Bcom 1st Year Meaning and Definitions of Monopoly
Meaning and Definition of Monopoly
The word ‘monopoly’ is made up of the sum of two terms mono and poly. More is ‘monopoly’. In other words, monopoly is a market situation in which there is only one producer or seller. Being a single producer or seller, that producer or seller is controlled on fulfillment. Pure monopoly, like full competition, is also a black situation. Although the status of a pure monopoly is not found in practical life
This is a very important concept from the point of view of economic analysis. According to Prof. Robert Tipina, “Monopoly is the state of the market in which no firm is affected by the price family of another firm.”
In the words of Prof. Chamberlin – “The seller’s control over supply is enough to create a monopoly market situation.”
In the words of Prof. Boulding – “A pure monopoly is a firm / industry and there is an elasticity of demand between the commodity of this firm and any other commodity of the economy.” .. In the words of Prof. Learner- “Monopoly is the seller who has the problem of falling demand curve for the commodity”. In simple words it can be said that in the event of a pure monopoly-
(1) The production and sale of goods is done by only one firm.
(2) There is no near or well substitute for the goods of a monopolistic firm ie the horizontal demand of the commodity is zero.
(3) There are significant restrictions on entry of other firms in the field of production. In other words, the entry of new firms into the field of production is completely closed.
(4) Monopolies can adopt their Independent Price Policy.
Meaning of oligopoly
“Oligopoly refers to a market condition where the number of sellers is so small that each seller’s supply has an impact on the market price, and each seller knows this.”
Business economics tends to be equal to the cost of production under the Price Determination Under Monopoly. Under such a bath.
“But this does not happen under monopoly. This is usually because monopolies usually try to set the maximum value. In other words, real monopoly income has to be maximized.
There is complete control over the fulfillment of Kari, but there is no control. Consumers are the determinants of commodity demand. Only by controlling such quantity can one determine the higher price of the commodity
Monopolies cannot control both price and supply at the same time, so they have the following two options –
(1) He can determine the value of the article or
(2) He can control the supply. In the first case, supply will be fixed according to demand at the fixed price of the commodity, while in the second stage the price will be determined automatically by the powers of demand and supply. Monopolies cannot determine or affect both price and supply simultaneously, so it often determines the price of the item first and then adjusts the supply accordingly. Monopoly is often not considered appropriate to determine the quantity of an object for two reasons.
(1) If there is no change in demand, it is not necessary for supply to remain consistent.
(2) Price may fall below production expenditure due to change in elasticity of demand. Hence there are two valid methods of pricing under monopoly I. Prof. Marshall’s mistake and investigation method or newly traditional method.
II. Marginal income and marginal cost method or modern method formulated by Mrs. John Robinson.
I. Trial and Error Method
According to Prof. Marshall, monopolies should adopt the mistake and investigation method to get maximum benefits. According to this method, the monopolist should change the price and quantity of his commodity several times and compare the quantities of income and determine the price or quantity at which he gets maximum profit, that price or quantity. Till the time maximum gain is achieved, he should keep trying continuously.
According to Prof. Marshall, monopolies often focus on pricing twice.
1. Conditions of demand and
2. Conditions of supply.
1. Conditions of Demand
-In this connection, there may be situations
(i) Demand for goods is highly elastic – it means that there is a slight decrease in demand on a small increase or a slight increase in demand at a small price. In such a situation the monopoly would be interested in setting a lower price and getting the maximum total profit, because if such monopoly sets a higher price for his commodity, he can ask for the commodity, in which the monopoly will not get the desirable profit.
(ii) Demand for goods should be inelastic — it means that price should not have any significant impact on family demand. In such a case, the monopoly should set a high value for maximum lapses.
2. Conditions of Supply
In the conditions of supply, attention is paid to which production is being done under the rule of origin.
The following three stages are possible in this regard
(i) In the case of consecutive generation decline rule – in this case the cost will increase as production increases, so the monopolist should set a higher price per unit by reducing the supply of the commodity, only then he will get the maximum profit.
(ii) In the case of consecutive originality parity rule – the quantity of production under this condition will not have any effect on the cost, so in this case the price of the commodity will be fixed on the basis of elasticity of demand.
(iii) In the case of successive generation increase rule – with the increase of production, the cost decreases with the application of this rule, so the monopolist must produce a large quantity and sell the item at a lower price to get maximum profit .
II. Marginal Revenue and Marginal Cost Method
This method is better. Modern economists like Mrs. John Robinson and Prof. Knight have proposed this method. In the words of Mrs. Joan Robinson – “The monopolist will set the price of his article at the point where his Marginal Revenue is equal to the Marginal Cost, so that he can get monopoly profit.” In other words, the marginal cost (MR) must be equal to the marginal cost (MC) for maximum profit.
Regarding the lines of demand and supply under monopoly, it is worth mentioning that the demand line is falling from left to right downwards like incomplete competition and Marginal Revenue is always below average Revenue. it happens. As far as the supply lines are concerned, the supply lines are like complete and incomplete competition. In terms of time, the interpretation of pricing under monopoly can be divided into two parts.
1. Short Period and 2. Long Period. ..
1. Determination of Value during Short Period
It is clear from the above discussion that pricing will be guided by the same point where the marginal proceeds (MR) are equal to the marginal cost (MC).
In the short run, the most important fact regarding monopoly is that monopoly can earn profit, loss or ordinary profit, anything during this period. In other words, in short-term pricing, monopolies can also gain, may also suffer losses and general gains (zero profit).
In technical terms, the monopolist will earn a profit if the average income is high and the average cost is low. If the average income is less and the average cost is equal then the normal profit will be achieved. If the average income is low and the average cost is high, the monopoly will suffer loss.
These three stages can be explained by diagrams.