What do you mean by Monopoly? What are the features of Monopoly?


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.

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