Advantages And Disadvantages Of A Monopoly Market

Updated on September 12, 2011

A monopoly market exists when there is huge number of buyers but small or very limited number of sellers in the market. Like any other market structure a monopoly market has its advantages and disadvantages to both the buyer and the seller.

In this article I will put into perspective the pros and cons of a market experiencing monopoly.

Advantages

  1. Stability of prices- in a monopoly market the prices are most of the times stable. This happens because there is only one firm involved in the market that sets the prices if and when it feels like. In other types of market structures prices are not stable and tend to be elastic as a result of the competition that exists but this isn’t the case in a monopoly market as there is little or no competition at all.
  2. Source of revenue for the government- the government gets revenue in form of taxation from monopoly firms.
  3. Massive profits- due to the absence of competitors which leads to high number of sales monopoly firms tend to receive super profits from their operations. The massive profits realized may be used in such things as launching other products, carrying out research and development among many other things that may be beneficial to the firm.
  4. Monopoly firms offer some services effectively and efficiently.

Disadvantages

  1. Exploitation of consumers- a monopoly market is best known for consumer exploitation. There are indeed no competing products and as a result the consumer gets a raw deal in terms of quantity, quality and pricing. The firm may find it easy to produce inferior or substandard goods if it wishes because t the end of the day they know very well that the items will be purchased as there are no competing products for the already available market.
  2. Dissatisfied consumers- consumers get a raw deal from a monopoly market because quality will be compromised. Therefore it is not a wonder to see very dissatisfied consumers who often complain about the firm’s products
  3. Higher prices- no competition in the market means absence of such things as price wars that may have benefited the consumer and as a result of this monopoly firms tend to charge higher prices on goods and services hence inconveniencing the buyer.
  4. Price discrimination- monopoly firms are also sometimes known for practicing price discrimination where they charge different prices on the same product for different consumers.
  5. Inferior goods and services- competition is minimal or totally absent and as such the monopoly firm may willingly produce inferior goods and services because after all they know the goods will not fail to sell.


This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Questions & Answers

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      • profile image

        carena 

        4 months ago

        well understandable ....great job!

      • profile image

        Joe 

        5 months ago

        Very helpful thankyou :)

      • profile image

        Ada 

        7 months ago

        It was very helpful

      • profile image

        maggy caren 

        8 months ago

        wonderful

      • profile image

        Manish 

        8 months ago

        Thanks

      • profile image

        grips noah waniaye 

        11 months ago

        your points carry guys kip it up

      • profile image

        ananya 

        13 months ago

        nice description good work

      • profile image

        McKenzie Live 

        14 months ago

        Nice contents

      • profile image

        Maria Ahmed 

        14 months ago

        Good Points... Very helpful

      • profile image

        morris 

        15 months ago

        wow good work

      • profile image

        Abraham kenyi isaiah 

        16 months ago

        Mkt structure

        merits and demerits of the monopoly mkt. So interesting and undertood

      • profile image

        John Smith 

        18 months ago

        Nice

      • profile image

        Hamza 

        21 months ago

        Very nice explanation

      • profile image

        Rutendo 

        21 months ago

        Helpfull alot and understandable

      • profile image

        bidhan 

        2 years ago

        good points

      • profile image

        luv sharma 

        2 years ago

        please give equal advantages and disadvantages

      • profile image

        zzzz 

        2 years ago

        helpful !

      • profile image

        Carolina 

        2 years ago

        in deed very great and awesome.easily understood and explainable

      • profile image

        bagiire mubarak 

        2 years ago

        ok, thats wonderful

      • profile image

        Rufus S Domah 

        3 years ago

        Very good I love that.

      • profile image

        mothiba gt 

        3 years ago

        tthis is more help full

      • profile image

        gaurav 

        3 years ago

        GOOD

      • profile image

        frank 

        3 years ago

        I like what you do, thanks.

      • profile image

        muchimba 

        3 years ago

        Wow nyc one

      • profile image

        mumilly 

        3 years ago

        Awesome

      • profile image

        Matthew Sayor Ebbah 

        4 years ago

        Market structure

      • profile image

        Jeff 

        4 years ago

        Hopes

      • profile image

        Sarah Noor 

        4 years ago

        Thanks for sharing these merits and demerits. They are quite easy and interesting too. Thankyou!

      • profile image

        jonathan siakeh 

        4 years ago

        I love the topic, it help me....

      • profile image

        Brady 

        4 years ago

        Close, but a real monopoly is when one firm owns everything or almost everything.

      • profile image

        divya 

        4 years ago

        Vry helpful this topic thanx

      • profile image

        Tracy 

        4 years ago

        Awesome

      • profile image

        Karen Basil 

        6 years ago

        Thank, the topic has helped me a lot

      • profile image

        princess 

        6 years ago

        it was quite helpful

      • profile image

        amrit 

        6 years ago

        very nice good,i like that topic

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