MONOPOLY AND MONOPOLISTIC COMPETITION

DIFFERENCE BETWEEN MONOPOLY AND MONOPOLISTIC COMPETITION

MONOPOLY

The word monopoly has been derived from the combination of two words i.e., ‘Mono’ and ‘Poly’. Mono refers to a single and poly to control.

In this way, monopoly refers to a market situation in which there is only one seller of a commodity.

There are no close substitutes for the commodity it produces and there are barriers to entry. The single producer may be in the form of individual owner or a single partnership or a joint stock company. In other words, under monopoly there is no difference between firm and industry.

MONOPOLISTIC COMPETITION

The concept of monopolistic competition was put-forth by an American economist Prof. E.H. Chamberlin in his popular book, “The Theory of Monopolistic Competition” published in 1933.

Monopolistic competition is a type of imperfect competition market structure in which a large number of firms produce differentiated products and there are no barriers to entry.

The difference between monopoly and monopolistic competition is as follows:

BASIS FOR COMPARISON	MONOPOLY	MONOPOLISTIC COMPETITION
MEANING	Monopoly refers to a market structure where a single seller produces/sells product to large number of buyers.	Monopolistic competition is a competitive market setting wherein there are many sellers who offer differentiated products to a large number of buyers.
NUMBER OF SELLERS	One seller in monopoly.	Large number of sellers are there.
PRODUCT DIFFERENTIATION	There is extreme product differentiation.	There is Slight product differentiation.
DEGREE OF CONTROL OVER PRICE	There is Considerable but very regulated control over price.	There is Some degree of control over price.
COMPETITION	In monopoly, competition does not exist.	There exists stiff competition exist between firms.
DEMAND CURVE	Demand curve is Steep sloping.	Demand curve is Flatter than demand curve in monopoly.
BARRIERS TO ENTRY AND EXIT	There exists barriers to entry and exit of firms.	There exists no barriers to entry and exit of firms.
DIFFERENCE BETWEEN FIRM AND INDUSTRY	There is no difference between firm and industry.	There exists the difference between firm and industry.

CONCLUSION

In a monopoly market, it is possible for a firm to charge distinct prices from various customers, for the same product. So, the firm can adopt price discrimination policy. On the other hand, as non-price competition is prevalent in the market, therefore, price discrimination is not possible, so, no firm can charge different prices from different customers.

Also Study	Also Study	Also Study	Also Study
Theory of Demand	Law of Demand	Demand Function	Exceptions of law of demand
Elasticity of demand	Change in demand	Price elasticity of demand	Law of demand Vs Elasticity of demand
Factors affecting price elasticity of demand	Production function	Short run vs long run production function	Law of variable proportions
Types of demand	Managerial economics	Characteristics of managerial economics	Scope of managerial economics
Utility analysis	Law of diminishing marginal utility	Law of equi marginal utility	Consumers Equilibrium
Indifference curve analysis	Consumer equilibrium using indifference curve analysis	Relationship between TP, AP and MP	Law of increasing returns
Law of diminishing returns	Law of constant returns	Returns to Scale	Economies and diseconomies of scale
Concept of costs	Relationship between AC and MC	Traditional theory of costs	Modern theory of costs
Explicit vs Implicit costs	Revenue	Perfect competition	Monopoly
Price discrimination	Difference between perfect competition and monopoly	Perfect Vs Monopolistic competition	Monopoly and monopolistic competition
Product differentiation strategy	Monopolistic competition	National Income in India	Measurement of national income in India
Consumption function	Keynes Psychological law of consumption