Market monopoly and Oilygopoly market - Essay Example

Market monopoly and Oilygopoly market (Macro Economics) Introduction: Economics is the social science that deals with money, markets, individuals, investments, economy etc. According to Samuelson “economics is the study of how societies use scare resources to produce valuable commodities and distribute them among different people” there are two main branches of economics “Micro economics and macro economics” Micro economics deal with individuals and how they earn their livelihood where as macroeconomics deals with aggregate issues or economy as whole. Macro economics consists of concepts that can be applied to the entire world. according to Economic Glossary “Macroeconomics is derived from (from "macro(o)-" meaning "large" + "economics") is a branch of economics dealing with the performance, structure, behavior, and decision-making of the entire economy. This includes a national, regional, or global economy” Financial market: In economics a financial market is a place which allow buying and selling activities, there are many manufacturers and consumers available in the market. There are many products available of same type hence that raises competition in the market. There are different types of competition and different types of markets available in economic sense. Let us discuss the different market structures in detail market monopoly: The word “monopoly” means one or “the only”. Monopolistic market is when there is only one producer and there is no one else who manufactures the same product. Market monopoly exists when the single firm/company is the only supplier or producer of a certain product. Characteristics of market monopoly here are certain characteristics of market monopoly |: It is a single firm/person who is the only supplier of the product hence he can create his arbitrary policies and set price according to his own will The entire market is in his control as he is the only supplier or producer of that particular product, he is in the position to argue and challenge any decision or demand made by the government or the customers He can increase/decrease the supply or demand of the product according to his own wish Advantages of market monopoly In market monopoly the producer have the control over the entire market hence he can produce according to his own will in whatever quantity he want. In market monopoly the producer is in a state to bargin with government and the customers. He can set his own arbitrary policies and everyone is bound to follow as there is no other option In market monopoly the producer spends very minimum amount on marketing and advertising In market monopoly the producer makes enough profit which can be further invested for the betterment of the company Disadvantages of Market monopoly Since the producer can set price according to his own wish as there is no competition, this can be harmful for the customers, they tend to pay high prices Exploitation of labor can take place in market monopoly In certain cases absence of competition leads to inefficiency and the company doesn’t progress much. There is not much variety available for the customers No substitutes available Oilygopoly market: Oligopoly is a common market form. In Oilygopoly market there are more than two producers who are manufacturing the same product with very less difference. There is cut throat competition in the market. Characteristics of Oilygopoly market Because there are more than two producers of the same product and there is cut throat competition, each producer keep notice of what other is doing. They are likely to aware of each other’s actions and that’s how they set their policies and market strategies for example, Company A launched a new advertisement campaign to promote their product. Now even Company B and Company C will launch some new market strategy or advertisement campaign to ensure that their sells don’t drop because of company’s a new advertisement campaign. The decision of one producer influences the decision of the other producer In oligopoly there is “barriers to entry” as there are already many firms in the market producing similar products its hard for some new firm to enter the market because of patents and copyrights of the already existing companies, other government restrictions, and the already existing firms are so established and successful in their field so its hard for a new firm to enter with same product as it would require a high start-up cost. Advantages of Oilygopoly market: here are certain advantages of the Oilygopoly market In oligopolistic market innovation is the key. As all the producers are constantly trying to get an edge over the other producers in market. the producers can coordinate with each other and set some mutual prices so that the prices don’t get below that or higher than that and they can earn their share of profit there are not much restrictions from the government as there are many firms producing the same product the government can’t put restrictions on any one firm particularly The producers have the best knowledge about the market. And know what is happening and each producer keep notice of what other is doing. They are likely to aware of each other’s actions Disadvantages of Oilygopoly market: There is cut throat competition and there is a lot of uncertainty in the market. the other firm can easily steal your ideas and that can result in great loss It is hard to create loyal customers in oligopoly market for example, for instance the customer couldn’t get your product he will simply switch to the other company’s product. There is very less margin of profit “ barriers to entry” There are many other substitutes available in the market for your product A large amount of investment goes in advertisement and marketing in oligopolistic market Conclusion: Monopolistic market is when there is only one producer and there is no one else who manufactures the same product where as in Oilygopoly market there are more than two producers who are manufacturing the same product with very less difference. In market monopoly the producer has the divine power and market share, he can set his own arbitrary policies, where as in Oilygopoly market there are more than two producers of the same sort of product and there is cut throat competition, each producers keep notice of what other is doing. They are likely to aware of each other’s actions and that’s how they set their policies and market strategies. In short these are two extreme sorts of markets. And there is no comparison between them but economist prefers Oilygopoly market over Monopolistic market because of the obvious advantages and disadvantages. References: 1. Albano, Gian L, and Alessandro Lizzeri. A Monopolistic Market for Certification. Louvain-la-neuve, Belgium: Center for Operations Research & Econometrics, Universite Catholique de Louvain, 1997. Print. 2. A Monopolistic Market for Advanced Traveller Information Systems and Road Use Efficiency. , 2006. Internet resource. 3. Samuelson, Paul A, and Peter Temin. Economics. New York: McGraw-Hill, 1976. Print. 4. Basak, Suleyman, and Benjamin Croitoru. "International Good Market Segmentation and Financial Market Structure." (2003). Print. 5. Mankiw, N G, and Mark P. Taylor. Economics. London: Thomson, 2006. Print. 6. Schotter, A. Free Market Economics: A Critical Appraisal. New York: St. Martin's Press, 1985. Print. 7. Kirzner, Israel M, Peter J. Boettke, and Fre?de?ric E. Sautet. Market Theory and the Price System. Indianapolis: Liberty Fund, 2011. Print. 8. Liski, Matti, and Juana?€?Pablo Montero. "Market Power in an Exhaustible Resource Market: the Case of Storable Pollution Permits *." The Economic Journal. 121.551 (2011). Print. Read More