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UNIT -III

MARKET

Q1) What is market and different types of market?

Ans:

Market: A place where parties (seller and buyer) are engaged in exchange of goods and services is called a market.

Types of market:

1)Physical market

2) Non physical / virtual market

3)Auction market

4) Intermediate goods market

5) Black market

6) Knowledge market

7) Financial market:

a) Stock market

b) Bond market

Q2) What do you mean by market structure and their types?

Ans:

Structure of market:

Market structure refers to a degree of competition in a market. Some other determinants of market are nature of products, number of sellers and consumer, economies of scale etc. There are basic four types of market structure in any economy, not all of these market structure really exists as they are theoretical concept

1)Perfect competition: In this type of market there are large number of buyers and sellers. Products in this market are completely identical to each other (homogeneous). Only motive of firms is profit maximization. There is free entry and exit and no concept like consumer preference.

2)Monopolistic competition: There are large number of sellers and buyers in this market. Sellers do not sell homogeneous products. Concept of consumer preference exists in this type of market. Sellers are almost price setter as they charge marginally higher price than original cost or maximum retail price.

E.g. Cereal market and tooth paste market are Monopolistic market.

3)Oligopoly: There are only few dominant firms in the market and buyers are far more than sellers. Firm uses their market influence to set prices and to maximize profit. So, the consumer becomes Price taker. New entry for firms and their further settlement in market is difficult.

4)Monopoly: There is only one seller in monopoly market, who controls whole of the market and fixes price according to their own will. Consumer do not have any alternative so they buy product no matter what price is.

Q3) Make comparison between Oligopoly and monopolistic competition market structure.

Ans: Following is the comparison between Oligopoly and monopolistic competition market structure.

Basis	Monopolistic market	Oligopoly
No. of actual or potential competitors	Many sellers	Few sellers whose decision are directly related to those of competitors.
Product differentiation	Consumer perceive difference among the products.	High or low depending on exit and entry condition.
Entry and exit	Easy entry and exit	High entry and exit barriers
Information	Low cost information on price and product quality.	Restricted access to price and product quality information.
Profit potential	High Profit in short run only. Normal profit in long run.	Potential for profit in short and long run.
Example	Clothing, professional services	Automobile, aluminum, soft drink etc.
Government intervention	No	Some
Pricing decision	Strategic pricing	MC=MR
Price and marginal cost	P>MC	P>MC

Q4) What are Regulated markets? Mention their roles.

Ans:

Regulated market and their role:

Regulated market: It is a market where government or other organization controls forces of supply and demand and regulates market actions.

It includes decision relating to allowance of entrance in market and deciding what prices can be charged. Basic philosophy behind establishment of regulated market is elimination of malpractices and fraudulent.

Role of Regulated market:

Prevention of farmers from exploitation.

Make market system flexible, effective and efficient so that farmer can get fair price for their produce.

By improvement of infrastructural facilities, to promote marketing of agricultural produce.

Development of market yards with the help of state government and NABARD. These yards contain all infrastructural facilities.

Under central government, development of rural markets, these rural markets provide proper storage facility for smooth marketing.

Establishment of godowns under “National grid of rural godown” to create network of rural godowns. In these godowns, farmers can easily hold their stock and can sell on price hike.

Construction of rural link road to provide transportation facilities to farmers.

Quality control and promotion of grading and standardization bon Agricultural commodities. Many AGMark laboratories have been established.

Importance of regulation of agricultural markets:

These markets are symbol of democracy and existence of rule or law.

They guarantee Right of free and choice of trade and business (Article 19).

They provide systematic and fair income to individual as well as to state economy.

They protect interest of consumer, of trade, farmers, retailers and buyers.

They control and directs farmers and consumers from middlemen from cheating and fraud activities.

Systematic and scientific marketing stabilizes the price level.

Q5) Write advantages and disadvantages of perfect competition and oligopoly.

Ans:

Perfect competition: In this type of market there are large number of buyers and sellers. Products in this market are completely identical to each other (homogeneous). Only motive of firms is profit maximization. There is free entry and exit and no concept like consumer preference.

Advantages of perfect competition:

It helps to allot resources in most efficient utilization.

It uplifts efficiency.

Elimination of fraud and malpractices, due to product homogeneity.

Is beneficiary to consumer, consumers charge low price.

Responsive to consumer wishes.

Disadvantages of perfect competition:

Conditions are very strict.

Insufficient profits for investment.

Lack of product variety.

Dissimilar distribution of goods and income.

Oligopoly: There are only few dominant firms in the market and buyers are far more than sellers. Firm uses their market influence to set prices and to maximize profit. So, the consumer becomes Price taker. New entry for firms and their further settlement in market is difficult.

Advantage of oligopoly:

It can adopt a competitive strategy.

Helps to earn extra income or profit.

It can make price stability.

It offers more information to their customers.

It allows more rectification for product.

Disadvantages of oligopoly:

Higher concentration levels reduce customer’s choices.

Conspiracy is possible to reduce competition.

Promotes irrational behavior and biasness.

Intentional barriers can occur.

It don’t require efficiency to be utilized.

Companies can add extra charges because there is no competition.

Illusion of choice made, it creates choice appearance without giving.

Q6) What are market agencies? Explain their types, benefits and their functions.

Ans:

Market agency: Agency which helps customer in implementation and management of market strategies to achieve their business goals.

E.g: propaganda, Ruckus, Response marketing.

They are also known as Marketing firms

Types of marketing agency:

1)Full service digital marketing agency:

a) PPC

b) SEO

c) website maintenance

d) web design and development

e) social media and advertisement management

f) review management.

2) Specialized marketing agency:

One or more of specialized services like web design and CEO.

3) Traditional marketing strategy:

a) Public relation

b) Broadcast marketing

c) Brand management

d) Print marketing

Benefits of marketing agency:

They focus on Running your business with profit maximization.

Chance to work under expertise.

It let stay relevant to one’s own industry.

Helps in getting new ideas.

Offers measurable results.

Functions of marketing agency:

Analyze and Identify different marketing strategy to obtain best business results and to maximize return in investment.

Help in execution and management of market campaign for clients.

They monitor market efforts and tries to improve campaign results

Q7) Make comparison between monopoly and monopolistic competition market structure.

Ans: Following is the comparison between monopoly and monopolistic competition market structure:

Basis	Monopoly	Monopolistic market
Description	Market have only one seller and no competition.	Amalgamation of monopoly and competition.
Demand	Inelastic and demand curve slopes downward.	Inelastic or elastic, depends on nature of competition.
Supply	Supply from only one seller.	Supply from large number of sellers.
No. Of sellers and buyers	Only one seller and all buyers depend on him. Buyer has absolute control over market.	Large no. Of sellers.
Competition	No competition, no price or Product competition.	Good competition between price as well as in products.
Product	Homogeneous product.	Heterogeneous products.
Price	Higher price, P>MR= MC	Highest price as selling cost is added to price of Product
Output	Sole seller fixes small output.	Due to product and selling cost variation, output also varies.
Profit	Excess profit, monopoly gains.	Excess Profit due to product and price variations.

Q8) Explain concept of marketable surplus. Calculate M.S if total production is 2500tons and total consumption is 900 tons and 100 tons is given to relatives in kinds.

Ans:

Marketable surplus: That quantity of produce, which can be available to non farming population of country after farmer meets his own genuine requirements (payment of wages, family consumption, payment of electricity bills, purchase of seed and fertilizers etc)

Marketing surplus can be expressed as: MS = P – C.

Here, MS is marketable surplus, P is Total production and C is Total requirement.

E.g.: Farmer produce = 100 quintals

Total requirement = 20 quintals

MS= P - C

= 100 Q – 20 Q

= 80 Q

Marketable surplus is a theoretical concept of surplus and is Subjective. Rise in MS helps in expansion of industrial sector. As we better know MS is that portion of produce left after exclusion of farmers requirement, available to sell. So, this concept directly relates to Production of agriculture. Hence, reason for low productivity becomes obvious reasons of low marketable surplus. If productivity of agriculture increases constantly than MS will also increase constantly.

Calculation of M.S

(P)Farmer produce = 2500 tons

= 1000 tons

,( MS= P - C )

= 2500 - 1000 tons

MS = 1500tons.

Q9) Describe reason for low marketable surplus.

Ans:

Reasons for low productivity/Marketable surplus:

1) Insufficiency of permanent means of irrigation: Indian farmers are heavily dependent on rainfall as they don’t have proper and permanent means of Irrigation. Stability in Agricultural output needs permanent means of irrigation across all over India.

2) Lack of Financial resources: Farmers requires short term credit facility to purchase

Farming equipment, seeds, fertilizers etc. Bulk of farmers are dependent on non-Institutional financial resources (landlords, relatives, moneylenders) who charges exorbitant heavy rates. This breaks down farmer’s capability of high productivity.

3) Lack of Awareness: Due to illiteracy and unawareness farmer’s remains unaware of government's schemes and programmes (PM fasal bima yojna , PM kisan mandhaan yojna etc ) initiated by govt. for welfare of farmers.

4) Traditional outlook: Farmers continue to rely on Traditional wisdom, means they consider farming as means of subsistence than business venture. Farmers should grow as an entrepreneur.

5) Exploitative relation between landlords and tenants: landlords rent out their holding to farmers and relying on rental income they exploit their tenants (actual tiller of soil) by charging higher rents.

Following are the reason of low productivity of agriculture, which directly results in low marketable surplus. Measures like use of permanent means of irrigation, proper availability of Financial resources, modern Outlook etc can be help in increase of marketable surplus.

Q10) Write advantages and disadvantages of monopolistic competition and monopoly.

Ans:

Monopolistic competition: There are large number of sellers and buyers in this market. Sellers do not sell homogeneous products. Concept of consumer preference exists in this type of market. Sellers are almost price setter as they charge marginally higher price than original cost or maximum retail price.

E.g. Cereal market and tooth paste market are Monopolistic market.

Advantages Of monopolistic competition:

Market are contestable due to easy entrance.

Differentiation of products causes diversity, Choices and utility.

Disadvantage of monopolistic competition:

Elimination of fraudulent and malpractices due to large number of sellers.

Due to control on supply, prices can be increased.

Inefficient, as are not produced for society to benefit.

Provides imperfect information.

Difficult to identify demand curve as demand can be elastic or inelastic.

Monopoly: There is only one seller in monopoly market, who controls whole of the market and fixes price according to their own will. Consumer do not have any alternative so they buy product no matter what price is.

Advantages of Monopoly:

Monopolies firms become efficient, successful and innovative.

Involves high profit than all other market competition.

Less competition due to less sellers.

They have large firms to conduct their activities.

Disadvantages of Monopoly:

Output is restricted and involves government restrictions also.

Higher price for customers.

Allocative inefficiency as (P>MC).

Less choice for buyers.

Monopolies can adopt political power to protect gain.

They might be monopsony power, pays lower wages to labors or workers.

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