Economic Markets

There are various kinds of markets that exist in economies. The study of these different markets characterises the study of microeconomics. It studies what differentiates one from another in terms of the products each one sells, the number of buyers and sellers in each market, and so on. There are a few primary forms of the market that we generally see in the commercial space. These fall into the perfect market, and the imperfect market consists of monopolistic competition and monopolies.

We use monopoly meaning that the seller monopolises the market, it could be because of the kind of product being sold, including patented, trademarked and copyrighted products or services. It could also be because of other barriers in the market. 

There are a few types of monopoly that we will also understand. However, before this, let’s take a look at the other forms of the market to see how monopolies are differentiated from them.

Perfect Competition

Perfect competition is a market where many producers sell an identical product that cannot be differentiated from the other. In this form, consumers also have perfect knowledge about the products they’re buying. Moreover, there are no barriers for the sellers to enter the market as long as they can support their own production and related costs. While it is difficult to find examples of perfect markets in the real world, vegetable markets or sabzi mandis are close to their definition.

Imperfect Competition: Monopolistic, Oligopoly

• Imperfect competition is starkly different from perfect. It encapsulates all other forms of markets, including monopolistic competition, oligopoly, and the various types of monopoly
• Monopolistic competition refers to a market that has no barriers to entry but has differentiated products. For example, different soap companies sell the same product – soap – but market and package it differently and use different ingredients. There is significant price competition in such a market, where if one firm reduces its prices, they will all have to
• Oligopolies are markets that have few sellers and many buyers, making for tough price competition. There are differentiated products here. But because of extremely high costs to enter or patented barriers, it is difficult for new sellers to enter. A good example of an oligopoly would be the airline industry
• A monopoly is a market where there are only one or very few sellers for an entire lot of buyers. It gives the monopolist firm great control over the market to set their prices as high or as low as they want. The main idea is that there are no close substitutes to this product, which is why it holds a monopoly in the market. The Indian Railways are an excellent example of this kind of market

Types of Monopoly

• Monopoly markets can take various forms. It includes simple, discriminating, natural, legal, government-imposed, pure and imperfect monopolies
• Simple monopolies are those where the monopoly firm charges its customers across its base the same price for the same goods and services. Discriminating monopoly quite literally distinguishes between individuals and charges different prices. It can often be seen on e-commerce websites where different customers on different mobile phones and IP addresses are shown varied prices for the same good
• A natural monopoly refers to a market where a resource is only available in one geographical area. As a result, the firms in these areas can only market and sell the products, giving the firm a natural advantage. For example, palm oil is only found in Asian, African and South American regions, giving these countries an edge for their production and export
• Besides, legal monopolies are granted to certain firms via patents, copyrights and trademarks. Government-imposed monopolies generally include heavy industries that public corporations can only produce. It was the case in post-independent India when our leaders focused on industrial development and monopolised several chemical plants
• Pure monopolies refer to those that have only one firm selling a single product in the entire market. Levi’s was such an example from decades ago when it was the only firm that sold blue jeans. Besides, imperfect monopolies have more than one but few firms in the market

Conclusion

A monopoly is a kind of market where one firm takes all the available sales of a product. It is owed to the fact that there are no other goods or services in the market that can substitute this one. There are also various types of monopolies that we looked at. Pure monopolies have only one firm, while imperfect monopolies have more. This kind of market can also be caused by governmental impositions, legal rights and natural causes such as the availability or unavailability of resources.