Economics

Market: Types of Market

len Alfred Ajibola - Wed, 22nd January, 2020 @ 7:02 PM

Topics in Economics

Types of capital market: Primary market and secondary market Capital market explained with its functions Basic tools for economic analysis: Graphs explained with its characteristics and importance Basic tools for economic analysis: Tables explained with its characteristics and importance Factors affecting population in economics Advantages of Inflation Disadvantages of Inflation Concept of Inflation in Economics Scheme of work for Economics, SS1, First Term Scheme of work for Economics, SS1, Second Term Scheme of Work for Economics, SS1, Third Term Functions of the Wholesaler Advantages and Disadvantages of the Wholesaler Wholesale Market: Who is a Wholesaler? Characteristics of the Wholesaler Retail Market: Who is a Retailer and Examples of Retailers Market: Types of Market What is a Market in Economics? Elasticity of supply explained with its types Supply Elasticity: Elasticity of Supply explained


Academic Questions in Economics

Please click here to see all Questions and Answers

_____ is defined as a gradual and sustained rise in price level of goods and services in relation to their availability.

  • A. Basis Point Rate

  • B. Hike Rate

  • C. Elastic Supply

  • D. Elasticity of Price

  • E. Price Inflation

  • F. Aggregate Supply

The wholesalers can bring about an economy of scale.

  • A. True

  • B. False

Which of the following statement isn't a characteristics of the wholesaler?

  • A. They may have to operate in specific areas or regions accorded them by the producer

  • B. They are often popular in the line of goods they supply

  • C. They are not risk bearers

  • D. They have good storage facilities

  • E. They often pay for goods supplied by the manufacturers in advance

  • F. They usually have business agents or brokers

The wholesalers act as the middlemen in supply chain.

  • A. True

  • B. False

Large retailers who buy directly from manufacturers are termed as _____.

  • A. Wholesale Retailers

  • B. Certified Retailers

  • C. Codified Retailers

  • D. Commodity Retailers

  • E. Manufacturers Retailer

  • F. Conspicuous Retailers

_____ is a market whereby the sellers buy goods in lesser quantities from the wholesalers and sells in bits to the final consumers.

  • A. Commodity

  • B. Retail

  • C. Wholesale

  • D. Labour

  • E. Common

  • F. General

Which of the following is not a financial market?

  • A. Money Market

  • B. Bond Market

  • C. Foreign Exchange Market

  • D. Virtual Market

  • E. Capital Market

  • F. Stock Exchange Market

A _____ market provides a platform whereby job seekers link up with employers in an attempt to be hired.

  • A. Wholesale market

  • B. Bond market

  • C. Physical market

  • D. Virtual market

  • E. Factor Market

  • F. Labor Market



Types of Market:

Market can be categorized into various types based on the following criteria:

  1. Commodities that are bought and sold.

  2. Channel of distribution. They include the wholesale market and retail market.
    Please read on the concept of a retail market here.

  3. Market structure. (Degree of competition and prices).

In this article, we will discuss on the types of market based on commodity bought or sold.

Please read on the concept of a market in economics here.

 

Types of Market based on Commodities Bought and Sold

Some overlaps may occur during a careful analysis of the various types of market based on the commodities bought and sold.

The market types (based on commodities bought and sold) are explained below:


1. Primary Products Market: Primary products refers to agricultural produce in their unprocessed (raw) form. In a primary market, unprocessed agricultural products are bought and sold.

Whenever we buy foodstuffs in their raw form, we may likely purchase them from the primary products market.

Similarly, manufacturing industries will usually buy their raw materials (primary products) from this market.

Please read on the types of production here.

 

2. Consumer Goods Market: This is a market where consumer goods (processed food and other finished products) are bought and sold.

Products like creams, clothes, shoes, processed food and books are bought in the consumer goods market.

You can read on scale of preference and opportunity cost here.

 

3. Black Market: This is a market setup for the purpose of selling various products outside the government's rader.

Oftentimes, illegal products like firearms, drugs and various computer malware are purchased here. This purchases may be done through a medium termed as dark web.

Understand that crypto currencies are well accepted as means of payment in the black market.

You can read on cheques (checks) as methods of payments here.

Note: A black market has its advantages and disadvantages.

Please read more on black market, its advantages and disadvantages.

 

4. Auction Market: An auction market is one where a seller will only sell a product to the highest bidder.

Auction markets are usually conducted when one is willing to put out an iconic and legendary material for sale.

Auction market may also be carried out in various religious launchings like harvest and bazaar celebrations.

 

5. Knowledge Market: Information and knowledge on various products and services are exchanged in the knowledge market. (This is similar to the functions of search engines like Google).

Functionally, knowledge markets can also stimulate the desire to satisfy the demand of something that's yet to exist. (Search engines may not be able to offer this knowledge).

Len Academy is an example of a knowledge market that offers all its services for free. Some other platforms do act as knowledge markets but not without making some form of payments; (which may not be a bad idea).

Also, websites that allow readers to post questions while other readers profer answers to such questions are also considered as knowledge markets.

You can attempt Len Academy questions on various academic subjects here.

Note: An individual's data may be collected in the knowledge market.

 

6. Physical Market: A physical market is a market whereby the buyers physically meet the sellers before purchases can be made.

Supermarkets, shopping malls and the general community markets are examples of physical market.

Note: The buyer will usually pay via cash or Point of Sale (PoS) to the seller in a physical market.

Please read on methods of payment and characteristics of legal tender here.

 

7. Virtual or Non Physical Markets: A market is considered to be virtual when the buyers and sellers transact business withing physically meeting each other.

The internet provides an excellent platform for the workings of a virtual market. In this case, such business is done online. Examples of virtual market include Jumia, Amazon, eBay and web host providers.

As a web developer, I have never visited the company that host my websites. I only communicate securely with them online while aslo making all my payments online.

Please read on the internet, world wide web and notable dates of internet evolution here.

It is noteworthy to state that online payment solutions are usually integrated into the web application (website) in order to facilitate payments (from a buyer to the seller in an online market). Importantly, the buyers ought to be careful when making online financial transactions due to the emergence of internet fraud.

Please read more on debit cards and credit cards here.

 

8. Labour Market: The labour market provides a platform where various job seekers (graduates and non-graduated) link up with the employers of labour in order to be hired.

In developing countries, the labour market will always appear to be populated with a large pool of job seekers searching for the few available jobs. To this end, the government of such countries is requires to make favourable policies for the masses, while also establishing the basic infrastructure towards attracting foreign investors into their country.

You can read more on the concept of a government here.

 

9. Factor Market: The factors of production are sold in the factor market. Factors of production include:

  • Land

  • Labour

  • Capital

  • Entrepreneur

 

10. Financial Market: Financial markets are involved in the exchange of liquid assets; (that is, money).

Note: Banks are generally involved in the financial market.

Financial market can be put into the followings:


I. Stock Exchange Market: This is a market that provide investors with an opportunity to buy shares, stocks and securities.

Examples of Stock Exchange Markets are the Nigerian Stock Exchange (NSE), Nasdaq, New York Stock Exchange, London Stock Exchange, Euronext Paris, SIX Swiss Exchange, B3, Canadian Securities Exchange and so on.


II. Bond Market: In a bond market, buyers and sellers are involved in the exchange of debt securities which are usually in agreement with the conditions of a bond.

A bond (in bond market) is a contract made by two or more parties in order to make one of the parties return money with interest at fixed intervals.

In a bond market, If a debtor fails to return the money at the appropriate time or interval, whatever consequent action agreed in the contract between both parties would be effected. An example of such consequent action could be the sale of the debtor's properties.

You can read on the disadvantages of money here.


III. Foreign Exchange Market: Currency are traded in this market. Usually, one person buys or exchanges a currency with the equivalent of another currency.

Since the foreign exchange market focuses more on currency exchange, it's therefore often referred to as a currency market.

Forex (which means Foreign Exchange) is a typical example of a Foreign Exchange Market.

You can read on global acronyms and their meanings here.


IV. Capital Market: This is a market that serves short and long term loans to individuals and institutions.

Capital Market will usually serve the needs of entrepreneurs who are in need of capital to start up a business.

Please read on how to start a home based fish farming here.


V. Money Market: This is a market where short term loans are granted.

Microfinance banks are considered to be an important aspect of the money market especially in the rural areas of developing nations. This is so because they will often give out short term loans to those who require it.

Please read on business structure (sole proprietorship) here.

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Amazing facts in Economics


Notable points in Economics

A unitary elasticity of supply is seen when a change in price brings about a corresponding and proportional change in the quantity of goods or services supplied.

The graph below shows a unit elasticity of supply:
Unit Elastic Supply Curve - Len Academy

Below is an instance of a unitary elasticity of supply:

  • If a 100% increase in the price of wheat translates into a 100% increase in the production and supply of wheat, then the supply elasticity is said to be unitary elastic and its value is equal to 1.

Unitary elasticity is always equal to 1, that is: Es = 1

The supply curve runs diagonally and will pass through the center.

Supply elasticity is defined as the rate at which an increase in price of goods translates into its increased production and availability in the market. Supply elasticity is also termed as price elasticity of supply.

Consider the statements below:

  • If a 100% increase in the price of rice translates into a 100% increase in the production and supply of rice, the supply elasticity is said to be unitary elastic and its value is equal to 1.

  • If a 100% increase in the price of rice translates into a 50% increase in the production and supply (quantity) of rice, the supply elasticity is said to be inelastic and its value will be greater than zero and less than 1. In this case, the exact value is 0.5: (value of change in the quantity of rice divided by value of change in price of rice = 50/100 = 0.5).

  • Please read on supply elasticity here

The individual demand schedule is a table that shows the demand of a commodity that an individual (consumer) purchased at various prices, and at a particular time.

The table below shows an individual demand schedule:

Price in Naira (of a tuber of yam)

Quantity demanded (per week)

500

5

400

10

300

15

200

20

100

25

The market demand schedule is also referred to as an aggregate demand schedule, total demand schedule or composite demand schedule.

This is a table that shows the different commodities purchased by all the consumers or customers in the market.

The market demand schedule is the summation of the individual demand schedules, showing the demand of different customers for a commodity at a particular price. It is shown in the table below:

Unit price of commodity (Naira)

Quantity demanded by consumer A (QA)

Quantity demanded by consumer A (QB)

Market demand (QA +  QB)

50

20

15

35

40

40

30

70

30

60

45

105

20

80

60

140

10

100

75

175

 

From the above table, notice that when the unit price of the commodity was 50 Naira, consumer A demanded 20 quantities while consumer B demanded 15 quantities.

Please read more on demand schedule here.

Below are definitions of demand from the perspective of some notable professors:

The demand for goods is a schedule of the amounts that buyers would be willing to purchase at all possible prices at any one instant of a time.

Professor Mayers

Demand is the various quantities of goods that would be purchased per time period at different prices in a given market.

Professor Hibdon

The demand for anything, at a given price is the amount of it which will be bought per unit of time at the price.

Professor Benham

Generally, demand is defined as the willingness of a person, buyer or consumer to buy a specific quantity of goods or service at a given price and time.

From the above definitions, we can infer that the definition of demand is referenced to three major factors. These are:

  1. Quantity of Goods Demanded

  2. Price

  3. Time

Please read more on the concept of demand here.