Meaning: -The term “MONOPOLY” is derived from two Greek words “Mono” which
means “Single” and “Poly” which means “Sellers”. Thus Monopoly refers to “market
structure in which a single seller controls the entire market”. And
therefore the seller is a price maker and not the price taker.
Features of
Monopoly
1.
Single seller:
- In a monopoly market, there is a single seller. The single seller controls
the price and supply in the market. Although, there is one seller, there may be
many buyers, depending upon the nature of the product.
2.
Absence of close substitutes:
- In a monopoly market the monopolist sells a product which has no close
substitutes. Therefore, the buyers have no close choice, whether to buy the
product or go without it.
3.
Barrier to Entry and Exist:
- Under Monopoly, there is a barrier to the Entry and Exist of firm in the
market. New firms are not allowed to enter into the market. The exit seller has
complete control (hold) over the supply in the market. No other firm is allowed
to sell that type of product, without taking prior permission from the patent
holders.
4.
No distinction between firms
and Industry: - Since there is only one seller, there is no
distinction between the firm and the industry. The firm itself becomes the
industry for that type of product.
5.
Price Maker:
- In a monopoly, the seller is a price maker. Under monopoly, there is a single
seller of a commodity, which has no close substitutes. The seller is
controlling the entire supply in the market. Therefore, he can dictate the
market price as per his wish.
6.
Profit Motive:
- The ultimate aim of the monopolist is maximisation of profit. Producer can fix
any price for his product and can take the whole income of the consumer.
7.
Downward
sloping Demand Curve: - A monopolists faces a downward sloping
demand curve. This indicates that, thought he is a price maker, he can not
charge a higher price. This is because he cannot disregard the demand
situation. Since the demand curve is downward slopping, he can increase the
sales by lowering the price.
