Understanding the Monopoly Market

This time we will discuss the meaning of the monopoly market and its characteristics, factors and examples completely and clearly.

 

Do you want to form a market that has only one seller / producer with many buyers. Or maybe you are considering a common market? What is the Monopoly Market?

 

Table of contents :

Understanding the Monopoly Market

Example of a monopoly market

Monopoly Market Features

Types of Monopoly

Monopoly market advantages

Lack of a monopoly market

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Understanding the Monopoly Market

Monopoly market is a form of market which only has one seller / producer with many buyers. People who monopolize a market are called monopolists.

 

Since there is only one seller in the market, the monopolist acts as a price maker. Monopolists can determine prices by increasing or decreasing the quantity of goods provided in the market.

 

Example of a monopoly market

the meaning of the monopoly market

The following is an example of a monopoly market form, namely; PT Pertamina (Persero), PT Perusahaan Listrik Negara (Persero), and PT Kereta Api (Persero).

 

Monopoly Market Features

There is a single seller with many buyers in the market. Because of this nature, buyers cannot switch to other sellers even though they feel disadvantaged by the price set.

There are no substitute goods that can be provided by parties other than the sellers in the market.

There are barriers to entering the market for new companies. The obstacles that exist can be in the form of laws, the latest technology that is owned, very large capital and others.

The seller in a monopoly market can determine the price according to his wishes because there are no close substitutes for the goods sold.

The demand curve in the market is the same as the demand curve faced by the monopolist firm.

The monopoly market is formed due to several factors, including:

 

Resources owned by a monopolist have characteristics and uniqueness that no other company can find and have.

Monopolists have a lot of funds, with which they are able to enjoy economies of scale even to the highest level. Related article: advantages and disadvantages of the liberal economic system – characteristics of the liberal economic system.

Monopoly companies get protection from the government through laws so that monopolistic practices can move freely.

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These three things are the factors for the formation of the monopoly market, then we will discuss the types of monopoly markets. There are several types of monopoly markets based on the causes, including:

 

Determined by law

In Indonesia, for example, it has been regulated in a law that the production branches which are important and affect the lives of many people are controlled by the state.

Natural

monopoly Monopoly that is created by itself, because the existing market is inefficient to accommodate more than one seller.

Community monopoly It is

different from natural monopoly which is based on natural conditions owned by a region. This type of monopoly can occur depending on the circumstances of society. When society gives a full and special trust in a product. So when the community is suitable and in accordance with a particular product, then that is what is able to control the market, because people will subscribe and will not move to other parties. For example, the D shoe brand has good quality, is comfortable to wear, elastic and others, this makes people put their trust in these products so they won’t move to other brands or other products. So that the product will monopolize all existing products.

Monopoly with license

Created because of a party who registered a patent, copyright or other intellectual property rights.

State

monopoly This monopoly arises with the reason to protect valuable assets and concern the livelihoods of many people and provide services to the public interest. This is realized by the government by building a large company to serve the community in its interests. For example, PLN which is engaged in electricity services, Pertamina which serves the community in fulfilling fuel or oil, Pos Indonesia which is engaged in correspondence, sending goods and others. This is called a monopoly because no one party or company can compete with them or can take power. Because this is reinforced by the government and the state.

Copyright (copy right)

Copyright is a protection given to someone who is talented and has a work or product that can affect many people or can be useful for many people. This copyright can also be regarded as a special right for creators or creators of works to publish and reproduce their works. Copyright is granted to several fields including science, literature, art and others. This copyright has a validity period, namely for books up to 50 years after the author’s death, for computer programs the copyright is valid for 25 years from the time the creator of the program received the rights. This right is what makes someone’s work not plagiarized or reproduced by other parties without the permission of the parties concerned.

Patents

Almost similar to copyright, this right is a special right given to the inventors of a new technology in the form of a production process, a production result or an improvement of these two things. This patent right serves to protect the inventions of someone from other parties who are not responsible by carrying out a mission to imitate or reproduce the inventions of others without permission. Examples of patents, for example, are the protection rights held by the Microsoft company for its advanced technology, especially in software.

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Types of Monopoly

  1. Monopoly by law

Monopoly by the State for production branches which are important to the State and control the livelihood of the people.

 

  1. Monopoly by nature

Monopoly that is born and grows naturally because it is supported by a certain climate and environment.

 

Monopoly market advantages

The nature of goods that do not have close substitutes makes monopolist companies not need to spend a lot of money on promotions and advertisements so that buyers can differentiate their products.

In a natural monopoly, additional sellers will actually make production unable to reach economies of scale so that monopoly will actually increase efficiency in production.

With a monopoly, the government can protect natural resources that are important to society.

Protecting individual property rights so as to encourage innovation.

Lack of a monopoly market

Because producers can set prices by reducing or increasing the amount of production, it is possible that production is not carried out optimally and efficiently.

Buyers cannot move to another seller even though the price set is high.

Profits are concentrated in producers because consumers have no choice but to buy from these producers to meet their needs.

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