1079. Monopoly Market



monopoly market monopoly market let's use the word monopoly if you break it down into two parts it becomes mono and poly the word mono means single and the word poly means seller so in a monopoly market what happens is that there is only one seller okay and there may be a large number of buyers you may call this guy as the seller or a firm okay so there is only one seller or one form but there are multiple number of buyers okay so effectively if you see there is no industry there is just one individual seller right so the characteristics of a monopoly market the first one as I told you is that there is only a one single seller they are not many sellers or rather you're not even to sellers there's just one single seller the second is in terms of substitutes okay so there are no close substitute for the product which is manufactured by this single seller the reason is simple if there is a closed substitute the moment this guy wants to make any kind of an adjustment to the price those top CTU's will trigger in so let's say I told you the example of tea and coffee if suppose this gentleman was controlling the market for coffee if he increases the price people will switch on and start using tea but because in this kind of a situation there is no closed substitute okay therefore the seller basically sells things at his discretion right the third one is that entry into market is not free which means that tomorrow if some other seller let's call him as s2 wants to come and produce this quantity of goods he cannot do this there can be various reasons for this okay and these reasons basically cater from one to the other so let's say for example if this person is controlling certain scarce resources okay let's say there are scarce resources which are used as input for the production of the commodity which this guy is selling okay in that case the new seller which was this guy cannot come into the market why because the resource which is required as an input to manufacture this commodity is not available in the market then there could be a reason of economies of scale what happens is that you know for example this seller there is a demand of 100 quantity of a particular commodity and this seller is manufacturing 100 so what happens is because he is manufacturing a large quantity therefore he might be using the technology which may result in cheaper cost of production okay at low cost of production right now because he is able to produce at a low price he also sell it at a low price right and still make his money but if someone else wants to come in he cannot come in because the economies of scale prevent them to produce at a low price right the third can be a legal barrier so let's say aviation now in aviation there are restrictions in India as to who can own the shareholding of an aviation company foreign airlines are not permitted to own a stake in the Indian Airlines right so according to the law only some foreign airlines have a restriction of entering into the domestic aviation sector in India right because of this a monopoly may be created so let's say for example till 10 15 years ago Air India used to be the single dominant player in the aviation market although now the situation has changed okay then there could be situations where there are particular patents right a patent or a process so what happens is if this company has manufactured a patent which it registers then effectively someone else cannot enter into that market because that will be a violation of patent for which he can be sued and five is some kind of a cartel now what do you mean by cattle cattle is a situation where in three or four forms may come together okay and they met together dictate the terms so instead of being four different individual firm they effectively become one single seller where they decide the price okay so this is what you need to know about a monopolistic market condition okay

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