MONOPOLY

MARKET
Type of market
DEFINITION
➤ In monopoly market , there is a
single seller of the commodity
and the entry of other firms is not
allowed.

➤ Monopoly is often confused with

Monopolistic market which are
very different types of market.
CHARACTERISTIC
S
➤ Single seller

➤ Difficult Entry and exit of firms

➤ Price Discrimination
➤ Determination of Price
➤ No Close Substitute
➤ AR and MR Curve
SINGLE SELLER OF THE COMMODITY
➤ This is the most important characteristic of monopoly.
➤ There is only a single seller who produces the commodity in the
market and there is no substitute present for the commodity.
➤ Due to no close substitute present the Monopolist has complete
control over the price.
➤ Being a single seller he can charge any amount for the commodity.
DIFFICULT ENTRY AND EXIT OF FIRMS
➤ The government often uses barriers like patent rights and licensing
as a method to make it difficult for new firms to enter the market as
it wants to have complete control over the such market
➤ As a result it becomes very difficult for New firms to enter the
market and the monopolist continues to control the market.
PRICE DISCRIMINATION
➤ Since the monopolist is the only seller of the commodity he has full
control over the price which causes in price discrimination.
➤ It is the decision of the monopolist of how much price he wants to
take from different sections of people.
➤ For example : a monopolist may take lesser price for tickets of
railway from the older section of the society whereas more charge
from the youth section.
DETERMINATION OF PRICE
➤ A monopolist having complete control over the price can manipulate
and change prices of the commodity according to his needs.
➤ However it does not mean that he can take any price that he wants as
he has to reduce prices to increase the demand for the commodity.
➤ So the price of the commodity is changed according to the demand
of the commodity.
NO CLOSE SUBSTITUTE
➤ In monopoly market there is no close substitute present for the
commodity because the monopolist is the single seller of the
commodity.
➤ This implies that the monopolist has no fear of competition and can
manipulate the market according to his objectives.
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