Definition of Market 

A market is a physical structure, virtual system or group of Infrastructures designated for parties to buy and sell goods and services. Markets allow for the distribution and allocation of resources in a particular location. The prices of goods or services depend on the market, which is primarily influenced by supply and demand. 

How is a Market created?

A market can be created on the spot or over time as an organised structure to exchange ownership of products. Markets can vary based on the products sold, location, target, government policies, taxes, size, liquidity and market concentration. 

In describing the general term “market”, the presence of a seller and a buyer is needed to make a market functional. A seller has a good or service that they can offer, while a buyer is willing to pay a fixed or negotiable cost for being offered that service. However, a third party can be introduced into the setting, and this third party is called a competition.

Market Structures

A market structure refers to the economic habitat that a business operates in. It determines how a business operates and what the possibilities are for many to transact in such a market. Suppose a market structure allows many to operate in it. In that case, there is room for competition and competitive advantage, and a market structure with little or no competition will require government regulation to maintain the standard price. 

To recognise the market structure operational, there are some features to consider: 

• Difficulty of the seller or organisation to enter the market
• Difficulty of the seller or organisation to exit the market
• The number of customers the market can reach 
• The Prices of the goods or services
• The degree of saturation of the companies in the market
• The degree of homogeneity or discrepancy in the company’s products. 

Types of Market Structures

• Perfect Competition

In a perfect competition structure, many small companies sell the same products and compete with each other. These companies do not influence the price of the product because consumers can easily predict the price. If a seller increases the price, the consumer has enough sellers to buy the product from. The seller can quickly enter or exit the market.

• Monopolistic Competition

In monopolistic competition, it is also easier to enter the market because it allows many sellers to transact. Seller organisations can sell similar products with little difference, giving them a portion of control in the market. A seller can get buyers to pay a few extra dollars because of the distinction of their business. However, an outrageous increase will turn the buyers over to another seller.

• Oligopoly

In an Oligopolistic market structure, a few large sellers serve a large consumer base. Entering this market structure is challenging because it is capital-intensive and usually requires a patent. There is a combination of the principles of perfect competition and monopolistic structure. This means that if a company reduces the price of their product, others might also be forced to reduce their price to stay competitive.

Sellers in an Oligopolistic structure also find it easy to collaborate because they have seen that working together is more beneficial than competing.

• Monopoly 

In a monopoly, a single company serves a large market. Because of the outrageously high cost of entering, it is ineffective for another company to invest in that field to serve that singular market. In most cases, the government has to regulate the organisation to ensure it does not charge an exorbitant price for the product or service. A typical example is investing in the power generation sector in a specified location. 

Types of Market 

• Underground/Black Market

An underground market, also known as a black market, describes an illegal market where the exchange occurs without the knowledge of the government or relevant regulatory bodies. Most underground markets are used to circumvent taxes, levies and necessary exchange fees. Underground markets often do not operate cashless because they need to transact non-traceably. Although underground/black markets are considered illegal, they play a significant role in sufficing for the product’s circulation.

• Auction Market

This market brings different sellers and buyers together in a unique manner. As used in an auction market, the buyers or bidders attempt to outpay each other to secure the goods. Usually, the highest bidder secures the product. Most common auction markets sell arts, antiques, livestock, bonds, notes and bills.

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• Financial Market

If you are familiar with securities, stocks, currencies and assets, then the term ‘financial market’ will not be strange. This is where all these instruments are traded, forming the fundamentals of any capitalist society. In the past, financial markets mainly consisted of physical locations like the New York Stock Exchange, Nasdaq, and many other prominent financial markets. However, in recent times, the emergence of the online financial market has made the market accessible to many. 

Market Regulation

The market depends on fundamental principles like the law of supply and demand, which determines the prices of goods and services. While these fundamental laws are not always responsible for price elasticity, the market is regulated by laws and governing bodies in the state, region, or country.