Monopoly has such a type of market structure, where there is only one firm present in it. This firm enjoys absolute power in producing and selling the product or service. Products offered in a monopoly market do not have any close substitute.
Monopoly is most likely to be found in public utility sectors.
Also, the combined effect of various characteristics of the monopoly market ensures that the market player is a sole price setter. Buyers cannot influence prices. Price is set by the firm taking into account demand elasticity of a product, product demand, and maximisation of profit.
An instance of monopoly competition can be found in the government sector. Government has a monopoly over infrastructure such as dams, railways etc.
These sectors count as a monopoly market with the government as the only entity because the competition is non-existent. The characteristics of the services and products in such a market are determined by the government.
Monopolistic competition is the market setting that includes differentiated products offered by a handful of sellers present in the market. Product differentiation is undertaken through packaging, brand name, trademark etc.
Monopolistic competition is evident in the manufacturing industry.
The characteristics of monopolistic competition such as differentiated products and a handful of sellers influence prices of products or services. Consumers in a monopolistic market buy more products when prices are comparatively lower. Firms set product price, taking into consideration marginal cost and revenue as well as profit maximisation.
Monopolistic competition can be seen on television programmes. With the advent of globalisation, consumers have greater choice in the variety of shows from which to choose. The television programmes offered across the world are also diverse. However, there are only a few companies that broadcast those shows.
Major differences between monopoly and monopolistic competition have been discussed below.
It can be understood that, in a monopoly market, the seller has the discretion to charge different prices to different sets of customers. It is known as price discrimination. However, in monopolistic competition, there exists non-price competition. Sellers in this market cannot adopt price discrimination policy for its customers.
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1. What is the Meaning of Monopoly?
Ans. Monopoly includes such a market structure that is characterised by the presence of a single seller. The product or service on offer is also unique. No competition is experienced by the seller as it is a sole entity in that market without any other close substitute.
2. Define Monopolistic Competition?
Ans. When a fewer number of firms are present in an industry, it is characterised by monopolistic competition. The services and products on offer are similar; however, those are not held to be perfect substitutes. The decision of one firm has less influence on the other.
3. Mention Key Differences Between Monopoly and Monopolistic Competition.
Ans. A monopoly market structure has a single-player operating in it. There are a few players present in a monopolistic market that results in competition. A single product is offered in monopoly with no close substitute. However, there are substitutable products in a monopolistic one.