Demand And Marginal Revenue Curve Economics Essay

By July 24, 2017 Economics

Microeconomic is trades with economic sciences determination are made at the micro or low degree. Specify this more accurate, microeconomic as an analysis of the determinations made by persons or groups. The determination will impact the supply and demand for goods and service. The chief topics covered under microeconomics include theory of demand, theory of the house, and demand for labour and other factors of production. Question 1 of this assignment is needed to clarify monopoly and its characteristic. Question 2 is needed to distinguish the characteristics of perfect competition, monopolistic competition, oligopoly and monopoly.

1.0 Introduction

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How formation the monopolies in a state? Firms have sole ownership or usage of a scarce resource. Government grants a steadfast monopoly position, such as the Post Office. Firms holding patents or right of first publication can guarantee them sole rights to sell a merchandise or protect their rational belongings. For illustration, Microsoft ‘s ‘Windows ‘ trade name name and package contents are protected from unauthorised usage. Firms merge to give them a dominant place in a market.

1.1 Elucidate monopoly

Monopoly means that a state of affairs in which a individual company owns all the market for some certain type of merchandise or service. There will hold no competition. So that, such an industry construction, the manufacturer will frequently produces a volume less than the sum which would maximise societal public assistance. Monopoly is a individual provider in a market. For the intents of ordinance, monopoly power exists when a individual house controls 25 % or more of a peculiar market.

1.2 Characteristic of monopoly

First cardinal feature of monopoly is individual supplies. Actually, the “ glandular fever ” portion of monopoly is intending that individual and “ poly ” portion of monopoly is intending that sell. The most of import facet of being a individual marketer is the monopoly marketer in the market. The market demand for a good is same with the demand for the end product produced by monopoly. So, this significance that makes a monopoly a monetary value shaper, instead than a monetary value taker.

Second cardinal feature of the monopoly is produce alone merchandise. There are no close replacements available for the good produced by a monopoly. For illustration, Microsoft is a large package monopoly. Microsoft was common usage and monopoly on the Personal computer runing system market. A monopoly company are sell the alone merchandise were non supply by another company because monopolies as a exclusive marketer.

Third feature of monopoly is limitation on the entry of the other houses into the market. Monopoly house is intending that are merely steadfast in market. Some barriers of the other houses to entry the market that are authorities licensing or franchise, resource ownership, patents and right of first publication, high start-up cost and diminishing mean entire cost. Other manufacturers are hard to entry the market of the same merchandise. For illustration, in power market TNB ( TenagaNasionalBerhad ) is national electricity company. TNB is dominant electric public-service corporation in Malaysia. So, other houses are hard or impossible entry the power market.

Fourth feature of monopoly is specialized information. Monopoly houses are command the information, method of production and engineering are non available to other. This is comes in the signifier of legal established, patents, right of first publication and hallmarks. Monopoly house will cognize something or have some of import information that is non available to others. This “ something ” may or may non be patented or copyrighted. It could be secret formula or alone method. For illustration, the process to develop the Microsoft is secrecy and patent.

1.3 Explain the monopoly graph

Based on the monopoly graph, super-normal net incomes in the long tally can keep by monopolizer. A monopolizer will maximise net incomes by puting end product where MR=MC. These will be at end product Q1 and monetary value P1. In common, the grade of competition in market will act upon the degree of net income. Supernormal net incomes are possible, that country besides called economic net income. Following, the diagram besides show that the monetary value ( AR ) is above ATC at Q.

1.3.1 Demand and Marginal Revenue Curve

The demand curve for a monopoly house is downward slopping, which shows the mean gross or monetary value for every unit of end product sold. Figure at above was show the demand curve and MR curve for a monopoly house. MR is extra in entire gross from selling one more unit. Entire gross is the monetary values multiply with measures. Follow the figure above the demand curve every bit good as MR curve incline downwards. But the MR curve lies below the mean gross or demand curve. Monopolist sets a monetary value for a merchandise, he will see the snap of demand for his merchandise. The monopolizer will repair a higher monetary value if demand is inelastic and lower monetary value if the demand is elastic.

1.4 Decision

Monopoly is intending that a individual marketer in a market. Four cardinal characteristic to formation the monopolies that is individual supplies, alone merchandise, limitation on the entry other houses into market, specialized information. Finally, the monopolies besides potential the negative consequence to the consumer.

2.0 Introduction

Perfect competition market besides called conjectural. Neoclassic economic experts believe that perfect competition would bring forth the best possible result for consumers and society. Monopolistic competition is market constructions in which several Sellerss are bring forth a same merchandise but the monetary value are set by their ain houses. Oligopoly means merely big houses are dominated the market. Monopoly is intending that merely a big houses are dominant a market.

2.1 Features of perfect competition, monopolies competition, oligopoly and monopoly

2.1.1 Number of Competitors or Seller

Perfect competition is incorporating many little houses in a market but no individual house can command the market monetary value or measure. Perfect competition is incorporating many rivals. Monopolistic competition contains big figure of Sellerss and purchasers in monopolistic market. There are bing competitions between all the eating houses but less than perfect competition. Oligopoly is dominated by little figure of big houses. This market is control by the big houses. Hypothetical the Coca-Cola soft drink market contain 20 houses, but it is oligopolistic because the three largest houses account for over 60 % of entire industry gross revenues. Monopoly is individual marketer and no rivals. For illustration, TNB is exclusive supplies are supply the electricity for all citizen.

2.1.2 Restricted of entry and go out the market

Perfect competitions are non limitations to forestall new houses come ining the market because there is no need authorities ordinance. Besides that, the houses are free to go forth the market without bar. Monopolistic competition is same with perfect competition so all eating houses are freedom of entry and go out the market. The barriers of entry the oligopoly market included the sole resource ownership, patents and right of first publication, authorities limitations and high start-up cost. If set up a new soft drink house must build a new mill and making more advertisement to advance their trade name so the start-up cost are expensive. The barriers of entry monopoly market are included authorities licence or franchise, resource ownership, patents and right of first publication, high start-up cost and diminishing mean entire cost. For illustration, TNB is dominant the electricity market in Malaysia.

2.1.3 Identical or differentiate merchandises

Perfect competition is produce indistinguishable goods. All vegetable store is selling the same merchandise that besides called homogenous goods. Buyer can non distinguish the merchandises because there are non branded. Perfect competition houses produce a good that is perfect replacement. Buyers prefer to purchase specific trade name of merchandises so the advertisement and gustatory sensation of the nutrients are of import during the procedure of determination devising by a purchaser. Oligopoly merchandises can be indistinguishable or differentiate merchandises. Monopoly house are selling the alone merchandise and the merchandises are non supply by other.

2.1.4 Ability to put monetary value

The monetary value of the goods is merely following the chou market monetary value as given. The monetary value will non impact by the marketer and consumers in perfect competition. The monetary value of merchandises in the perfect competition market are investigated and updated by both Sellerss and purchasers daily. Next, no individual eating house can act upon and put the monetary value of monopolistic competition market. Oligopoly has more control over their schemes than monopolistically competitory houses, but the actions of one house can significantly act upon the gross revenues of every other house in industry. When one house rises monetary values so other by and large follow suit. Monopoly is full control over the monetary value. The monetary value is puting by the monopolizer and the purchasers must accept it.

2.1.5 Example

Perfect competition like agribusiness, Sellerss sell indistinguishable merchandise and the market monetary values are unaffected. Monopolistic competition like eating house, Sellerss are produce indistinguishable merchandise and advance their merchandises through advertisement to derive demand. Oligopoly like soft drink market, this market contains many houses but merely dominates by some big houses. Monopoly like TNB and “ Microsoft ” is individual marketer in this market.

2.2 Decision of inquiry 2

Characteristic Perfect Competition Monopolistic Competition



Example Agriculture Restaurant Soft Drink Market TNB ( TenagaNasionalBerhad )

Number of Competitors Many Many, but fewer than in pure competition Few None

Ease of Entry into Industry Relatively easy Fairly easy Difficult Regulated by authorities

Similarity of Goods or Services offered by viing houses Identical Similar Can be similar or different No replacement goods or service

Level of control over monetary value by single houses None Some Some Considerable

3.0 Conclusion and Recommendation

Monopoly mean individual provider rule the market. Characteristic is individual marketer, alone merchandise, barriers to entry and specialised information. Features of perfect competition are big figure of little houses, indistinguishable goods, perfect resource mobility and perfect cognition. Features of monopolistic competition are big figure of Sellerss and purchasers, freedom of entry and issue, merchandise differentiate and competition among Sellerss. Monopoly is selling the alone merchandise and the merchandises are non supply by other.


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