Non-Competitive Markets- NCERT Notes UPSC

Under perfect competition, both the buyers and sellers are price takers. However, there exist other forms of market structures which may not satisfy one or more conditions of the perfect competitive market. A market is non-competitive when the firms acting in such a market have the power to influence the price, directly or indirectly. 

Read this detailed article on Non-Competitive markets and give an extra edge to your UPSC CSE preparation.

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:

https://youtu.be/ATYWLlw-pwE

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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