Posted at 01.02.2019
Monopoly is a single seller and large number of buyers. There is a single seller producing a commodity that does not have any close alternative. The monopoly market continues to be entirely by mutually beneficial exchange of company can be found and many. Besides that, research the impact of any relaxation of the multiple firms assumption on equilibrium.
Introduction to monopoly
Monopoly is a kind of market framework where there's a single seller producing a commodity that does not have any close substitutes. There is absolutely no difference between firm and industry and monopoly form as imperfect market. Besides that, monopoly is the only real company of goods and services.
2. 1 Characteristics of Monopoly
There are some characteristics of monopoly market.
One owner and large number of buyers
The one of monopoly characteristic is one vendor and large number of potential buyers is large and the size of each organization is very small. The number of clients also large which firm cannot influence the market price. So basically, individual firm does not bother about the reactions of the organization. Besides that, adjusts its sales to earn maximum profits and the price given under perfect competition. The demand of specific buyers relative to the total demand. Therefore small that cannot effect the price tag on the product by his individual action.
Product does not have any lose substitutes
The second characteristics is, product differentiation, there may be product are close substitutes however, not perfect substitutes. Its means, products are equally but not identical. For an example, Colgate toothpaste is just a little different from Darlie toothpaste. Usually, likewise dettol soap differs from life buoy soap. But if the buyers can find any substitutes for toothpaste and soap means, will be the differences is real or imaginary but its create parts. Consumers like one product to some other, under monopolistic competition. Monopoly cannot exist when there is a competition or any alternative product because consumers or customers cannot find any replacement for the merchandise.
Restriction on the accessibility of new company.
The third characteristics of the monopoly are, firm under monopolistic are easy to entry and leave the industry. Barriers are not access is natural or legal limitation that restricts the accessibility of new organizations into the industry. Hence, a company has legal control over other organizations. There exists restricting competition on the market.
In monopoly market, advertising is will depend on to the merchandise sold. If the product is good and services means, the monopoly needs make advertisement to see consumers on the products. So that, its make an effort to build goods of its own products. From the advertising, consumers can know their advertising costs. However, if the products aren't luxury goods such as drinking water service, electricity service, and local mobile phone service, then the seller you don't need to create any advertisements. This is because most of the buyers know that where will be the places and locations to get and purchase these few products.
2. 1. 1 Diagram
The Monopolist and Income Maximization
In the diagram, the number of produced and price priced has own control for both of it. That also, complete demand curve for goods and services produced. So that, it'll facing a downward slopping demand curve in the diagram. Equivalently, a monopoly never functions in the inelastic portion of its demand curve.
Monopolist Earnings Maximization
What happens if the monopolist later encounters a demand curve such as D1? If so, the monopolist cannot cover costs and can go out of business.
2. 1. 2 Demand, Marginal Earnings, and Elasticity
http://cyro. cs-territories. com/asa2_economics/unit4/images/monopolisticcompetitionlongrun1. png
In the diagram, demand curve is elastic as there many organizations. So that, there is certainly lack of close substitutes. The profits shown as excessive where in fact the shaded area and competition the brief run.
As shown in the graph above, a monopolist facing demand curve D0 will produce number Q0 and the purchase price incurred will be add up to P0.
2. 1. 3 Conclusion
All in all, monopoly have four characteristics of framework. Besides that, monopoly is the sole service provider of goods and services. The monopoly market is still exclusively by mutually beneficial exchange of firm are present and many.
3. 0 Difference between Perfect competition, monopolistic competition, oligopoly, and monopoly
Perfect competition, monopolistic competition, oligopoly and monopoly have their own respectively features. Their characteristic of these four market segments is not same. In monopoly, the marketplace structure in which there is only one producer and vendor for a product. Oligopoly is only few firms that make up an industry and choose group of firms has control over the purchase price. Monopoly and oligopoly has high barriers to admittance. Then, monopoly framework is opposite for perfect competition. Perfect competition are has many buyers and retailers, many products that are similar in nature and there are many substitutes.
3. 1 Differentiate between perfect competition, monopolistic competition, oligopoly and monopoly
3. 1. 1 Perfect competition
Perfect competition is a market is a possible market where competition is at its most significant in possible level. The merchandise are homogeneous and retailer can easily enter in and exit using their company market.
Number of seller and buyers
Perfect competition is very large numbers of businesses on the market. Perfect competition also life of large numbers of buyers and vendors. There is no dominating firm and all organizations are usually small and are price takers, because the individual sales level is relatively small in comparison to market level. Perfect competition also, has many buyers and sellers, many products that are similar in character and for that reason, many substitutes. This ensures that no single organization can exert market control over price or volume. If one firm decides to increase its result or stop producing totally, the market is unaffected. The price will not change and there is absolutely no discernible change in the quantity exchanged in the market.
Unrestricted to entry and exist
The second characteristics of perfect competition is there are unrestricted on the entrance and exist of both purchasers and sellers. A firm can easily enter into perfect competition market and leave the marketplace anytime, if that firm cannot continue the company. The lack of such barriers will not affect the prices, and there is always an alternative for suppliers, who gets into and leaves if, wants. If any losses occur the company will are present the industry without any reason. This is important to understand the free entry and free exist can be done in the long-time company.
There another condition of perfect competition is homogeneous product that is a product offer on the market by seller. It must be goods offers on the market and perfect substitutes of one another vendor. One organization cannot differentiate the same products sold in the industry because buyers can identify the difference in conditions of colors, quality and packaging. There is certainly mean, even though the products are same in nature but there exists difference in terms of quality. Owner cannot raise the price above the prevailing price or lower the purchase price. Homogeneity of product has an important implication for the marketplace if products of different vendor. Besides that, purchasers not care who they obtain, as long as the purchase price is same.
In the perfect competition, profit maximization determine by the amount of product they sell. The marginal cost by the merchandise of a single unit of the merchandise is add up to the marginal income. Total revenue and total cost way are the income maximization. When the cost is least expensive, and then only can be maximum income.
3. 1. 2 Monopolistic competition
The notion monopolistic competition is more sensible than perfect competition. Monopolistic competition market each company has its price insurance policy. The most things from one more thing feature of monopolistic competition are the products of varied firms are not identified. However they are close substitutes for each and every others. In the case, monopolistic and perfect competition is characteristic by the lifetime of retailers. The businesses do not produce perfect substitutes. Normally, each firm has a little percentage of the total monopolistic market and thus has limited control over selling price.
Under monopolistic competition, product differentiation may entail physical or characteristics differences in the products by their selves. There productivity product are differentiated between that are relatively close substitutes for every other. So that, that product prices cannot be very much not the same as each other. Product differentiated by location, services, designs, and brands. The organizations in monopolistic competition will differentiated their products and make sure they are more desirable to the clients in order to increase their earnings.
Control over price
In the short run of monopolistic competition works like monopoly. Its can increase their prices in at time because they differentiated their product. It really is a distinctive feature of monopolistic competition. In such kind of market, due to product differentiation, every organization must incur some additional expenditure by means of providing cost. This cost includes sales advertising expenses, advertisement expenses, and salaries of marketing staff. But on account of homogeneous product in perfect competition and zero competition in monopoly, offering cost does not are present there.
3. 1. 3 Oligopoly
In an oligopoly, there are only a few organizations that define a business. This select band of companies has control over the purchase price and, just like a monopoly; an oligopoly has high barriers to admittance. Main attribute of oligopoly is interdependence of firms on the market. Total more, in the oligopoly market, all firms can earn abnormal profits in the long run because, the admittance of new companies are difficult. Oligopoly is nothing like monopolistic market, because if organizations change the costs or output, it has noticed effects on the profits of its challengers.
Small variety of large firm
Approaches from few large organization are each which is relatively large compared to the overall size of market. Under oligopoly, few companies control the overall industry and there is absolutely no specific quantity of firms that has to control the marketplace.
Homogeneous of differentiated product
Under oligopoly, when a product sold that can be either a homogeneous or a differentiated product. For example, petroleum, material and etc. and also, oligopoly focus on goods sold. Essentially, folks have different desires needs and so enjoy variety. Such as, automobiles and pcs.
Barriers no entry
Barriers no entrance is similar to monopoly market. The oligopoly organizations will restrict new entry into the market. On this industry, a few huge organizations own almost all of the available flat iron ore, a required raw material for steel creation. After the new firms are from the market, there large firms reduce the creation will increase the price. In these cases, barriers to entrance are low, looked after as small investment may be required to enter the market structure.
3. 1. 4 Monopoly
Monopoly can be viewed as opposite of perfect competition. It really is market form where there are only sellers. Even though, there are numerous factors to rise up monopoly market. There is only one distributor; and the demand curve that each businesses face is the market demand curve. A monopoly company is deemed to obtain substantial control over the price of its product. In the case a monopoly can also arise if the company owns the complete supply of a necessary material had a need to create a product.
3. 1. 5 Conclusion
Number of firms
Type of Product
Homogeneous / Differentiated
Only product of its kind
(no close substitute)
Ease of entry
Price Preparing power
Non Price Competition
Considerable for a differentiated oligopoly
Long run profits
Doesn't Exist; agriculture close
Fast Food, retails stores, cosmetics
Cars, Steel, soft drinks, cereals
Small town magazine, rural gas station
4. 0 Finish and recommendations
In the complete assignments, I learned all about microeconomics subject matter ant it is an essential subject to whom taking business course. The topic teaches every college student about business skills and really helps to learn about business understanding of economics.
In first question, I know the characteristics of monopoly. I also learn the differentiated of monopoly in the markets. The next question is about the differentiate between perfect competition, monopolistic competition, monopoly and oligopoly marketplaces. From this question, I learned about the four characteristics of the markets including the four markets aren't same all the times.
In spite of the assignment, I thank to my lecturer and coordinator for guide us to get this done launch to business. I appreciate out of this assignment that I can know well about the business enterprise chapters.