Concept of market

1. Presence of a commodity — In a market there must be commodities which have been brought for sale.
2. Presence of buyers — The people who are able and willing to purchase the commodities being sold at a particular price and time.
3. Presence of sellers — The people who have brought their commodities for sale.
4. Location or presence of an area (region) — Refers to a particular locale where the transactions are taking place.
5. The price — One price should prevail for the same commodity at the same time.

Refers to the size of the market. The market may be wide or narrow.

The size of the market depends on the following factors

1. Character of the commodity — In order to have a wide market a commodity must be:

   • portable
   • durable
   • suitable for sampling, grading and exact description and
   • such as its supply can be increased such commodities are wheat, gold, government securities etc.

   Bulky articles like brick and perishable articles like fresh fruits and vegetables have a narrow market.

2. Nature of demand — A commodity which is in universal demand e.g. gold & silver will have a wide market. Similarly, a commodity of general consumption has a wide market.

3. Means of transport and communication — The size of the market depends upon the extent to which means of communication and transport have been developed. Properly developed transport and communication systems enable commodities to be carried long distances and establish wide contact. Thus widen the market.

4. Peace and security — Obviously, goods cannot be marketed in distant places unless peace and order prevail in war time. Due to insecurity in war zones, markets get restricted. The extent of the market depends on the peace prevailing in the region.

5. Currency and credit system — If the currency and credit system of the country are well developed, marketing can be conveniently and profitably carried on over extensive areas. The extent of the market depends on the state of the currency and the confidence it inspires.

6. Policy of the state — Markets may be restricted by the policy of the state. Prohibitive duties and quotas restrict the market. The zoning system eg: wheat zones, which allow free movement of goods only within a certain zone has the same effect. Thus the government policy can also affect the extent of the market.

7. Degree of division of labor — We know that division of labor is limited by the extent of the market. The converse of this is also true. That is the extent of the market also in its turn depends upon the degree of division of labor. The greater division of labor, the cheaper the articles and wider the market.

1. It facilitates the transaction by providing opportunity of buying and selling goods.
2. It serves as an outlet for the goods produced by various manufacturers.
3. It is a source of supply of goods of own consumer choice.
4. It helps to establish contact among buyers and sellers
5. It helps to maintain prices at a specific level
6. The market for a commodity helps to determine the demand for that commodity. A greater demand encourages firms to produce more hence increase in production.