Faculty of Management

GLS University
MONOPOLY AND IT’S EFFECT ON ECONOMY

(ECONOMICS)
 Team Members
Roll No. Name
221 PRACHI THAKKER

222 ASTHA PRAJAPATI

223 DEV PRAJAPATI

224 KHUSHAL PRAJAPATI

225 MILAN PRAJAPATI

• 226 NISHANT PRAJAPATI

227 PRAKRATI SINGH

228 PRAPTI PANCHAL

229 PRISHA PADHYE

230 PRIYANKA LAKHWANI

 What is monopoly?
Pure monopoly is the form of market organisation in which there is a single seller of a commodity for
which there are no close substitutes.
In other words, it describes a market situation where one company owns all the market shares and
control prices and output.
A pure monopoly rarely occurs, but there are instances where company owns large portion of market
share and anti-trust laws apply.
For example, natural gas company, electricity company and other utility companies. They exist as a
monopolies because the cost to enter the industry is high and new entrants are unable to provide
same services at lower price and in quantities comparable to the existing firm.
 Characteristics of monopoly
• Sole traders
• Price maker
• Barrier to entry and exit
• Unique product
• Price discrimination
• Downward sloping curve
• Profit maximiser
• Stability of product elements
 Types of monopoly
 The Pure Monopoly
A pure monopoly is a single seller in a market or sector with high barriers to entry such as significant start-up costs whose product has
no substitutes. Microsoft Corporation was the first company to hold a pure monopoly position on personal computer operating systems.
As of 2022, its desktop Windows software still held a market share of 75%.
 Monopolistic Competition
Multiple sellers in an industry sector with similar substitutes are defined as having monopolistic competition. Barriers to entry are low,
and the competing companies differentiate themselves through pricing and marketing efforts .Their offerings are not perfect substitutes,
such as Visa and MasterCard. Other examples of monopolistic competition include retail stores, restaurants, and hair salons.
 The Natural Monopoly
A natural monopoly develops in reliance on unique raw materials, technology, or specialization. Companies that have patents or extensive
research and development costs such as pharmaceutical companies are considered natural monopolies.
 Public Monopolies
Public monopolies provide essential services and goods, such as the utility industry as only one company commonly supplies energy or
water to a region. The monopoly is allowed and heavily regulated by government municipalities and rates and rate increases are
controlled.
Advantages of monopoly Disadvantages of monopoly

• Development and Research • Exorbitant Prices

• Increase efficiency by taking
use of Economies of Scale
• Increase your ability to
Innovate
• Continual Improvement for
the Good of Society
• Scale Diseconomies
• Offer Suppliers Low Prices
• Customers who are dissatisfied
because of a lack of output
• There is a Lack of Product
Innovation and Improvement

• Assist with Loss Mitigation

Services
 Examples of monopoly

Few examples of monopoly are as follow :

1. Standard oil
2. Microsoft
3. Facebook
4. Amazon
5. Andrew Carnegie Steel Company
6. Tyson foods
7. Google
8. Meta (formerly facebook )
 Effect of monopoly on economy
A monopoly’s potential to raise the prices indefinitely is its most critical detriment to
consumers. Because it has no industry competition , a monopoly’s price is the market price
and demand is market demand . Even at high prices , customers will not be able to
substitute the good or services with a more affordable alternative . As the sole supplier , a
monopoly can also refuse to serve customers . If a monopoly refuses to sell an important
good to a company, it has the potential to indirectly shut down that business. If the
supplier sells to consumer , it can refuse to serve areas that have lower profit potential ,
which could further impoverish a region .
 Sources of monopoly power
• Elasticity of demand
• Economic barriers
• Economies of scale
• Capital requirements
• Technological superiority
• No substitute goods
• Control of natural resources
• Network externalities
• Legal barriers
• Advertising
• Manipulation
• First-mover advantage
• Monopolistic price