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.


Comments

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    • profile image

      Abraham kenyi isaiah 

      3 weeks ago

      Mkt structure

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

    • profile image

      John Smith 

      2 months ago

      Nice

    • profile image

      Hamza 

      5 months ago

      Very nice explanation

    • profile image

      Rutendo 

      5 months ago

      Helpfull alot and understandable

    • profile image

      bidhan 

      12 months ago

      good points

    • profile image

      luv sharma 

      18 months ago

      please give equal advantages and disadvantages

    • profile image

      zzzz 

      19 months ago

      helpful !

    • profile image

      Carolina 

      20 months ago

      in deed very great and awesome.easily understood and explainable

    • profile image

      bagiire mubarak 

      20 months ago

      ok, thats wonderful

    • profile image

      Rufus S Domah 

      21 months ago

      Very good I love that.

    • profile image

      mothiba gt 

      22 months ago

      tthis is more help full

    • profile image

      gaurav 

      22 months ago

      GOOD

    • profile image

      frank 

      2 years ago

      I like what you do, thanks.

    • profile image

      muchimba 

      2 years ago

      Wow nyc one

    • profile image

      mumilly 

      2 years ago

      Awesome

    • profile image

      Matthew Sayor Ebbah 

      2 years ago

      Market structure

    • profile image

      Jeff 

      2 years ago

      Hopes

    • profile image

      Sarah Noor 

      3 years ago

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

    • profile image

      jonathan siakeh 

      3 years ago

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

    • profile image

      Brady 

      3 years ago

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

    • profile image

      divya 

      3 years ago

      Vry helpful this topic thanx

    • profile image

      Tracy 

      3 years ago

      Awesome

    • profile image

      Karen Basil 

      4 years ago

      Thank, the topic has helped me a lot

    • profile image

      princess 

      5 years ago

      it was quite helpful

    • profile image

      amrit 

      5 years ago

      very nice good,i like that topic

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