Characteristics of a monopoly economics11/25/2023 ![]() Really good example is this company de beers that provides diamonds, right? It's a it's a huge diamond seller um for a very long time, they owned almost all of the diamond mines in the world and they had very much control over the supply of diamonds. ![]() The first one here is the ownership of key resources. What's keeping other firms from joining a monopolies market. NowĪlright, so let's go ahead and discuss what some of those barriers to entry are. Okay, So let's go ahead and in the next video, let's discuss those barriers to entry that would keep people out of a monopoly market. It's not as easy as with uh, something in a perfectly competitive market. The company build a utility, build a generator, this and that. Right? You can just say, hey, I'm gonna start an elector. Right? So, if you wanted to start your own electrical company, it probably wouldn't be that easier. So, imagine, for example, um, a good example of a monopoly would be a utility company, some sort of utility, I like to think of like electricity, Right? So, if we think of electricity, think about your town, there's probably not a whole slew of suppliers for electricity, there's probably just one supplier for electricity and you just kinda have to take it as it comes from that supplier. You're probably not gonna be able to start the business. Um but just, just for now, just know that if you wanted to get into this business in in a monopoly business, it's not easy. Okay, So we're gonna discuss the barriers to entry in more detail. The entry to the market is going to be blocked by what we call barriers to entry. Okay, so, next, let's talk about the entry and exit into the market, remember when we were talking about perfect competition, uh, firms could freely enter, or exit, right? If you wanted to sell, if you wanted to get into the wheat market, you get a farm and you start selling wheat well here, it's a little different. Okay, So, if you can have influence on the price of the product, we're gonna say, you have market power. Okay, So, that's market power, is when one person or a group in this case, the seller of, in the monopoly, um, is gonna have substantial, substantial influence on price. ![]() So you can imagine that they're gonna have some influence over the price, and that's this term market power. Okay, there's only one producer of the product. And this is because in a monopoly, we've got only one producer. The price was set by the market, we'll hear the monopoly is gonna have enough power to set the price itself. ![]() Alright, Remember, in perfect competition, we had the price takers, right? Everybody in the market was a price taker. Alright, so, next, how do they set the price? Well, we're gonna see here that the sellers are gonna be price makers. Okay, so, that's a key feature of these monopoly, monopoly markets. Okay, so, these products are gonna be unique. Well, here in a monopoly, we've got unique goods. So, when we were in perfect competition, remember we were selling identical goods, we couldn't tell one farmer's wheat from another. Um First, we've got the nature of the good. So let's start here by defining some of the key characteristics. Alright, so now, let's discuss a different market structure.
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