HomeIndustriesThe Advantages and Disadvantages of Monopoly Market

The Advantages and Disadvantages of Monopoly Market

A monopoly market is a market condition that dominates and has complete control over certain products. With this situation, the benefits become very large. As a result, the party who does the monopoly will become the price maker of a product.

The market is an infrastructure that provides goods and services. In addition, the market also contains various systems, procedures, and social relations because it is a meeting place for sellers and buyers to conduct a transaction (either directly or indirectly).

Trading activities that occur in the market give rise to a competitive market structure, such as a perfectly competitive market and an imperfect competition market. 

Table of Contents

Definition of Monopoly Market

A monopoly market is a company or form of market that dominates a product, and no other party produces or competes with it. In addition, another meaning of a monopoly market is a form of market that has products or services that many people need without any competitors.

A company that produces products and services makes that party a price marker or a price controller. The government takes over the resources of electricity, fuel, and clean water because it involves many people’s lives.

If it is controlled by other parties, such as the private sector, the government will not be able to control the price, especially when people are in dire need. To help manage business operations, you can also use ERP Software. 

Monopoly Market Advantages and Disadvantages

Advantages 

  • Due to the nature of the goods, there are no close substitutes, which makes the monopolist company not need to spend a lot of promotion and advertising costs to differentiate their products. 
  • A monopolist will increase the efficiency of production than the presence of an additional seller, making production unable to achieve economies of scale. 
  • With the government’s monopoly, natural resources are maintained and very important for the community’s welfare.
  • The encouragement of innovation is due to the protection of individual property rights.

Disadvantages

  • Given that producers can control prices by reducing or increasing production, production may be less than optimal and efficient.
  • Buyers cannot switch to other sellers even though the price is relatively high.
  • Profit is centred on producers because consumers have no other choice. After all, the product is essential to meet their needs.

Monopoly Market Characteristics

  • One person is controlling the market with many buyers. Buyers cannot switch even if the price set is detrimental.
  • There are no substitute or substitute goods other than the product sold by one party.
  • There are several barriers to entering the market for new companies. Fences can be in the form of laws, technology, to significant capital.
  • Sellers in a monopoly market can set prices according to their wishes because there are no substitutes.
  • The demand curve in the market is the same as the demand curve facing the monopolist.

Conclusion

After learning about the monopoly market, you can research for business chances to build the business by developing a new product. Choose a market where no company has a monopoly on a product or service. 

In addition, doing proper bookkeeping on the business is also essential for a company to grow. This will make the business plan more structured with financial reports that contain the company’s financial flows.

Know the financial condition of each branch of the business with in-depth analysis and estimate your income accurately with the Best Accounting System from HashMicro.

Interest in getting savvy tips for improving your business efficiency?

Annastasya Berliana Dunda
Junior content writer at HashMicro's Company. If you have any questions or cooperation please kindly contact my email. My email: [email protected]

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