A market exists when buyers wishing to exchange money for a good or service are in contact with sellers who are willing to exchange goods or services for money.

Thus, a market is defined in terms of the existence of fundamental forces of supply and demand and is not necessarily confined to a particular geographical location. The concept of a market is basic to most contemporary economies, particularly in a free market economy, where resources are allocated through this mechanism.

Market

A market is the area within which the forces of demand and supply converge to establish a single price. The term ‘market’ does not mean a particular marketplace in which things are bought and sold but the whole of any region in which buyers and sellers are in such free intercourse with one another that the prices of the same goods tend to equalize easily and quickly.

Classification of Agricultural Markets

1. On the Basis of Location

i. Village markets: A market located in a small village where major transactions take place among the buyers and sellers of a village is called a village market. These markets are essential for agricultural communities as they facilitate the trade of local produce.

ii. Primary wholesale markets: These markets are located in big towns near production centres. In these markets, a major part of the agricultural produce is brought for sale by farmers themselves. Transactions in these markets usually take place between farmers and traders.

iii. Secondary wholesale markets: These markets are located generally at district headquarters or important trade centres near railway junctions. Major transactions in agricultural commodities take place between village traders and wholesalers or between wholesalers and retailers.

The bulk of the arrivals in these markets is from other markets, and the produce is handled in large quantities, requiring specialised operations for services like storage, handling, and banking.

iv. Terminal markets: A terminal market is one where the agricultural produce is either finally disposed of to consumers or processors or assembled for export. Merchants in these markets are well-organised and use modern methods of marketing.

These markets are usually found at ports with sufficient warehousing and storage facilities and cover a wide area, sometimes extending over multiple states.

v. Seaboard markets: These markets are located near the seashore and are mainly intended for the import and export of goods. Examples include Bombay, Madras, and Calcutta.

2. On the Basis of Area/Coverage

i. Local or village markets: Buying and selling among buyers and sellers occur from the same village or nearby villages. These markets mainly exist for perishable commodities in small lots, such as local milk markets or vegetable markets.

ii. Regional markets: A market in which buyers and sellers of a commodity are drawn from a larger area than local markets. Regional markets in India commonly exist for food grains.

iii. National markets: A market in which buyers and sellers are at the national level. National markets typically exist for durable goods like jute and tea.

iv. World markets: A market in which buyers and sellers are drawn from the whole world. These markets exist for commodities with worldwide demand or supply, such as coffee, agricultural machinery, and gold.

3. On the Basis of Time

i. Short period markets: These are held only for a few hours, and the products traded, such as fish, vegetables, and milk, are highly perishable. Prices in these markets are primarily determined by the demand for the commodities, as supply cannot be easily adjusted within a short period.

ii. Long period markets: These markets last longer than short period markets, and the commodities traded are less perishable, such as food grains and oilseeds, which can be stored for some time.

iii. Secular markets: These are permanent markets where durable goods, such as agricultural tools, machinery, and fertilizers, are traded. The commodities in these markets can be stored for many years.

4. On the Basis of Volume of Transactions

i. Wholesale markets: In these markets, agricultural commodities are bought and sold in large quantities or bulk. Transactions typically occur between traders rather than consumers.

ii. Retail markets: Here, commodities are sold to consumers in smaller quantities according to their needs. Retailers purchase goods in wholesale markets and then sell them to individual consumers. These markets are usually located near consumers for convenience.

5. On the Basis of Nature of Transaction

i. Spot or cash markets: Goods are exchanged for money immediately after the sale, making these markets ideal for immediate transactions in agricultural produce.

ii. Forward markets: In these markets, the sale of a commodity happens at time ‘t’, but the exchange of the commodity takes place on a specified future date. For example, forward contracts for groundnut oil.

6. On the Basis of the Number of Commodities in which Transaction Takes Place

i. General markets: These markets deal in all types of commodities, such as food grains, oilseeds, fiber crops, and other agricultural products.

ii. Specialized markets: These markets are dedicated to specific groups of commodities, like food grains, vegetables, wool, and cotton.

7. On the Basis of Degree of Competition

i. Perfect markets: These markets fulfill the following conditions: a large number of buyers and sellers; perfect knowledge of demand, supply, and prices; uniform pricing over an area (minus transportation costs); and uniform pricing for different forms of the same product, such as wheat, rice, and cotton.

ii. Imperfect competition: In imperfect markets, buyers or sellers (or both) lack complete knowledge of market conditions, leading to different prices for the same commodity at the same time.

Imperfect competition is categorized into three forms:

A. Monopolistic competition: When many sellers offer differentiated or heterogeneous products (e.g., branded tractors), this is called monopolistic competition. The key features include a limited number of sellers, non-homogeneous products, and varied pricing based on demand and transportation costs.

B. Oligopoly: This refers to a market with more than two, but still a few, sellers of a commodity. When there are few buyers, it is termed an oligopsony market. For example, the toothpaste market can be considered oligopolistic. In a perfect oligopoly, the commodities are homogeneous, while in an imperfect oligopoly, the products are differentiated.

C. Monopoly: In a monopoly, a single seller controls the supply of a product, and there are no substitutes for that product. This control allows the monopolist to set prices higher than in competitive markets. For instance, farmers may face monopoly markets when purchasing electricity for irrigation. In a monopsony market, a single buyer dominates the market.

8. On the Basis of Extent of Public Intervention

i. Regulated markets: These markets operate under specific rules and regulations to standardize marketing costs and practices. They help protect farmers by providing organized markets where the interests of all stakeholders, including producers and consumers, are safeguarded.

ii. Unregulated markets: These markets function without formal rules, leaving traders to frame their own regulations. Such markets often suffer from unfair practices, including unauthorized charges for marketing services, which can negatively affect both farmers and consumers.

This classification of agricultural markets provides a comprehensive understanding of the different types of markets that exist, helping in the efficient organization of agricultural trade and market operations.

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