, and belts.

Market Types Depending On The Competition

Based on the type of competition faced by product producers or suppliers, markets can be divided into:

Perfectly Competitive Market – The perfectly competitive market is hypothetical. In this type of market, all the products are homogeneous, and there are no barriers to entering the market. There are many buyers and sellers where no individual buyer or seller can affect prices.

Monopolistic Competition – There are many buyers and sellers, but no one sells homogeneous products. The products are similar, but the sellers sell slightly differentiated products, and the consumers can choose one product over another. This is a more realistic type of market. Sellers are the price setters and can charge a marginally higher price. For example, milk products in the market are similar but slightly differentiated.  

Oligopoly: This is a concept where just a handful of firms are in the market, and there is no clarity about their number. Some firms dominate the market, and buyers hold more importance over sellers. In such a case, the firms can either compete or collaborate. They need to use their influence to set product prices. In an oligopoly, there are entry barriers, and new firms may find it difficult to establish.

Monopoly: Only one seller controls the entire market. It can set product costs per its wish and hold the market monopoly. Buyers must pay prices set by the seller. These highly undesirable types can be considered another hypothetical scenario after perfect competition.

Miscellaneous Types of Market

• Traditional Market: A traditional market is a platform where goods are sold and purchased face-to-face, often in open or tiny shops. Goods are fresh and locally manufactured, and prices are negotiated. Example: A farmer's market where they sell fruits, vegetables, and milk products to consumers directly.
• Digital Market: A digital market is a computer network system by which people acquire and exchange online products and services. It permits people and firms to conduct transactions without physical contact. For example, Amazon, Myntra, eBay, etc., are all digital markets where you purchase merchandise over the net, and they ship it to your home.
• Black Market: A black market is an unlawful market through which goods and services are sold without any respect for government regulations. This usually entails prohibited items or products sold untaxed. Example: Selling forged passports, contraband items, or prohibited drugs is in the black market.
• Consumer Market: A consumer market is a market in which businesses sell goods and services directly to consumers. These are everyday items that customers purchase regularly. Example: Grocery stores, fashion stores, and online shopping portals fall under the consumer market.
• Business-to-Business (B2B) Market: A B2B market sells products or services to other businesses rather than directly to consumers. These products are usually utilized in the production of different goods. Example: A business that sells equipment to a car manufacturer is in the B2B market.
• Commodity Market: A commodity market is where individuals sell and purchase raw goods and natural resources such as oil, gold, wheat, and cotton. Prices are based on supply, demand, and world conditions. Example: The New York Mercantile Exchange (NYMEX) is a commodity market exchanging oil and gold.
• Real Estate Market: A real estate market is where individuals sell, purchase, and lease land, homes, offices, and buildings. Prices are influenced by locality, demand, and economic factors. Example: If you rent an apartment or purchase a house, you are a part of the real estate market.

Conclusion

Understanding and knowledge of different types of markets in the economy is crucial for consumers, sellers, producers, as well as governments alike. It will help them make informed prices, production, and investment decisions. Amidst the dynamic economies, markets continue to evolve, with technology, globalisation, and consumer tastes included. Recognizing such market structures encourages more participation in economic activities and maintains industry growth.