Top 6 Differences between Monopoly and Monopolistic Competition
A market is made up of buyers and sellers. A market is made up of buyers and sellers. The seller sells products or services to the buyer, who then promotes his product.
When there are many sellers, and the government does not interfere in the market, there is a strict competition. There are two kinds of competition in a market: perfect and imperfect.
Perfect competition occurs when the individual buyers and sellers do not have control over the price of the commodity. A situation of imperfect competition occurs when either the buyer, or seller, has control over the price. There are three different types of imperfect competition, including monopoly and oligopoly.
What is Monopoly?
Monopoly is an imperfect form of competition where a product or company dominates a particular industry. This occurs when there are no competitors on the market for a particular product.
Monopolies have a large market share because they lack any competition. Knowing that their product will sell, they can set the price.
Due to the high entry barrier, competitors are prevented from entering the market. Due to their resources, the organisation can alter the price at will, thereby eliminating the competition of small-scale manufacturers.
What is Monopolistic Competition (MC)?
Monopolistic competition is an imperfect form of competition in which there are multiple sellers competing in the same market. They sell products that are close substitutes for the original product.
In a monopolistic market, entry and exit barriers are relatively low. Companies try to differentiate themselves by offering discounts on their products and services. Hotels, ecommerce stores, retail shops, and salons are examples of industries that offer price cuts.
This table helps students understand the key differences between monopoly competition and monopolistic monopoly.
Top 6 Differences Between Monopoly and Monopolistic Competition
| Aspect | Monopoly | Monopolistic Competition |
|---|---|---|
| What is it? | A form of imperfect competition where a single seller dominates the market due to the absence of substitutes or rivals. | A form of competition where many sellers offer differentiated products, competing for market share. |
| Number of Players | Only one dominant player. | Multiple sellers competing in the same market. |
| Level of Competition | No competition as there is only one seller. | High competition due to the presence of many sellers. |
| Barriers to Entry | High entry barriers prevent other firms from entering the market. | Low entry barriers allow new firms to enter and exit the market easily. |
| Demand Curve | Steep, reflecting the monopolist’s control over the price. | Flatter, as consumers have multiple options to choose from. |
| Price Control | The monopolist exercises significant price control due to the lack of competition. | Sellers have less price control as competition from other firms influences pricing. |
This comparison provides a clear understanding of the essential differences between Monopoly and Monopolistic Competition, helping students and readers grasp the key concepts in market structures.