Q.Explain the meaning of Monopoly with its features.
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Start your 14-day free trial to unlock the full solution →Monopoly is a market with a single seller of a product that has no close substitutes and strong barriers to entry, so the monopolist is a price-maker. Its features include one seller with many buyers, absence of close substitutes, restricted entry, full control over price, price discrimination and a downward-sloping demand curve.
Meaning of Monopoly: The word 'monopoly' comes from 'mono' (single) and 'poly' (seller). Monopoly is a market structure in which there is a single seller or producer of a commodity that has no close substitutes. Because there is only one firm, the firm itself is the whole industry, and it has significant control over the price and supply of the product. Examples include public utilities such as railways or the sole supplier of a patented product.
Features of Monopoly:
- Single seller and many buyers: There is only one producer/seller of the commodity, while the number of buyers is large; hence no single buyer can influence the price.
- No close substitutes: The product has no close substitutes, so buyers must buy from the monopolist or go without the good.
- Barriers to entry: Strong legal, natural or technical barriers (patents, licences, huge capital, control over raw materials) prevent new firms from entering the market.
- Price-maker: Since the monopolist controls supply, the firm can fix either the price or the quantity, but not both; it is a price-maker rather than a price-taker.
- Price discrimination: The monopolist can charge different prices to different buyers or in different markets for the same product. …
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