With the advancement of the era of liberalisation, privatisation and globalisation, the markets have evolved completely. The global market scenario has segmented itself into various types of markets. There are several kinds of markets in the world that have been working conjointly and contributing toward the total Gross Domestic Product (GDP) of individual countries and the globe. In this article, we will learn more about the Monopoly market.
When we hear ‘Monopoly’, we often think of the board game. However, in addition to monopoly being known popularly for the board game, it has another meaning in the real-time world. Before we dive into understanding the importance of monopoly, let us look at the different market segments.
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What Are The Different Types of Markets?
The five major types of markets are as follows;
- Perfect Competition – An ideal competition refers to a market type with multiple buyers and sellers selling similar products in the market. The product is homogeneous, allowing free entry and exit of firms in the market.
- Oligopoly – An oligopoly market refers to a market where only a select number of producers of goods or services exist. These groups of producers are the dominants of the market. However, they do not hold the authority to set the prices in the market.
- Monopolistic Competition – A monopolistic competition refers to a market where one can find elements of monopoly and perfect competition. Multiple competitors in the market sell products, but they are highly different from each other. In this market, a few producers can charge a higher price when compared to other producers.
- Monopsony – A monopsony refers to a type of market structure where only one buyer exists. There could be multiple producers, but the market has only a single buyer.
- Monopoly – Lastly, monopoly refers to a condition in which the market has a single seller. There is only one seller of a particular product or service, which has no substitutes at all. Hence, this seller has the sole right to fix the price of the product. Let us understand the meaning of monopoly and some real-world examples as we move further.
What Is Monopoly?
As discussed earlier, monopoly refers to a market structure where only one seller of a particular product or service exists. All the customers in the market are forced to buy the product or service from the same producer itself. It simply means that a single supplier dominates the market, and no new entrants are allowed into the market. The monopoly also gives the seller an advantage in setting the price in the market. In the monopoly, the seller is the price maker. Hence, the prices in the market are consistently above the marginal cost.
The main aim of the monopolist is to increase profit maximisation. The selling price of the product in a monopoly market always sustains the maximum difference between total revenue and total cost. This means that the monopoly market helps meet customer demand alongside the profit maximisation demands of the monopolist.
Some of the Real World Examples of Monopoly
While monopoly might look like a hypothetical situation, it is often a common phenomenon in real-world scenarios. Let’s take a look at the different monopolies in different industries in the economy.
The first and most obvious example of a monopoly in the transport industry is the Indian Railways. The Indian Railways are the sole monopoly in the transport sector of the Indian economy. It is considered to be a natural monopoly since there are no private players in the transport industry.
One of the earliest monopolies created in the Indian economy was by the Hindustan Aeronautics India Limited (HAL). HAL is known for being one of the oldest organisations in the Indian aviation industry, and it has played a prime role in the government’s defence industry. They started as manufacturers of aircraft for the country. And over time, HAL became a state-owned corporation.
Another necessary monopoly that we must consider is Bharat Heavy Electricals Limited, which, when abbreviated, is known as BHEL. It is one of India’s first and most significant engineering and energy manufacturing enterprises and one of the leading power producers in the world. It offers and produces a wide range of energies such as hydro energy, gas, nuclear energy, thermal energy, and solar energy for defence, transportation, manufacturing, aviation and aerospace, oil, and so much more.
In conclusion, monopoly refers to a market structure where a single seller earns maximum profit share in the market. As an entrepreneur, it is crucial to educate yourself about different market structures and the business tactics employed in the economy. To know more about markets and market structure, read our article “A Guide To Marketing Environment 101” to learn more.