One Seller And A Large Number Of Buyers Economics Essay
In the advancement of making this undertaking, I understand that microeconomics is the survey of single economic units where we will utilize it in our day-to-day lives.We will larn how to run into the organisation ends with limited resources with the better apprehension of the economic constructs and theories.Besides that, we can besides larn basic economic sciences and have a better apprehension of the economic sciences of the market place.Through this study, I can understand more about the monopoly market, how it operates and its features from my research.From this research, I have a good apprehension on the monopoly in the market structure.Besides that, this research besides taught me to distinguish the four market construction in footings of its features which are wholly different from one and another.
2.0 Definition of monopoly
Harmonizing to Hashim, A. ( 2001 ) Comprehensive Economics Guide. 2nd erectile dysfunction. Singapore: Oxford University Press Pte Ltd, p.84, Monopoly is an industry composed of a individual marketer of a merchandise with no replacements and with high Barries to entry.A monopoly power exists when a individual house controls more than 25 % of a market.
3.0 Features of monopoly
3.1 One marketer and a big figure of purchasers
3.1.1 A monopoly exists when there is merely one marketer of a product.For illustration, The Tenaga Nasional Berhad ( TNB ) has a monopoly of the electricity supply of Peninsular Malaysia.All houses and stores who get supply from Tenaga Nasional Berhad ( TNB ) will necessitate to pay their electricity measure.
3.2 Product has no stopping point replacements
3.2.1 The merchandise sold by a monopolizer should be no stopping point substitutes.There are no other electricity provider in Malaysia.The merely provider is the Tenaga Nasional Berhad ( TNB ) .There is no competition for their merchandise.
3.3 Monetary value shaper
3.3.1 In a perfect competition, there will be no individual house can act upon the monetary value and this is called monetary value taker.The Tenaga Nasional Berhad ( TNB ) will hold the power to make up one’s mind and command the monetary value in the market since there are no rivals around.
3.4 Restriction on the entry of new houses
3.4.1 In a monopoly market, there will be rigorous barriers to the entry of new houses and the barriers of entry are natural.A monopolist faces no competition because of barriers to entry.
AAdvertising in a monopoly market depends on the merchandises sold.If the merchandise are luxury goods such as imported points so the monopoly will necessitate some advertizement to advance the consumers on the goods.Local public public-service corporation such as the electricity by Tenaga Nasional Berhad ( TNB ) need no advertizement since the consumers know from where to obtain such goods and they are the lone corporation who supplies electricity.
Super-normal net incomes
Monopolies can keep super-normalA profitsA in the long tally. As with all houses, net incomes are maximised when MC = MR. In general, the degree of net income depends upon the grade ofA competitionA in the market, which for a pure monopoly is zero. AtA net income maximization, MC = MR, and end product is Q and monetary value P. Given that monetary value ( AR ) is above ATC at Q, supranormal net incomes are possible ( country PABC ) .
With no stopping point replacements, the monopolizer can deduce super-normal net incomes, country PABC.
A monopolizer with no replacements would be able to deduce the greatest monopoly power.
4.0 Differentiation of the characteristics of the four market constructions
Type of market
Number of houses
Freedom of entry
Nature of merchandise
( undifferentiated )
Cabbages, carrots ( these approximate to hone competition )
Builders, eating houses
1.Undifferentiated or 2.Differentiated
1. Some, such as
2. Cars, electrical contraptions
Restricted or wholly blocked
house ‘s “ image
Many prescription of drugs,
local H2O company
4.1 Number of houses
4.1.1 The perfect competition has big figure of purchasers and sellers.Firms are monetary value taker because the measure of a individual marketer sells in a market is so little compared to the overall industry.Besides that, the monetary value is ever changeless where the marketer can merely make up one’s mind the measure to be sold and non the monetary value of merchandising of a product.An illustration of the perfect competition is the duck producers.The monetary value of the duck in the market is still depends on the demand and supply.The Sellerss can ne’er command the monetary value of the duck in the market even if they have high production, it will non impact much in that industry.
4.1.2 In a monopolistic competition, there are a big figure of sellers.The figure of houses exist in a monopolistic competition market is less than perfect competition.Due to the size of each house which is little and hence, no single house can act upon or command the market price.Therefore, each house follows an independent price-output policy.The house that produces toothpaste is in the monopolistic competition where there are many trade names of toothpaste in Malaysia such as Darlie, Colgate and Polleney.They can ne’er act upon or command the monetary value in of their merchandises in the market.
4.1.3 In an oligopoly, the figure of houses is little but the size of the houses is large.The market portion of each house is big plenty to rule the market.A few houses control the overall industry of an oligopoly.For illustration the crude oil companies viz. Shell, BHP, Caltex.They are big houses who have market portions which able to rule the market.
4.1.4 Under monopoly, there is merely one marketer of a merchandise and big figure of purchasers exist.A monopolizer is a monetary value shaper since there is merely one marketer and no rival and it has the power to command the monetary value in the market.One of the illustrations of a monopoly is the Tenaga Nasional Berhad ( TNB ) where their company supplies electricity for the whole Peninsular Malaysia.
4.2 Freedom of Entry
4.2.1 There is unrestricted freedom of entry and issue of the houses from the industry in the perfect competition and the monopolistic competition.A house can easy come in the market and go out the market anytime they wish to.No limitation is imposed.If any house who wish to open a fruit farms and run the concern if he/she has the necessary factors of production ( land, labor and capital ) he/she can ever get down the concern even there is a batch of fruit farms exist.
4.2.2 In an oligopoly market, there are assorted barriers to entry.Although similar to a monopoly, the houses in an oligopoly will curtail new houses to come in the market.The types of barriers to entry are economic systems of graduated table, forces to unify, ownership of patents and right of first publications to call a few.This can be illustrated briefly by the crude oil industry in Malaysia where Mobil, Shell, Petronas and Caltex which already exist in the market and they control the market.The opportunities for a new house to be formed in the crude oil industry in Malaysia is really low due to the immense capital investing that they need to hold a place in the market.
4.2.3 Under the monopoly market, there will be restricted freedom of entry and there are legal limitations that restrict the entry of new houses into the industry.Hence there will be no rivals and competition for houses who are in the monopoly market.Telekom Malaysia ( TM ) is a good illustration of a monopoly since there is merely one place telephone service in Malaysia which is Telekom Malaysia ( TM ) and non any other houses.
4.3 Nature of merchandise
4.3.1 The houses in a perfect competition must sell homogeneous products.In the perfect competition construction, purchasers can non distinguish merchandises in footings of quality, packaging, coloring material and design since they are identical.Furthermore, the house can non bear down a different monetary value for the same merchandise which exist in the market.A authoritative illustration of this is the telecommunication service supplier in Malaysia which are Digi, Maxis and Celcom.They provide clients with the same merchandise in the market but purchasers can non distinguish their merchandises no affair how, since they are all the same.
4.3.2 The monopolistic competition market sells differentiated merchandises which are non identical.Each houses will hold their ain method to distinguish their merchandises from other Sellerss to acquire more clients or consumers. Their merchandises can be different in footings of the design, advertisement, stigmatization, and labeling. For illustration, when a aroma is nicely packaged in a box and labeled as ‘best aroma ‘ so this merchandise is in monopolistic competition.
4.3.3 Products in the oligopoly may be differentiated or undifferentiated. In Malaysia, the illustration of oligopoly market are crude oil and cars where crude oil is indistinguishable while autos are differentiated merchandises.
4.3.4 Under monopoly market, the merchandises produced has no close replacements or unique. Tenaga Nasional Berhad ( TNB ) is one of the illustration of monopoly who is the electricity provider from local public public-service corporation which has no close replacements but if the purchasers can happen any other manner to acquire electricity so this merchandise is no more in monopoly and monopoly can non be if there is a competition or any utility merchandise.
4.4 Being of Non-price Competition
4.4.1 In the perfect competition, the function of non-price competition is undistinguished since many Sellerss sell the merchandises at a fixed monetary value and furthermore, the merchandises are indistinguishable. On the other manus, non-price competition can besides be referred as merchandising cost which is the disbursals that used to increase the sale of the merchandise of a house. In perfect competition, houses can non command the monetary value and their goods are homogeneous, so there is no merchandising cost. For illustration, we do non see any advertizement in the telecasting or any other media about a merchandise that has no trade name.
4.4.2 Under monopolistic competition, some non-price competition exist particularly in advertisement when houses compete for their merchandises and non the monetary value of the merchandise. Firms will necessitate to utilize assorted methods such as advertizement and publicity to pull more clients to purchase their merchandises.
4.4.3 The houses will seek to capture the market through better advertisement run and bring forthing high quality merchandises to the clients alternatively of cut downing the monetary value. This is because when one house reduces the monetary value of the merchandise other houses will follow the same technique. In fact, the oligopoly houses compete with each other through non-price competition instead than monetary value competition. They will seek to do better merchandises in footings of the quality and measure so that this will do the house more competitory as compared to other houses.
4.4.4 In a monopoly the houses will merely publicize for their ain image since there is no rival about. There is merely one marketer for that merchandise, so houses do non truly necessitate to publicize much to increase the sale of the merchandise. Customers will decidedly cognize that this steadfast supply this sort of merchandise and they can merely acquire such merchandise from this house.
5.0 Conclusion and recommendations
A monopoly is the market where there is merely one marketer and many buyers.Furthermore, the merchandise produced has no close replacements to do them the monetary value shaper or the they will hold the power to command the monetary value in the market.There is besides the limitation on the entry of new houses to do it has no competitor.Hence, they advertise depends on the merchandises sold.A monopoly will merely be when it meets all the features stated.