3. INTRODUCTION
COMBINATION OF TWO WORDS:
MONO ONE
MONOPOLY
POLY CONTROL
• Refers to a market situation in which there is only one seller of a commodity
• Power to set the price
• Monopolist may be a king without a crown.
5. DEFINATION
Monopoly is a market situation in which there is a single seller. There are no close substitutes of
the commodity it produces, there are barriers to entry”. -Koutsoyiannis
Features of Monopoly
Single seller
No close substitute
Unique product
Price maker
Entry barrier
Eg. In Saudi Arabia the government has sole control over the oil industry
By branding, Copyrights, patents there can be no creation Perfect substitutes
6. EXISTENCE OF MONOPOLY
True monopoly generally exists in government controlled markets
E.g. Indian Railways
Monopoly in private business is rare
Private firms who have considerable market shares may enjoy
monopoly
E.g. Microsoft, Intel, Google,
7. TYPES OF MONOPOLY
PRIVATE MONOPOLY: -
The monopoly firm owned and operate by private
individuals is called the private monopoly. Their main
motive is to make profit.
PUBLIC MONOPOLY: -
The monopoly firm owned and operated by public or state
government is called public monopoly Their main motive is to
provide welfare to the public.
ABSOLUTE MONOPOLY: -
It is a type of monopoly, where a single seller controls the
entire supply of market without facing competition. It is
also known as pure monopoly.
8. Discriminative monopoly:
When a monopoly firm changes different prices for the same goods
or services to different consumers it is known as discriminative
monopoly.
Legal monopoly:
When a firms enjoys rights like trade mark, copy right, patent right, etc.
then it is known as legal monopoly. Such monopoly rights are approved by
the government.
Natural monopoly:
When a firms enjoys monopoly right due to natural factors like location
reputation earned etc, it is called as natural monopoly.
Technological monopoly:
When a firm enjoys monopoly power due to technical superiority
over other products in the market, then it is called as technological
monopoly.
9. ADVANTAGES AND DISADVANTAGES
Advantages
Monopoly avoids duplication and hence
avoids wastage of resources
A monopoly enjoys economies of scale of
product or services in market
Sources of revenue for the government as
government gets revenue from of taxation
Earning of huge profit led monopoly to
invest in R&D and provide us new product
Disadvantages
Poor level of services
Consumers may be charged high price for
low quality of goods
Lack of competition may lead to low
quality and out dated goods and services
Loss in R&D may force them to revert the
profit from consumer
10. APPLICATION OF MONOPOLY
Example Indian railway
Monopoly in its segment
Government , is the only seller
No close substitute for railway in market
Barriers to entry in market(capital, requirement, technology)