Concept of Market

In everyday life, the word 'market' usually makes us think of a place like a bazaar, shopping mall, or vegetable market where buying and selling take place.
In economics, the idea of a market is wider: it is not only a place but any arrangement that brings buyers and sellers into contact so that they can exchange goods and services.

According to Augustin Cournot, “Economists understand the term 'market', not any particular marketplace in which things are bought and sold, but the whole of any region in which buyers and sellers are in such close contact with one another that the prices of the same goods tend to equality easily and quickly.”

A market will exist at a particular time if the following conditions are present:

• A commodity or service
  There must be some good or service to be bought and sold (for example, wheat, mobile phones, taxi rides).
• Presence of buyers and sellers
  There must be people who are willing to buy and people who are willing to sell that commodity.
• Area or region of operation
  Buyers and sellers should operate in some area – a village, city, region, country, or even the whole world.
• Contact or communication between buyers and sellers
  There must be some way for buyers and sellers to communicate with each other (directly or indirectly) so that they know the price and can agree on a deal (e.g., in person, by phone, through an app, etc.).​
• A price for the product
  There should be a price at which the commodity is traded, and this price should tend to be the same for the same commodity at the same time within the market.

When these conditions are fulfilled, a market is said to exist even if there is no single physical marketplace.

Economists often classify definitions of 'market' into two broad types.

A. Geographical definition

This focuses on place or area.

• A market is seen as a place or region where buyers and sellers come together to fix the price and carry out transactions.​
• Example: The “Mumbai stock market” refers to the area where the buying and selling of certain financial instruments occur.

B. Functional definition

This focuses on activity or function rather than place.

• A market refers to the group of buyers, sellers, intermediaries and organisations who are in contact with each other and carry out the process of buying and selling.​
• In economics, more emphasis is placed on this functional view: how exchange actually happens, not where it happens.

• Local vegetable market
  Farmers and traders bring vegetables to a nearby yard; customers come and buy. This is a local physical market.
• Online book market
  A student orders a textbook from an online platform. The seller may be in another city, but because both can see and accept the same price on the platform, this is also a market, even without a common physical place.
• World gold market
  Gold is traded in many countries, but international communication and financial systems link these trades so that the price of gold is roughly similar across major markets after adjusting for costs. This is a world market.

• In common language, a market is a place where buying and selling occur.
• In economics, a market is any arrangement that allows buyers and sellers to meet (physically or virtually), decide a price, and exchange a commodity or service.​
• A market can be local, national, or international.
• Essential elements of a market: commodity, buyers and sellers, area of operation, communication/contact, and price.​
• There are two main ways to define a market: geographical (place‑based) and functional (activity‑based).​
• Competition among buyers and sellers tends to produce one prevailing price for the same commodity at the same time within a market.​