The document discusses different types of markets, including monopoly, perfect competition, wholesale, and retail markets. It defines a market as an arrangement where buyers and sellers interact directly or indirectly to buy and sell goods. A monopoly exists when there is a single seller of a unique product with no close substitutes. Perfect competition exists when many small firms sell homogeneous products with free entry and exit into the market. Wholesale markets involve the sale of goods in large quantities to retailers, while retail markets involve the sale of goods in small quantities directly to consumers. Online markets allow consumers to directly purchase goods or services from sellers over the internet.

1. Market
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12
MARKET
Inpreviouslessonwestudiedaboutproductionandfactorsofproduction.Whatever
goodsareproducedbythecombinedeffortsoffactorsofproductionhavetobeplaced
inmarketorofferedforsaleinthemarket.Wheneverandwhereverwewanttohave
anything,wegotothemarketandbuythatthing.Itmaybesoap,shampoo,cloth,and
so on.
OBJECTIVES
Aftercompletingthislesson,youwillbeableto:
explain the meaning of market;
understand the structure of market;
distinguish the markets on the basis of channels of distribution;
explain the meaning of online market.
12.1 MEANING OF MARKET
Ordinarily,thetermmarketreferstoaplace,wheregoodsarepurchasedandsold,such
asBigBazaars,ChandniChowkinDelhi,FashionStreetinMumbaiandmanymore.
Marketshouldnotbelimitedtoaparticularplace.IneconomicsMarketcanexisteven
withoutpersonalcontactofbuyersandsellers.Inthisway,“Marketreferstothe
arrangementinagivenareawherebybuyersandsellerscomeincontactwith
eachotherdirectlyorindirectly,tobuyorsellsgoods.”Thisdefinitionindicates
thatfacetofacecontactisnotnecessaryformarket.Buyersandsellerscancarryon
theirtransactionindirectly,throughagents,telephone,mobileorinternet.Whateverway
thebuyersandsellersinteract,theydosotoexchangegoodsandservicesformoney.
In the process, the price and quantity of the goods and services traded are also
determined.

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Notes
Thus,marketisamechanismorsystembywhichbuyersandsellersinteracttodetermine
thepriceandquantityofagoodorservice.”
Important Features of a Market
Asperthedefinitionstatedabove,amarkethasfollowingfeatures:
1. Commodity,i.e.,theremustbeacommoditywhichisbeingdemandedand
sold.
2. Buyers and sellers, i.e., there must be buyers and sellers of the commodity.
3. Communication, i.e., there must be communication between buyers and
sellers.
INTEXT QUESTIONS 12.1
Fillintheblanks.
1. Amarketexistswherethereis.........................betweenbuyersandsellers.
2. Buyingandsellingtakesplaceina.........................
3. Theprocessof.........................and.........................takesplacesimultaneously
inmarketplace.
4. Amarkethasexistenceof buyersandsellers,communicationbetweenthemand
.........................
12.2 STRUCTURE OF MARKET
By“structureofmarket”wemeannatureoftheproduct,numberofsellersandbuyers
inthemarketetc.Onthisbasiswecangivetwoextremeformsofmarket:
1. Monopolymarket 2. PerfectlyCompetitivemarket
12.2.1 Monopoly
The word “Monopoly” has been derived from the two Greek words ‘Monos’ and
‘Polus’meanssingleseller.’Monos’meanssingleand‘Polus’meansseller,sotheword
“Monopoly”meanssingleseller.Monopolyisamarketstructureinwhichthereisa
singlefirmproducingalltheoutputandthereisnoclosesubstituteofproductsoldby
themonopolist,therebyrulingoutanysortofcompetition.Inthismarketthesellerdoes
notfaceanycompetitionbecausetherearenoothersellersoftheproductheisselling.
The seller is in a position to charge a high price of his product depending upon the
response of the consumers. Example: In India the government has monopoly in
atomic energy, defence, public water supply system, railways, etc.

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Features of Monopoly
(i) Asinglefirm:Themonopolististheonlyproducerofthegood.Hehasgotno
competitor.Heistheonlyonewhorulesthemarketwithhiscommodity.
(ii) No close substitute of the commodity: There are no close substitutes of the
commodityproducedbythemonopolist.“Closesubstitute”meansanothersimilar
producthavingsameuse.Themonopolistproducesalltheoutputinaparticular
market.
(iii) Pricemaker:Themonopolistbeingthesolesellerofthecommodityinthemarket
decidesthepriceofthecommodityasthereisnoonetochallengehisprice.The
monopolistisa‘price-maker’.Itdoesnotmeanthatmonopolistcanfixbothprice
andthequantitydemanded.Ifhefixesahighprice,lessquantityofthecommodity
willbedemanded.
(iv) NoEntryofNewFirm:Itisnotpossiblefornewfirmstoenterinthemarketand
competewiththesingleseller.Beingthesinglesellerorfirm,thereisnodifference
betweenfirmandindustryundermonopoly.
(v) The aim of the monopolist is to maximise profit
12.2.2 Perfectly Competitive market or Perfect Competition
Theotherextremesituationofmonopolymarketiscalledperfectlycompetitivemarket
orperfectcompetition.
FeatureofPerfectCompetition
(i) Large number of sellers and buyers – As against monopoly market, a
competitivemarkethaslargenumberofsellerssellingthecommoditytoalarge
numberofbuyers.
(ii) Homogeneousproduct:Underperfectcompetitiononlyasingleproductissold.
Thismeansallthesellerssellthesametypeofproducttobuyers.Sotheproduct
isaperfectsubstitute.
(iii) Freeentryandexit:Underperfectcompetitionthereisnobaronanynewfirm
orproducertoenterthemarkettosellorproducetheproduct.Similarlyifany
existingsellerwantstoexitthenheisfreetodoso.
(iv) Everysellerwantstoearnmaximumprofit
(v) The government’s role is to provide protection to sellers and do not
interfere in business.
(vi) Underperfectcompetitionsellersandbuyershaveperfectknowledgeaboutthe
product.
(vii) There is no bar on factors of production such as labour etc. to move from one
productionunittoanothertodowork.

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Notes
MarketStructureinRealWorldSituation
Thesituationofmonopolyorperfectcompetitionisnotseeninrealworld.Asper
lawprivatemonopolyisnotallowed.Onlymonopolybythegovernmentexists.
Now-a-daysthemarketisfloodedwithsomanyvarietiesofthesameproductthat
perfectcompetitioninrealsensealsodoesnotexist.Taketheexampleof“soap”–
aproductmeantfortakingbathorwashinghands.Underperfectcompetitionitis
expectedthatonlyonetypeofsoapwillbesoldbymanysellers.Butinrealitywe
havedifferentbrandsofsoapsavailableinthemarketandsoldbydifferentfirmssuch
as Lux, Dove, Liril, Godrej, Nim, Mysore Sandal, Johnsons, Hamam, dettol,
Lifebuoyetc.Theseareallusedforthesamepurposei.e.takingbath.buttheyare
differentintermsofcolour,packaging,fragranceetc.Allthesesellersalsoincur
heavyexpenditureonadvertisementtoselltheirkindofsoap.Contrarytoperfect
competition where there are many sellers selling a single product without any
advertisement,inthiscasetherearemanysellerssellingdifferentvariationsof
particularproduct.Sowecannotsaythatthistypeofmarketisperfectlycompetitive.
Thistypeofmarketiscalledmonopolisticorimperfectcompetition.
INTEXT QUESTIONS 12.2
1. Whatismeantbymonopoly?
2. GivetwoexamplesofmonopolyinIndia?
3. Whyistherenodifferencebetweenfirmandindustryundermonopoly?
4. Whetherthemonopolyfirmispricemakerorprice-taker?
5. Whatdoyoumeanby“freeentry”underperfectcompetition?
6. Say Yes or No
(a) Thereisonesellerunderperfectcompetion.
(b) Therearedifferentgoodssoldunderperfectcompetition.
(c) Governmentinterferesin productionunderperfectcompetition.
(d) Productisperfectsubstituteunderperfectcompetition
(e) Buyershaveperfectknowledgeabotuproductunderperfectcompetition
12.3 CLASSIFICATION OF MARKETS ON THE
BASIS OF CHANNELS OF DISTRIBUTION
OR SALEABLE LOTS
Onthebasisofchannelsorsaleablelots,marketsareclassifiedinto:
(a) Wholesalemarkets
(b) Retailmarkets.

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(a) Wholesalemarkets
Awholesalerisadistributorormiddlemanwhosellsmainlytoretailersandinstitutions,
ratherthanconsumers.Wheninamarketgoodsaretransactedinbiglotsitiscalleda
wholesalemarket.Wholesalersusuallydonotsellgoodsinsmalllots.Theyusuallysell
totheretailers.Thewholesaleristheessentiallinkbetweenmanufacturersandend
consumers.Itisthepresenceofwholesalersthatmanufacturersareincomfortzoneas
theycanselltheirproductsinlargequantitiesandfocusonbusinessandproduction.
(b) Retailmarkets
Retailconsistsofthesaleofphysicalgoodsormerchandisefromafixedlocation,such
asadepartmentalstore,shopkeeperinsmallorindividuallotsfordirectconsumption
bythepurchaser.Inretailmarkets,goodsaresoldinsmalllots.Retailersnormallysell
totheultimateconsumers.
Manufacturer→Wholesaler→Retailer →Consumers
Inthechannel ofdistributionofgoodsandservicesthepositionofaretailerismost
importantasitisindirectcontactwiththefinalconsumers.Sothelocationoftheretail
shoporoutletisveryimportantascomparedto wholesalebusiness.Aretail outletmust
belocatednearertoresidentiallocalitiessothatpeoplecaneasilycometobuygoods
andservices.Thereatileralsohastoincurlotofexpenditureondecorationofoffices
shops and proper presentation of the commodities so that consumers are attracted
towardstheretailshop.
INTEXT QUESTIONS 12.3
1. Givesomeexamplesofretailoutletinyourlocality.
2. DefineWholesaler.
3. DefineRetailer.
4. DefineRetailMarket.
12.4 ONLINE MARKET OR ONLINE SHOPPING
Itisaninnovativeprocesswherebyconsumersdirectlybuygoodsorservicesfroma
sellerwithoutanintermediaryserviceovertheinternet.Itisalsoknownaselectronic
commerce.Nowadays,onlineshoppinghasbecomepopular,shoppinghasevolved
withthegrowthoftechnology.Inthisshoppingonecanuseacreditcardordebitcard
tomakepayments,howeversomesystemsenableuserstocreateaccountsandpayby
alternativemeans,suchas:
Billingtomobilephonesandlandlines
Cashondelivery

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Notes
Cheques
Debitcard
Postalmoneyorder
Once payment has been accepted the goods or services can be delivered through
downloading,distribution,in-storepickingetc.
Onlinestoresareusuallyavailable24hoursaday,andmanyconsumershaveinternet
accessbothatworkandathomesotheycan,ratherthanvisitinganystoreorshop,they
prefertopurchasethroughinternetonly.Onlinestoresmustdescribetheproductsfor
salewithtext,photos,andmultimediafileswithdetailinstructions.Inpresentscenario
throughonlineshoppingonecanshopforvarietiesofgoodsandservicesinnotime.
Over all, this mode of shopping has gained importance in recent years only due to
exposuretotechnologyinthemarket.
WHAT YOU HAVE LEARNT
Ineconomicsmarketreferstothearrangementinagivenareawherebuyersand
sellerscomeincontactwitheachotherdirectlyorindirectlytobuyorsellgoods.
MonopolyandPerfectCompetitionaretwoextremeformsofMarketstructure.
Monopoly is a market structure in which one firm possesses control over the
market.Itisamarketofsingleseller,whosellsauniqueproducthavingnoclose
substitutes
PerfectCompetitionisamarketstructurewheremanyfirmssellahomogeneous
product.Thereisfreeentryandexitunderthismarket.Buyersandsellershave
perfectknowledgeaboutthemarketsituation.
A wholesaler is a distributor or middleman who sells mainly to retailers and
institutions,ratherthanconsumers.
Aretailerisonewhosellsvarietiesofgoodsorservicesdirectlytothegeneralpublic.
Onlineshoppingistheprocesswherebyconsumersdirectlybuygoodsorservices
fromsellerwithoutanywastageoftime,withoutanintermediaryservice,over
internetoncomputer.
Onlineshoppingisaformofelectroniccommerce.
TERMINAL EXERCISE
1. DefineMarket.
2. DefinePerfectCompetition.

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3. DefineMonopoly.
4. DifferentiatebetweenRetailandWholesaleMarket.
5. ExplainthefeaturesofPerfectCompetition.
6. ExplainthefeaturesofMonopoly.
7. Doyouthinkthatretailerisconcernedaboutlocationandpresentationofgoodsthat
heoffersforsale?Ifyesthenwhy.
ANSWERS TO INTEXT QUESTIONS
Intext Questions 12.1
1. Interaction 2. Marketplace 3. Buying;Selling 4. commodity
Intext Questions 12.2
1. Monopolyisamarketstructureinwhichasinglesellerproducingalltheoutputand
thereisnoclosesubstituteofproductsoldbythemonopolist.
2. Atomicenergy,IndianRailwaysandPostandtelegraph
3. Becausemonopolististhesingleproducer/seller,
4. Price-maker
5. "FreeEntry"meanssellersunderperfectcompetitionarefreetomoveinandout
ofthemarket.Therearenobarriersonentryofnewfirms.
6. (a) no (b) no (c) no (d) yes (e) yes
Intext Questions 12.3
1. Stationeryshops,KendriyaBhandar,Motherdairy,Medicineshops
2. A wholesaler is a distributor or middleman who sells mainly to retailers and
institutions,ratherthanconsumers.
3. Retailer is one who sales goods or merchandise from fixed location such as
departmentalstore,shopkeeperinsmallorindividuallotsfordirectconsumptionby
thepurchaser.
4. Retailmarketmeansthemarketinwhichgoodsaresoldinsmalllotstotheultimate
consumers.