Market Structure

Market Structure

The study of market is very important in economics. It is the meeting point of demand and supply or buyers and sellers. The interaction between demand and supply determines the equilibrium price of a commodity. Market price and its trend influence the basic economic activities in a society. In a capitalist society production, consumption, exchange and distribution are determined by the market. In such a society the role the Govt. is kept at a minimum. Hence capitalist economy is called the market economy. Therefore it is necessary to study the nature and characteristics of different markets.

Meaning of Market

In common language, market refers to a particular place where buyers and sellers gather to carry on the process of buying and selling. But in economics, the term market is not confined to a particular place or a geographical area. The term is generally associated with a particular commodity. In this sense we talk of rice market, gold market, tea market etc. Which is not confined to a particular place. The buyers and sellers can effect transactions by residing in different places. According to John F. Due, “A market consists of a group of buyers and sellers in sufficiently close contact with one another that exchange takes place among them.”  This definition shows that contact between buyers and sellers for effecting transaction of a good is the essential condition of a market.

According to Cairncross, “Market is simply the network of dealing in any factor or product between buyers and sellers.”

From the above definitions it is clear that market refers to the buyers and sellers of an economic good having close contact with one another for effecting transactions.

Forms of Market

On the basis of the degree of competition market can be broadly divided into perfect competition and imperfect competition. Again imperfect competition can be subdivided into monopoly, monopolistic competition and oligopoly. Below we discuss about these market forms and their characteristics.