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Question

Explain how a chain of markets is formed. What purpose does it serve?


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Solution

Goods are first produced in factories, farms and homes (depending on the type of business). However, it does not mean that a consumer needs to visit these places to buy these goods since the ones making them will not sell in small quantities to an individual buyer. This is where wholesale traders come in. They are the intermediaries between the producers and the final consumers. They first buy the goods in bulk and then sell them to the retailers. The number of goods sold will depend on the demand. Finally, retailers will sell it to the end consumers.
Thus, we can infer that from factories to consumers, a chain is formed. This is called a chain of markets or market chain, as given below.
Factories/Farms → Wholesale traders → Retailers → Consumers


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