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Home Price and Output Determination Under Monopoly What is Monopoly


What is Monopoly?


Definition and Meaning:


Monopoly is from the Greek word meaning one seller. It is the polar opposite of perfect competition. Monopoly is a market structure in which one firm makes up the entire market. Monopoly and competition are at the two extremes. It is define as:


"Monopoly refers to a market where there is a single seller for a product and there is no close substitute of the commodity that is offered by the sole supplier to the buyers. The firm constitutes the entire industry".




Monopoly, therefore, indicates a case where:


(i) There is only a single seller of a product or service in the market.


(ii) The goods produced by a sole seller has not close substitutes.


(iii) The entry of new firms into the industry is effectively barred by legal or natural barriers.


(iv) The firm being the sole supplier of a product constitutes industry. Firm and industry thus have single identity. Or we can say monopoly is a single firm identity.


(v) The single seller affects no other seller by its own action in the market. The other sellers too cannot affect the price and output of the monopolist.


(vi) The demand curve facing the monopolist is negatively sloped. The monopolist being the only seller of the commodity in the market can increase the total sale by lowering the price and if, he raises the price, he would not lose all his sale. The demand curve facing a monopolist is less than perfectly elastic, i.e., . it slopes downward from left to right.     


For the monopoly to exist, it is not necessary that the size of a firm should .be large. Even a small firm may have a monopoly. For instance, a local water company or a local electricity company, supplying water and electricity in the city possesses all the characteristics of a monopoly.




Spencer has defined monopolist market in the following words:


"A monopolist market can be defined as one m which there is no perfect substitute for the product of an individual seller so that there is a separate demand curve for the product of each seller in the market".


Pure monopoly in its actual form does not exist in the real world. It is near monopolies which are very common. For example, railways face competition from road transport, electricity companies from oil and gas, telephone company from postal service, internet etc.

Relevant Articles:

What is Monopoly
Conditions/Base of Monopoly Power
Monopolist's Demand Curve
Short Run Equilibrium Price and Output Under Monopoly
Long Run Equilibrium Under Monopoly
Comparison Between Monopoly and Competitive Equilibrium or Perfect Competition
Misconceptions Concerning Monopoly Pricing
Monopoly Regulations
Monopoly Price Discrimination
Price and Output Determination Under Discrimination Monopoly
Assessment of Discriminating Monopoly or Price Discrimination

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

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