Understanding Markets — Class 7 Social Science
Exploring Society Part 1 · Chapter 12
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- Mathematics
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2- Mathematics
- Space weighted by chapter size
- Charts from the book's own data
- Traps corrected
- Space weighted by chapter size
- Charts from the book's own data
- Traps corrected
- Space weighted by chapter size
- Charts from the book's own data
- Traps corrected
Chapter summary
Key ideas & terms
- Market
- A place — physical or online — where people buy and sell goods and services, also called a bazaar or haat.
- Price
- The amount at which a buyer is willing to buy and a seller is willing to sell a particular good or service.
- Demand and supply
- Demand is the quantity buyers are willing to purchase at a given price; supply is the quantity sellers are willing to sell; their interaction helps set the price.
- Wholesaler and retailer
- A wholesaler buys goods in large quantities from producers, while a retailer buys from wholesalers and sells in smaller quantities to final consumers.
- Aggregator
- A website or mobile application that combines offers from many sellers and sells them to consumers in one place, common in online markets.
- Certification marks
- Government-issued labels like FSSAI, ISI, AGMARK and BEE Star ratings that help buyers judge a product's quality and safety.
Extra questions & answers
What is a market?
A market is a place where people buy and sell goods and services, which may be a physical place or online, and is also known as a bazaar or haat.
What features must a place have to be called a market?
It must have buyers and sellers who agree on a price, since price is an important feature in completing a transaction, often reached through negotiation and bargaining.
How is the price of guavas settled over time?
As the quantity sellers offer and the quantity buyers demand interact, the price settles at a level that is high enough for the seller and low enough for the buyer — 'just right'.
What is the difference between a domestic and an international market?
A domestic market lies within a country's boundaries, while in an international market sellers export products to, or buyers import products from, another country.
What is the difference between a wholesaler and a retailer?
A wholesaler buys goods in large quantities from producers and stores them, while a retailer buys from wholesalers and sells in smaller quantities directly to final consumers.
How does an online market's supply chain differ from a physical one?
In online markets, manufacturers send bulk products to the warehouse of an aggregator business, which packs and delivers them directly to online buyers, rather than passing through many physical shops.
How do markets have non-economic significance?
They bring people together and enable the exchange of ideas and traditions; long-lasting relationships often form between buyers and sellers, as at the Ima Keithal women's market in Imphal.
How does the government control prices to protect people?
It may set maximum prices for essentials like lifesaving drugs, minimum support prices for crops like wheat and paddy so farmers do not lose, and minimum wages so employees are paid fairly.
Why does the government provide public goods?
Because some goods and services like public parks, roads and policing are not profitable for private producers, so the government provides them for everyone.
How can consumers assess product quality?
Through government certification marks such as FSSAI for food, ISI for many manufactured goods, AGMARK for agricultural products and BEE Star ratings for energy efficiency, as well as online reviews.
LET'S EXPLORE
Can you imagine what this bazaar must have looked like during its peak?
During its peak under the Vijayanagara Empire, the Hampi Bazaar would have been very crowded, noisy and colourful. The wide street opposite the Virupaksha temple would have been lined with shops and stalls full of grains, silk, oil, horses, cattle, rubies, diamonds, pearls and cotton cloth. Foreign travellers described it as prosperous and well-stocked, with craftsmen making jewellery on the streets and buyers and sellers bargaining loudly. It would have looked much more grand and busy than the ruins we see today.
Do you know of any old markets from your state? How would they be similar or different from today’s markets? Discuss with elders in the family and community.
Students can ask elders about old markets in their state, for example Chandni Chowk in Delhi, Johari Bazaar in Jaipur, Khari Baoli in Delhi, or Ima Keithal in Manipur. Similarities are that both old and new markets bring buyers and sellers together and sell daily needs like food and clothes. Differences are that old markets mostly had open stalls, weekly haats and bargaining, while today’s markets also have malls, branded shops, fixed prices, online shopping and electronic payment.
LET'S EXPLORE
Observe the illustration. What are these people discussing? Imagine you and your partner as a buyer and a seller of guavas. Prepare a set of dialogues between both of you and present it in your class as a skit.
In the illustration the buyer and seller are discussing the price, quantity and quality of guavas. A sample skit dialogue is: Seller: Fresh guavas, sweet and ripe, ₹60 per kg! Buyer: ₹60 is too high, will you give it for ₹40? Seller: My cost is high, I can give ₹50 last price. Buyer: Okay, give me 1 kg for ₹50 after I check the quality. Seller: Done. This shows bargaining to reach a mutually agreeable price.
THINK ABOUT IT
Can you think of a type of market where negotiation is less common and why?
Negotiation is less common in fixed-price markets like super bazaars, malls, brand showrooms, medical stores, and online shopping apps or websites. There the price is printed as MRP and displayed on the product, and the computer bills that price for everyone, so sellers do not bargain with each buyer. Prices are decided by the company and not by individual haggling.
THINK ABOUT IT
Vegetables are sold cheaper late at night at the weekly market compared to during the day. Why do you think this is so?
Vegetables are perishable. By late night the sellers want to finish their stock because leftover vegetables may spoil by the next day and they also want to avoid carrying them back and paying storage. So they lower the price to attract buyers quickly and clear the stock.
Garment stores offer heavy discounts on woollen clothing at the end of the winter season. Why does this happen?
Demand for woollen clothes falls sharply when winter ends. Shops want to clear old seasonal stock to make space for summer clothes and to avoid keeping them stored for a whole year. Heavy discounts attract buyers even though the season is over.
THINK ABOUT IT
What do you think are the pros and cons of online and physical shopping respectively? Explore this question from the point of view of both, sellers and buyers.
For buyers, online shopping pros are convenience, home delivery, wide choice and anytime shopping, cons are cannot touch or try products, risk of wrong size or quality, and waiting for delivery. Physical shopping pros are you can see, touch and try goods, get it immediately and bargain, cons are need to travel, limited choice and fixed shop hours. For sellers, online pros are reach customers far away and need fewer shops, cons are competition, commission to aggregator, returns and packaging cost. Physical shop pros are personal relationship with customers and immediate payment, cons are rent, limited customers and need to keep stock in shop.
Some services require in-person contact like tailoring and cannot be provided online. Can you suggest other services where physical markets are needed?
Other services needing physical presence are hair cutting in a salon, dental or doctor check-ups, eating in a restaurant, cinema and theatre, repair of mobiles or vehicles, trying clothes in a trial room, and beauty parlour services. These need face-to-face contact, skill and physical tools that cannot be fully done online.
LET'S EXPLORE
Observe the diagram and describe the flow of goods from the manufacturer / producer to the consumer. What is the role of the wholesaler and the retailer in the flow?
The flow is: Producer or Manufacturer makes goods and uses inputs, then gives bulk goods to Wholesaler, who stores them in godowns or cold storage and supplies to Retailers, who finally sell in small quantities to Consumers. The wholesaler buys in large bulk from producers, stores and transports goods to many places and supplies retailers. The retailer buys smaller lots from wholesaler or distributor and sells directly to final consumers in convenient, small quantities near their homes.
LET'S EXPLORE
Ask your nearest retailer about a product, its place of origin, and the chain of suppliers in the process of the product reaching the shop. Trace this using a flow chart like Fig. 12.11 and share it in class.
Example: A retailer selling apples in Delhi said the apples come from orchards in Shimla, Himachal Pradesh. Flow: Farmer in Shimla -> Commission agent at Azadpur Mandi Delhi (wholesaler) -> Cold storage -> Retailer in local market -> Consumer. The farmer harvests, wholesaler transports by truck and stores, retailer buys 2-3 boxes and sells per kg to households. Students can make a similar chart for rice, biscuits or soap by asking their local grocer.
DON'T MISS OUT
Can you spot the port, highway and railway network on the map in Fig. 12.24? How do you think they helped make Surat a trading hub?
Yes, the Surat city map shows the port near the Tapi river mouth, national highways and railway lines connecting Surat to Mumbai, Ahmedabad and interior Gujarat and Maharashtra. These networks helped Surat become a trading hub because raw cotton could come easily from cotton-growing districts, finished textiles could be sent quickly to markets across India and abroad, and diamonds and labour could move in and out cheaply and fast.
THINK ABOUT IT
We have discussed different dimensions of markets. Can we imagine what life might be like without markets? What would happen if farmers did not bring rice, wheat, dal, vegetables and fruits to the market? What would happen if the producers of cloth in Surat could not procure inputs like cotton from markets?
Without markets life would be very difficult. If farmers did not bring rice, wheat, dal and vegetables, households could not get food and would have to grow everything themselves, leading to shortage and hunger. If Surat cloth producers could not buy cotton from markets, looms would stop, workers would lose jobs, and we would not get clothes. Markets connect producers and consumers and allow specialization; without them we would lack variety, face high costs and have to be self-sufficient.
LET'S EXPLORE
Consumers prefer to buy refrigerators that use less electricity. When a large number of consumers begin to ask for refrigerators that use less electricity, what do you think happens in the network you saw in Fig. 12.11?
When many consumers demand energy-efficient refrigerators, retailers tell wholesalers and distributors that only 5-star BEE rated models are selling. Wholesalers pass this demand signal to manufacturers. Manufacturers then design and produce more refrigerators that use less electricity and less harmful gas, and supply them through the chain. Thus consumer preference travels backward from consumer to retailer to wholesaler to manufacturer and changes what is produced.
LET'S EXPLORE
Have you observed any such practices in your community or neighbourhood? Describe the practice as a drawing or in a short paragraph.
Yes, in my neighbourhood the Kirana shop owner keeps a monthly account book for regular families and settles payment at month end, showing trust. Also during Diwali the shopkeeper gives a small packet of sugar or haldi-kumkum free as good wishes. The vegetable seller gives extra coriander leaves free. These practices show relationship and auspiciousness beyond just buying and selling.
LET'S EXPLORE
Onions are an important part of the cuisine in most parts of India. In some seasons, the supply of onions comes down in the market. What do you think happens to the price of onions when this happens?
When supply of onions falls but demand stays high, the price rises sharply. Buyers compete for fewer onions and sellers can charge more because onions are needed daily for cooking.
What will happen if the people supplying onions do not bring the required quantities to the market? What do you think the government should do in this situation?
If suppliers withhold onions to create artificial shortage, prices will rise even more and ordinary people will suffer. The government should monitor hoarding, release buffer stock from its godowns, allow imports if needed, take action against black-marketing, and use price controls or subsidized sale through fair-price shops to protect consumers while also ensuring farmers get a fair price.
THINK ABOUT IT
What are the other areas where you can see the government being involved in the markets?
The government is involved in setting quality standards and certifications like FSSAI, ISI, AGMARK and BEE star ratings, testing medicines, checking weights and measures on packets, controlling pollution from factories, banning single-use plastics, building roads, parks and policing, setting minimum wages and running public distribution system for essential goods.
Are there areas where government intervention needs to be reduced? Discuss with family or relatives.
Too many complicated rules, licenses and delays can make it hard for small shopkeepers and manufacturers to work, increase costs and discourage new businesses. Families feel that for non-essential goods and competitive areas where quality is already ensured by consumer choice, like fashion or mobile phones, fewer controls and faster approvals would help markets run more smoothly, but safety, health and environment still need strong regulation.
THINK ABOUT IT
There is a marbles competition in your neighbourhood with the team in the next street. You want to buy new marbles for the competition. You have ₹150 saved up. You go to a shop to buy the marbles. What are the qualities you would look for in the marbles so that you can win the competition?
I would look for marbles that are round, smooth, uniform size, hard and not chipped, with good weight and shine, and that roll straight. I would check the price within my ₹150 budget, compare brands, and see if they look strong and attractive. Value for money, durability and good grip also matter to win.
LET'S EXPLORE
Check out the BEE Star labels on the electronic devices in your home and make a chart of all the devices in an increasing order of their energy efficiency.
Example chart from most to least efficient: 5-star: New inverter AC and refrigerator, 4-star: Washing machine, 3-star: Old refrigerator and LED TV, 2-star: Ceiling fan, 1-star: Old window AC. Students should read the gold star label on each appliance at home, note brand, device and stars, then arrange from 1 star lowest efficiency to 5 star highest efficiency and display as a table in class.
Questions and activities
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?
Main features of a market are a buyer and a seller, goods or services to exchange, a price agreed by both, and negotiation or bargaining to fix that price. On my recent visit to buy notebooks at the local market, I saw many stationery shops (sellers) and students (buyers), price tags showing MRP, my mother bargaining for a discount, variety of brands, and payment in cash and UPI. Online markets also have apps and home delivery.
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.
Adam Smith said prosperity comes when people need goods they cannot create themselves and markets develop to supply them. This fits the chapter perfectly: farmers grow food but need cloth, Surat weavers make cloth but need cotton and food, artists make paintings but need buyers. Markets connect all these people, allow exchange at a mutually agreed price, and help everyone get what they cannot produce alone, creating prosperity for society.
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?
The farmer will see high demand and good prices, so he will try to grow more guavas next season, perhaps plant more trees, use better fertilizer and care to increase yield. He will anticipate continued demand and expect profit, but if many farmers do the same, supply may rise and prices may later fall, so he must balance. Markets thus signal producers what to grow.
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
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?
Yes, luxury goods like diamonds, designer watches, sports cars, or rare paintings have high prices even though few buyers want them. Reasons are high cost of production, scarcity, high quality and brand value, limited supply, and status value. Also life-saving medicines may be costly due to research cost and monopoly even if few patients need them.
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?
The family pays more at the super bazaar because non-price factors matter: trust in fixed quality, cleanliness, neat packaging, air-conditioned comfort, feeling of prestige, assurance of correct weight, and convenience of buying many items at one place. Bargaining can feel tiring, while super bazaar has no haggling and feels more hygienic and reliable, so people sometimes prefer it even at higher price.
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?
Farmers throw tomatoes when bumper harvest causes supply to be far more than demand, so market price crashes below transport cost, and it is cheaper to dump than to carry to market. Wholesalers can help by buying bulk, storing in cold storage, transporting to deficit regions, and linking to processing units. Solutions are cold chains, making tomato puree, ketchup and dried tomatoes, farmer cooperatives like AMUL, government minimum support price and food processing support to reduce waste.
Have you heard about or visited a school carnival / fair organized by your school or any other school? Discuss with your friends and teachers about the kind of activities organized by students there. How do they conduct selling and negotiation with the buyers?
Yes, our school annual fete has student stalls selling handmade crafts, bookmarks, snacks, and games. Students act as sellers, display prices, invite buyers, explain product quality, bargain politely, offer small discounts to attract, and use posters and slogans. Buyers (parents and students) compare stalls, bargain and pay, learning about demand, supply and negotiation like a real market.
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?
Example: 1) Biscuit packet has FSSAI mark, 2) Pressure cooker has ISI mark, 3) Tube light has BEE star rating, 4) Honey bottle has AGMARK, 5) Loose vegetables from cart have no logo. Loose or unbranded goods, small local producer items, or unpackaged goods may not have certification because they are not tested or packaged by formal companies. Certified logos appear on branded, packaged goods that follow government standards.
You and your classmates have manufactured a soap bar. Design a label for its packaging. What in your opinion should be mentioned on the label for the consumer to know the product better?
My soap label would have in front: Brand name Fresh Glow, picture of lemon, ISI mark, net weight 100 g, MRP ₹40. On back: Name and address of manufacturer, ingredients like coconut oil and fragrance, date of manufacture, best before date, batch number, directions for use, storage warning, customer care number and barcode. This tells quality, safety, quantity and contact details.