Non-Competitive Markets- NCERT Notes UPSC

Monopoly

• It is a market structure in which there is a single seller or producer of a particular commodity.
• In monopoly, no other commodity works as a substitute for this commodity.
• To maintain the monopolistic nature of the market sufficient restrictions are required to be in place to prevent any other firm from entering the market and to start selling the commodity.
• For a monopolistic firm, the price depends on the quantity of the commodity sold as the firm can sell a larger quantity of the commodity only at a lower price and vice versa.  
• The firm can also decide the price at which it wishes to sell its commodity, and therefore, determines the quantity to be sold.

Also read: Globalisation and the Indian Economy

Rural Development in India

Government Budget and the Economy

Determination of Income and Employment

Basic Concepts of International Trade

Differences Between Perfect Competition and Monopoly

• Perfectly competitive market provides production and sale of a larger quantity of the commodity compared to a monopoly firm. 
• Price of the commodity under perfect competition is lower compared to monopoly. 
• The profit earned by the perfectly competitive firm is also smaller compared to monopoly.
• The profits earned by the monopolistic firms, do not go away in the long run, unlike in perfect competition. 
• In general sense, monopolies are considered to be exploitative and charge the consumers comparatively a higher price.

However, it is very difficult for such a monopoly to exist in the real world as substitutes for all commodities exist. New firms are taking up new technologies and coming up with newer products in an ever-changing economy. 

Here's a related video lecture on The Basic Questions Faced by Every Economy by Vivek Singh Sir, our Economy Faculty:

Oligopoly

• It is a market structure, where for a particular commodity there exist only a few sellers (more than one). 
• In oligopoly market, the product sold by the firms is homogenous. 
• The special case of oligopoly where there are exactly two sellers is termed duopoly. 
• In the oligopoly market, each firm is relatively large as compared to the size of the market. 
• Each firm can affect the total supply in the market, and thus influence the market price. 
• Any change in supply or price by one firm can significantly impact all the other firms as well. 
• In an oligopoly, firms can also act as a “cartel” and create monopolistic conditions. On the other hand, they can keep on undercutting each other’s prices to attract more consumers. 

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