Advantages and Disadvantages of a Monopoly Market - ToughNickel - Money
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Advantages and Disadvantages of a Monopoly Market

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A monopoly market exists when there is a huge number of buyers but a 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 a monopoly.

Advantages

  1. Stability of prices: In a monopoly market, the prices are most of the time 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 the form of taxation from monopoly firms.
  3. Massive profits: Due to the absence of competitors, which leads to a 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 at 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 the 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.

Comments

Ghost on November 12, 2019:

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carena on May 29, 2019:

well understandable ....great job!

Joe on May 01, 2019:

Very helpful thankyou :)

Ada on March 04, 2019:

It was very helpful

maggy caren on February 21, 2019:

wonderful

Manish on January 27, 2019:

Thanks

grips noah waniaye on November 07, 2018:

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ananya on September 27, 2018:

nice description good work

McKenzie Live on August 18, 2018:

Nice contents

Maria Ahmed on August 09, 2018:

Good Points... Very helpful

morris on July 24, 2018:

wow good work

Abraham kenyi isaiah on June 22, 2018:

Mkt structure

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

John Smith on April 25, 2018:

Nice

Hamza on January 28, 2018:

Very nice explanation

Rutendo on January 19, 2018:

Helpfull alot and understandable

bidhan on July 13, 2017:

good points

luv sharma on December 30, 2016:

please give equal advantages and disadvantages

zzzz on November 30, 2016:

helpful !

Carolina on October 29, 2016:

in deed very great and awesome.easily understood and explainable

bagiire mubarak on October 26, 2016:

ok, thats wonderful

Rufus S Domah on October 02, 2016:

Very good I love that.

mothiba gt on September 20, 2016:

tthis is more help full

gaurav on September 13, 2016:

GOOD

frank on March 15, 2016:

I like what you do, thanks.

muchimba on November 25, 2015:

Wow nyc one

mumilly on November 17, 2015:

Awesome

Matthew Sayor Ebbah on September 30, 2015:

Market structure

Jeff on September 14, 2015:

Hopes

Sarah Noor on May 05, 2015:

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

jonathan siakeh on April 28, 2015:

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

Brady on March 10, 2015:

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

divya on January 19, 2015:

Vry helpful this topic thanx

Tracy on October 30, 2014:

Awesome

Karen Basil on July 21, 2013:

Thank, the topic has helped me a lot

princess on June 14, 2013:

it was quite helpful

amrit on February 03, 2013:

very nice good,i like that topic