The term ‘Monopoly’ has been created from the combination of two terms, ‘Mono’ meaning single and ‘Poly’ meaning seller. Hence, etymologically speaking, the term Monopoly refers to single seller. This refers to a situation or structure in a market wherein there is only a single seller of a certain good or service in the market. A Monopoly is often considered to as an extreme form or structure of the market wherein the entire control of the supply is rendered into the hands of the one single supplier of a good because the difference between a firm or a company gets eliminated.
Monopoly markets are a part of Economics and are often discussed as a topic in various economics assignments. If you are a student in need of Economics Assignment Help, you can visit www.makemyassignments.com.
There are several features of a monopoly, such as –
Single seller, more buyers
This is one of the most important and essential features of a monopoly because in a monopoly, there is only a single seller of a product in the market and there are a large number of buyers who buy such product from that one seller. In such a situation, as opposed to the usual structure of a healthy and competitive market, the seller gains all the power to manipulate the prices of the said product in the market, being the only seller, with no competition to adhere to which can be often exploitative for the consumers in the market. The forces of demand and supply barely apply in a monopolistic market because the seller themselves decides the prices of the goods and services.
There are often a number of factors associated with a monopoly in the market which makes it difficult for a number of other possible sellers of the product to enter into the market which means that the monopolistic nature of a seller creates barriers to the entry of other sellers in the market. These factors that can cause barriers to the entry of other sellers in the markets can be economies of scale, the access to a distribution or production channel exclusively, protection of patents or copyrights, etc.
No close Substitutes
This is another important factor that creates a monopoly because the whole concept of a monopoly is based on the premise that there is only one seller of a good or service that satisfies a certain need of the consumers in the market. This means that if there would be a substitute for such a good or service, the consumers can easily satisfy their needs by using such substitute, defeating the nature of a monopoly. Hence, in a monopoly, there are no close substitutes of the product being sold by the seller in the market and the absence of a substitute allows the seller to sell the product at whatever price they deem convenient and best, with no forces to manage and control such prices of the good or service.
Nature of Demand Curve
The demand curve represents the quantity demanded of a good or service in a market and is used as an important representation of the demand in economics. The nature of a demand curve in a Monopoly is such that since the curve of the consumers individually is downward loping, the demand curve of a monopolist is downward sloping because there is only one seller of the product in the market who enjoys the entire demand of the product in the market.
Another feature of a monopoly is that, since the prices of the goods and services being sold by the seller are not determined by the forces of the market and are not even influenced or controlled by any of the forces in the market, the seller is capable of deciding the price at which they wish to sell the product, no matter the ratio of profit and hence, in a monopoly, a seller becomes able to earn abnormal profits for a long amount of time.
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