Question

Explain what a market is by writing a single definition of the term “the market” as it is used in expressions like “the market for wheat,” “the legal US market for kidneys,” and “the market for the common stock of a particular US corporation.” Explain why your definition is broad enough to apply to all markets, including each of those listed above. Also explain why your definition is narrow enough to exclude things that are not markets. A good definition captures the most essential features that all markets have in common. If a market’s characteristics listed in your definition change, we should be able to agree that the market has changed.

Answer 1

Answer :- Market is defined as the entire area in which buyers and sellers are in contact with each other for the purchase and sale of the commodity. It does not refer to any particular place but simple to mechanism through which buyers and sellers of a good or service are brought together to exchange goods or services.

Market may assume different forms. There are various factors determining the particular form of market :-  

(i) Number of buyers and sellers :- Whether the number of buyers and sellers (or firms) in the market are few or large or one.

(ii) Nature of the product :- Whether the product of different firms or sellers are homogeneous or differentiated; whether they are perfect substitutes, close substitutes or distinct substitutes.

(iii) Entry and Exit of firms :- Whether the entry and exit of the firms in the market is free or not. Whether there are restrictions on the entry of firms or no restrictions on the entry or exit of the firms.

On the basis of three factors mentioned above, The three main forms of market are distinguished as :-

1). Perfect competition.

2). Monopoly.

3). Monopolistic competition.