Typology markets land real estate Typology of markets

Typology - markets , land real estate

Typology of markets Meaning of market. Any body of persons who are in intimate business relations and carry on Extensive transactions in any commodity. According to french economists market is not only a place in which things Are bought and sold but the whole of any region in which buyers and sellers Are in such interchange with one another that the price of the same goods Tend to equality easily and quickly. The essentials of a market are: (a) Commodity which is dealt with; (b) The existence of buyers and sellers; (c) A place, be it a certain region, a country or the entire world; (d) Such interchange between buyers and sellers that only one price should Prevail for the same commodity at the same time. Classification of markets Markets may be classified a: (a) On the basis of area as local, national and world markets; (b) On the basis of time, as market price on any particular date or moment, Short period price, long period price, or secular markets covering a generation and; (C) On the basis of nature of competition obtaining therein as perfect and Imperfect markets.

Market structure: It refers to the framework of different markets or it refers to different types of market in which the producers or sellers operate. Different type of market structures: • Perfect competition • Monopoly • Monopolistic competition • Oligopoly Perfect competition – It is the form of market where there is a large number of buyers and sellers of a commodity. Homogeneous product is sold with no control over price by an individual firm. There is one price that prevail in the market and the firms sell the product at that price. E. g. Wholesale vegetable, fruits market, bicycle parts industry. Monopoly – It is the form of market in which there is a single seller or producer of a commodity. There are no close subsitutes of the monopoly product and there are legal, technical or natural barriers to the entry of new firms in the monopoly market. A monopolist has complete control over price and can also practise price

Monopolistic competition – It is the form of market i. Which like perfect competition, has a large number of buyers and sellers and allows the firm the freedom of entry and exit and ii. Which would also allow product differentiation and partial control over price of the product. E. g. . Different brands of toothpastes or different brands of soaps. Oligopoly – A form of market in which there a few big sellers of a commodity, like The automobile industry in India. Factors on which market structure depends – 1) Number of buyers and sellers: - when there is a large number of buyers and sellers of homogenous commodity, it is a situation of perfect competition. - When there are large number of buyers and sellers but the product is not homogenous, then it is monopolistic competition. - When there is one seller but a large number of buyers of a commodity, its a sitution of monopoly. .

2) Nature of commodity: - In a perfectly competitive market, commodity must be homogenous. - In monopolistic market, the commodity is differentiated. - In monopoly, product may or may not be homogenous. 3) Degree of price control: - Perfect competition is said to exist, when the producer has no control over the price. - In contrast the monopolist has full control over the price. - Monopolistic is characterized by partial control over price. 4) Knowledge of market: - In case of perfect competition, buyers and sellers have perfect knowledge of the market. In other forms of the market, there is imperfect knowledge of the market. 5) Mobility of factors: - Perfect mobility of the factors is another unique characteristic of perfect competition. It is not an essential feature of other forms of the market.

Size of the market The size of the market depends upon several factors: (a) Character of commodities: In order to have a wide market a commodity must be (i) Portable (ii) Durable (iii) Suitable for sampling, grading and exact description and; (iv) Such as its supply can be increased. Such commodities are wheat, gold, Government securities, etc. Bulky articles like bricks and perishable Articles like fresh fruit and vegetables have narrow market. (b) Nature of the demand for the commodity A commodity which is in universal demand (e. g. Gold and silver) will have A wide market. Commodity of general consumption is bound to have a wide market. (c) Development of the means of communication and transport this has enabled things to be carried long distance and has widened the Market. Extension of transport system necessarily leads to the extension of the area of the market. (d) Peace and security Obviously goods cannot be marketed in distant place unless peace and order prevail. In war time, due to insecurity in war zones, markets get Restricted. Thus the extent of the market depends on peace prevailing In the region.

(e) Currency and credit systems If the currency and credit systems are well developed, marketing can be conveniently and profitably carried on over extensive areas. The extent of the market very largely depends on the state of the currency. (f) Policy of the state Markets may be restricted by the policy of the state. Prohibitive duties and Quatas restrict the market. Thus, government policy can affect the extent of the market. (g) Degree of division of labour We know that division of labour is limited by the extent of the market. The converse of this is also true. The extent of the market, also , in its turn, Depends upon the degree of division of the labour. The greater the division Of the labour, the cheaper the article and wider the market. Perfect and imperfect markets A market is said to be perfect when all the potential buyers and seller are promptly aware of the prices at which transactions take place and all the offers made by the other sellers and buyers, and when any buyer can purchase From any seller and conversely. Under such condition, the price of a commodity will tend to be the same( after allowing for cost for transport including import duties) all over the market. The prevailence of the same prices form the essential characteristics of a Perfect market. On the other hand, a market is imperfect when some buyers or sellers or both Are not aware of the offers being made by the others. Therefore different prices come to prevail for the same commodities at the Same time in an imperfect market, whereas in a perfect market same price rules Throughout the market.

Perfect competition It is wider in its scope and it has the following conditions. (i) Large number of buyers and sellers (ii) Homogeneous product (iii) Free entry or exit (iv) Perfect knowledge (v) Degree of control over price (i) Large number of buyers and sellers There should be a large number of buyers and sellers in a market so that, no single producer or purchaser will be able to influence the market price, because the output of any single firm, is only a small portion of the total output and of the total demand. Hence the market price has to be given and unalterable. (ii) Homogeneous product The articles produced by all firms should be standard and identical. This ensures that the same price rules in the market for the same commodity. The product of each firm is a perfect substitute of the products of all other firms in the industry. (iii) Free entry or exit of firms Freedom of entry means that there are no artificial barriers like patent rights, copyrights, legal restriction etc in the way of new firms entering the industry. Similarly there are no natural barriers like huge capital expenditure required to start a new firm.

Freedom of exit means no barriers in the way of firms deciding to leave the industry like labour laws, government rules etc. iv. Perfect knowledge – buyers and sellers are fully aware of the prices and costs prevailing in the market. v. Degree of control over price – sellers have no control over prices because they are price takers and price is determined by industry by the forces of market demand market supply.

REAL ESTATE • Real estate is a legal term that encompasses land along with anything permanently affixed to the land, such as buildings, specifically property that is fixed in location. • Real estate is a part of an asset & determines the growth & economic strength of country. • The main source of capital used by individuals and small companies is to purchase and improve land. A significant fraction of the total wealth is in the form of land buildings. • The word Real is derived from "royal”. For hundreds of years the Royal family / King owned the land, and the peasants paid rent or property taxes to be on the Royal's land. Today, just like hundreds of years in the past, we pay property taxes, or rent to be on the government's land or the Royal Estate. Business Sector • With the development of private property ownership, real estate has become a major area of business. Purchasing real estate requires a significant investment, and each parcel of land has unique characteristics, so the real estate industry has evolved into business field. Some kinds of real estate businesses include: • Brokerages: A fee charged by the mediator who facilitates a real estate transaction between the two parties. • Development: Improving land for use by adding or replacing buildings • Property management: Managing a property for its owner(s) • Real estate marketing: Managing the sales side of the property business

• • Real estate investing: Managing the investment of real estate Corporate Real Estate: Managing the real estate held by a corporation to support its core business—unlike managing the real estate held by an investor to generate income. Real estate economics is the application of economic techniques to real estate markets. It tries to describe, explain, and predict patterns of prices, supply, and demand. It depends on partial equilibrium analysis (supply and demand ). The main participants in real estate markets are: Owner/User - These people are both owners and tenants. They purchase houses or commercial property as an investment and also to live in or utilize as a business. Owner - These people are pure investors. They do not consume the real estate that they purchase. Typically they rent out or lease the property to someone else. Renter - These people are pure consumers. Developers - These people prepare raw land for building which results in new product for the market. Renovators - These people supply refurbished buildings to the market. Facilitators - This includes banks, real estate brokers, lawyers, and others that facilitate the purchase and sale of real estate. The owner/user, owner, and renter comprise the demand side of the market while the developers and renovators comprise the supply side. The unique characteristics of the real estate market must be accommodated. These characteristics include: Durability - Real estate is durable. A building can last for decades or even centuries, and the land underneath it is practically indestructible. Because of

Heterogeneous - Every piece of real estate is unique, in terms of its location, in terms of the building, and in terms of its financing. This makes pricing difficult, increases search costs, creates information asymmetry and greatly restricts substitutability High Transaction costs - Buying and/or moving into a home costs much more than most types of transactions. These costs include search costs, real estate fees, moving costs, legal fees, land transfer taxes, and deed registration fees. Long time delays - The market adjustment process is subject to time delays due to the length of time it takes to finance, design, and construct new supply, and also due to the relatively slow rate of change of demand. Because of these lags there is a great potential for disequilibrium in the short run. Both an investment good and a consumption good - Real estate can be purchased with the expectation of attaining a return (an investment good), or with the intention of using it (a consumption good), or both. Immobility - Real estate is locationally immobile (save for mobile homes, but the land underneath them is still immobile). Consumers come to the good rather than the good going to the consumer. Because of this, there can be no physical market-place.