Home / Notes / Economy /

Market Classification Criteria: Competition, Scope, and Price Dynamics

Economy2.94 KB

Market Classification: Key Criteria and Types

Markets are classified based on several fundamental criteria: geographic area, type of offer (goods or services), time horizon for price formation, and the nature of price competition.

1. Classification by Geographic Area

  • Local Markets

    These markets have a reduced geographical scope, typically limited to a city or a province.

  • Regional Markets

    These integrate multiple locations or cover a defined geographical region.

  • National or Internal Markets

    These encompass transactions conducted within the boundaries of a single nation.

  • Global or International Markets

    This category includes all transactions occurring between different countries or across various international markets.

2. Classification by Type of Offer

  • Goods Markets (Commodities)

    In these markets, the goods offered are of a tangible nature, such as food, clothing, or footwear.

  • Services Markets

    These markets offer intangible services, such as transportation, insurance, and banking services.

3. Classification by Time Horizon for Price Formation

This criterion distinguishes markets based on the time required for supply adjustment and price establishment:

  • Instantaneous Markets (Supply Snapshot)

    The price is established instantly, regardless of predetermined costs.

  • Short-Term Markets

    Prices are formed over a period not exceeding one year, taking production costs into account.

  • Medium and Long-Term Markets

    Prices are formed over a period exceeding one year, factoring in production costs.

4. Classification by Type of Competition

Perfect Competition

This market structure requires several strict conditions to be met:

  • A large number of buyers and sellers of a commodity exist.
  • Supply and demand are divided into very small pieces, meaning no single supplier or customer can individually intervene and modify the price.
  • There is full mobility of goods and production factors.
  • New entrants face no administrative obstacles to intervene in the market.
  • Commodities are homogeneous (i.e., there are no substantial differences between them).
  • Suppliers and demanders have perfect knowledge about market conditions.

Imperfect Competition

Imperfectly competitive markets are those where one or more conditions required for perfect competition are not met:

  • The number of suppliers and customers may be reduced or even unique (monopoly or oligopoly).
  • There may not be full mobility of goods, persons, and capital.
  • Products may not be homogeneous due to real differences or business effort.
  • Administrative barriers may impede freedom of entry or exit.

Download

PDF Word HTML