Chapter - 12 Undestanding Markets

 Chapter - 12 Undestanding Markets

Buyer and Seller Interaction:- The buyer and seller discussed the price of the goods being sold.

Initial Offer:- The seller quoted a high price for the item.

Counter Offer:- The buyer offered a lower price, stating it was too expensive.

Bargaining:- Both parties exchanged reasons — the seller explained quality or scarcity, the buyer emphasized budget or availability elsewhere.

Agreement:- Finally, they agreed on a mid-point price acceptable to both.

Outcome:- The transaction was completed, showing how negotiation helps in settling on a fair price in markets.

Prices and Markets

1. What happens if the seller fixes the price very high?

• Buyers may not be willing to purchase.
• Fewer transactions take place.
• The seller may not earn as expected.
• Leads to unsold stock of goods.

2. What happens if the seller fixes the price very low?

• Many buyers will want to buy.
• Seller may run out of stock quickly.
• It may not be profitable for the seller.
• Seller suffers loss or low profit.

3. What happens when the price is just right?

• Both buyers and sellers are satisfied.
• The price is affordable for buyers and profitable for sellers.
• This leads to a balanced market with regular transactions.

Markets Around Us

1. Types of Markets:

a. Physical Market

• Buyers and sellers meet face-to-face.
• Examples: Weekly haats, local markets, malls, street vendors.

b. Online Market

• Transactions happen using apps or websites.
• No need to meet physically.
• Goods and services like groceries, electronics, online classes are available.

c. Stock Market

• No goods are exchanged.
• Shares of companies are bought and sold.
• More details are studied in higher classes.

2. Domestic and International Markets:

a. Domestic Market

• Trade happens within the country.
• Example: Buying paper from Indian paper mills to print books.

b. International Market

• Trade happens between countries.
• Example: India exporting spices to other countries or importing mobile phones.

3. Wholesale and Retail Markets:

a. Wholesalers

• Buy in large quantities from farmers or manufacturers.
• Store goods in godowns or cold storage (for perishables).
• Supply to retailers.

b. Retailers

• Sell to the final consumers (like us).
• Sell in small quantities.
• Examples: Grocery shops, salons, restaurants.

4. Distributors and Aggregators:

a. Distributors

• Help wholesalers reach distant retailers.
• Example: Milk middlemen in the AMUL story.

b. Aggregators (in online markets)

• Receive goods in bulk from manufacturers.
• Store in warehouses.
• Deliver products to customers after online orders.

The Role of Markets in People’s Lives:

1. Economic Role of Markets:

• Markets connect producers and consumers.
• Help people access goods and services they cannot produce themselves.
• Enable transactions that support individuals, households, and businesses.

2. Example – Aakriti the Artist:

• Aakriti makes oil paintings but finds it hard to sell them.
• Some products like art, antiques, or handmade crafts do not have a ready market.
• This affects sellers (hard to find buyers) and buyers (hard to find authentic sellers).

3. Ways Artists Can Find Buyers Today:

• Online platforms (websites, art apps, social media).
• Art exhibitions, fairs, and galleries.
• Partnering with interior designers or art dealers.
• Online auctions and marketplaces.

4. How Markets Benefit Society:

• Producers learn what people need (e.g., energy-efficient refrigerators).
• Encourages innovation and better quality.
• Markets help improve living standards over time.

5. Non-Economic Role of Markets:

• Markets build long-term relationships (e.g., with tailors, doctors, grocers).
• Some families have trusted vendors for generations.
• Markets support community bonding and social trust.

Government’s Role in the Market:

1. Why Government Intervenes in the Market:

• To ensure fair interactions between buyers and sellers.
• To protect consumers and producers from unfair practices.
• To correct imbalances where markets fail to work effectively.

2. Price Control by the Government:

a. Maximum Price (Price Ceiling):

• Set for essential goods like lifesaving drugs to make them affordable.
• Protects buyers from overpricing.

b. Minimum Price (Price Floor):

• Set for agricultural goods like wheat, paddy, and maize.
• Ensures farmers get fair payment.
• Minimum wages are also fixed to protect workers.
• If prices are too low: Producers lose interest.
• If prices are too high: Consumers suffer.

3. Ensuring Quality and Safety:

• Government enforces standards for goods and services.
• Especially important in healthcare (e.g., medicine approval and testing).
• Ensures safe, effective, and reliable products.

4. Controlling Negative Impacts (Externalities):

• Markets can create pollution or health risks (e.g., single-use plastic).
• Government regulates and restricts harmful production and waste.
• Also monitors weights and measures to prevent cheating.

5. Providing Public Goods:

• Some services do not generate profit, so the government provides them:
• Parks
• Roads
• Police and safety
• Welfare schemes
• Ensures equal access for all citizens.

6. Balanced Regulation:

• Government rules help markets function fairly.
• But too many rules can also make markets less efficient.

1. Government Certifications and Quality Marks:- These marks indicate that the product meets minimum safety and quality standards:

• FSSAI – For food safety
• Full form: Food Safety and Standards Authority of India
• Found on: Food packets (e.g., gram flour)
• Ensures: Food is safe to consume
• ISI Mark – For industrial and electrical goods
• Issued by: Bureau of Indian Standards (BIS)
• Found on: Electrical appliances, building materials, tyres
• Ensures: Product is safe and reliable
• AGMARK – For agricultural produce
• Full form: Agricultural Marketing
• Found on: Fruits, vegetables, cereals, spices, etc.
• Ensures: Purity and quality of agricultural items
• BEE Star Rating – For energy efficiency
• Full form: Bureau of Energy Efficiency
• Found on: TVs, refrigerators, ACs, etc.
• More stars = Less electricity usage = Lower bills + Good for environment

2. Word of Mouth

• Opinions from family, friends, and neighbours influence buying decisions.
• Trusted recommendations often come from personal experience.

3. Online Reviews and Ratings

• Found on shopping websites and apps.
• Consumers share experiences and rate products/services.
• Help in deciding whether to purchase or avoid a product.

NCERT QUESTIONS

1. What are the main features of a market? Recall a recent visit to a market to purchase a product. What are the different features of a market that you observed during this visit?

Answer:- Main features of a market include the presence of buyers and sellers, exchange of goods and services, price negotiation, competition, and multiple payment methods.

During my recent visit to a vegetable market, I observed many sellers, bargaining over prices, variety in products, and both cash and UPI payments being accepted.

2. Remember the epigraph from a famous economist at the beginning of the chapter? Discuss its relevance in the context of the chapter you have read.

Answer:- The epigraph by the economist highlights how markets are not just places for buying and selling, but also reflect human needs, choices, and interactions. This is relevant to the chapter as it explains how markets connect producers and consumers, determine prices, offer variety, build relationships, and influence society beyond economic exchanges.

3. In the example of buying and selling of guavas, imagine that the seller is getting a good price, and is able to make a profit. He will try to get more guavas from farmers to be able to sell them at the same price and increase his earnings. What is the farmer likely to do in this kind of a situation? Do you 

think he will start thinking about the demand for guavas in the next season? What is likely to be his response?

Answer:- Yes, the farmer is likely to notice the high demand for guavas and good prices. In response, he may plan to grow more guavas in the next season to earn more profit. He will think about market demand, prepare his land accordingly, and try to increase production to meet future demand.

4.  Match the following types of markets with their characteristics: 

Answer:- 

• Physical market – Requires physical presence of buyers and seller
• Online market – Buyers and sellers meet virtually and can transact at any time
• Domestic market – Lies within the boundaries of a nation
• International market – Goods and services flow outside the nation’s boundaries
• Wholesale market – Deals in bulk quantities
• Retail market – Serves the final consumers with goods and services

5. Prices are generally determined by the interaction between demand from buyers and supply by sellers. Can you think of products where prices are high despite lesser number of buyers demanding the product? What could be the reasons for that? 

Answer:- Yes, luxury items like gold, diamonds, or designer clothes often have high prices despite fewer buyers. This is because they are rare, have high production costs, or are seen as status symbols. Their value comes from quality, exclusivity, and brand reputation, not just demand.

6. Look at the real life situation that a retail seller of vegetables encountered: A family came to shop for vegetables. The price of beans that the seller on the cart was offering was ₹30 / kg. The lady started to bargain with the seller to bring the price down to ₹25 / kg. The seller protested and refused to sell at that price saying he would make a loss at that price. The lady walks away. The family then goes to a super bazaar nearby. They buy vegetables in the super bazaar where they pay ₹40 / kg for the beans that is neatly packed in a plastic bag. What are the reasons that the family does this? Are there factors that affect buying and selling which are not directly connected to price? 

Answer:- Yes, there are factors beyond price that affect buying and selling. In this case, the family may have bought beans from the super bazaar because of cleanliness, packaging, convenience, trust in quality, or comfort of shopping. These non-price factors like hygiene, reputation, and environment can influence a buyer’s decision.

7. There are some districts in India that are famous for growing tomatoes. However, during some seasons, the situation is not good for farmers. With a large quantity of harvest, there are reports of farmers throwing away their produce and all their hard work going to waste. Why do you think farmers do this? What role can wholesalers play in such situations? What are the possible ways of ensuring that the tomatoes are not wasted, and the farmers are also not at a loss?

Answer:- Farmers sometimes throw away tomatoes when there is overproduction and prices fall so low that they can’t even cover transportation costs. Wholesalers can help by storing or distributing the excess produce more efficiently. Possible solutions include creating food processing units (like making puree or ketchup), improving storage and transportation, connecting farmers directly to bigger markets, and government support through minimum support prices or timely procurement.

9. Choose any 5 products and check out the label with the certification signs discussed in the chapter. Did you find products that did not have a logo? Why do you think this is so?

Answer? 5 products and their certification signs:

• Milk packet – Shows the FSSAI logo.
• Electric iron – Has the ISI mark.
• Packaged honey – Has AGMARK and FSSAI.
• Refrigerator – Shows BEE Star Rating.
• Wheat flour packet – Has FSSAI, sometimes AGMARK.

Some products do not have a logo because:

• They may be locally made or unbranded.
• The producer may not have applied for certification.
• It may not be legally required for that item.

This can make it harder for consumers to judge the quality or safety of such products.