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In a monopoly market, a single seller dominates the market and has the ultimate power to control the market prices and decisions. In this type of market, customers too have limited choices. On the other hand, in an oligopoly market, there are multiple sellers. As a result, there is a huge and never-ending competition to stand out.
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Differences BetweenMonopoly and Oligopoly
- A monopoly is a marketplace where a single seller of goods or services is the only price determinant in the marketDeterminant In The MarketDemand is an economic principle that explains the relationship between prices and customer behaviour as a result of price changes for products and services. Many elements in the economy influence demand for goods and services; these elements are known as determinants of demand, and they include the price of commodities, the price of substitutes, buyer's taste, and changes in buyer's income.read more. The seller is the sole provider of goods or services in that market. The seller has the power to influence the price of the goods, and there are a lot of buyers in need of that good.
- An oligopolyOligopolyAn oligopoly in economics refers to a market structure comprising multiple big companies that dominate a particular sector through restrictive trade practices, such as collusion and market sharing. Oligopolists seek to maximize market profits while minimizing market competition through non-price competition and product differentiation.read more can be defined as a market structure where few sellers (more than one and may be less than ten) sell products of the same category without much differentiation. The differentiation is only about the making of the product or its packaging. In this type of market, there is intense competition among the players. The buyers have the choice to choose the identical alternative of the product among the ones available on the market.
Table of contents
- Differences BetweenMonopoly and Oligopoly
- Monopoly vs Oligopoly Infographic
- Key Differences Between Monopoly and Oligopoly
- Comparative Table
- Recommended Articles
Monopoly vs Oligopoly Infographic
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Key Differences Between Monopoly and Oligopoly
- There is a single seller of goods in the market in a monopoly. In an oligopoly, there are few sellers in the market.
- There is no competition among the sellers in a monopoly as they are the only ones in the market. In contrast, there are few sellers in the market in an oligopoly, and there is intense competition.
- In an oligopoly, the customer has various product choices and is mainly driven by the price, customer preference, and brand loyalty. In contrast, the customer has no option or alternative to pick among the goods in a monopoly.
- In an oligopoly, the demand curveDemand CurveDemand Curve is a graphical representation of the relationship between the prices of goods and demand quantity and is usually inversely proportionate. That means higher the price, lower the demand. It determines the law of demand i.e. as the price increases, demand decreases keeping all other things equal.read more of the market is kinked. While, in a monopoly, the demand curve is downward sloping.
- In the long run, in an oligopoly market structure, the seller ends up making the normal profitNormal ProfitThe term "normal profit" is used when the profit is zero after accounting for both the implicit and explicit expenses, as well as the overall opportunity costs.It happens when all of the resources have been used to their full potential and cannot be put to better use.read more in the industry as any change in the price will be counter-set by the subsequent fall in the cost of the rival firm. Whereas, in the case of monopoly, there is a possibility that the seller can earn abnormal profitsProfitsProfit refers to the earnings that an individual or business takes home after all the costs are paid. In economics, the term is associated with monetary gains. read more in the long run.
- The price set by the monopoly is generally controlled or monitored by the government to protect the customers’ interests. For example, electricity is an example of a monopoly marketExample Of A Monopoly MarketMonopoly is the “one-&-only” seller of a good or service in the market & it faces no competition from any other entity. Generally, it is controlled or monitored by the Government to safeguard the customers’ interests. read more where there is only one producer of goods. On the other hand, oligopoly is driven by private players in the market. For example, a brand of toothpaste has many closely related substitutes, which is anexample of an oligopolymarket.
Comparative Table
Monopoly | Oligopoly |
---|---|
A market structure is dominated by a single seller of the goods and the services. | A market structure where numerous sellers sell close substitutes of the goods. Large industries generally dominate the market. |
The seller controls the price as there is no competition in the market. | The competition in the market determines the price and keeps in mind the competitor’s actions. |
This market structure is a high barrier to entry and exit as the industry is generally capital intensive. There are also economic, institutional, or legal restrictions on this kind of industry. | In this market structure, thebarrier of entry is generally high because of the economies of scale in the industry. |
A firm is a price maker. | A firm is a price taker. |
Thedemand curve of the market is kinked. | Thedemand curve of the market is downward-sloping. |
Electricity, railways, and water are examples of the monopoly market. | FMCG and automobiles are examples of an oligopoly industry. |
No competition exists as there is a single seller of the goods. | Intense or high competition among the sellers. |
Recommended Articles
This article is a guide to Monopoly vs Oligopoly. We discuss the top difference between monopoly and oligopoly along with infographics and a comparison table. You may also have a look at the following articles: –