Definitions
1. Perfectly competitive market
A market in which there exists large number of buyers and sellers and the individual buyer or
seller cannot affect the price of the product. All units of the product sold in the market are
homogeneous, resources are perfectly mobile and knowledge of market is perfect.
2. Monopoly
A market in which there exists a single seller of a commodity for which there are no close
substitutes. There exist barriers to entry and exit of new firms into the market. The seller in
monopoly market can influence the price or supply of the commodity. Therefore the seller in
monopoly market is called price taker.
3. Natural monopoly
Sometimes a particular raw material, minerals, petroleum and gas are primarily found in a
specific country or in a region. Such natural endowments give monopoly power to particular
region or country. This form of monopolies is termed as natural monopolies.
4. Legal monopoly
Sometimes certain firms are granted patent rights or copyrights by the governments granted
patent rights to certain firms for the production or distribution of specified materials or
products. The monopoly resulting from the patent or copyright laws is termed as legal
monopoly.
5. Social monopoly
In many countries the governments set up undertakings in the public sector to protect the social
interest like electricity, water, gas, and public transport etc. The private operators are not
allowed to venture in these activities. Such monopolies created by the government to serve the
social interest of the community are called as the social monopolies.
6. Dumping
Dumping is a special case of price discrimination. It is a practice of selling a large quantity of
the product in the foreign market at a lower price than the price charged in the home market.
In dumping, any loss sustained by the monopolist in foreign market due to lower price is
compensated through the high or monopoly price in the home market.
7. Price discrimination
Price discrimination is practice of monopolist by charging different prices for the same product
from different categories of customers. The monopoly firm that take resort the practice of price
discrimination is called discrimination monopolist. The aim of practice price discrimination by
monopolist is to earn maximum profit.
Dr Ratheesh C, Assistant Professor, Dept. of Economics, FMNC, Kollam Page 1
, 8. First Degree Price Discrimination
The price discrimination is said to be of the first degree, when the monopolist can sell each unit
of his product to each customer at a separate price. In the first degree price discrimination, the
monopolist charges different price from each one of the customer in such a way that the price
charged is exactly equal to the demand price i.e., the price which he is willing to pay of the
consumer.
9. Second Degree Price Discrimination
In the second degree price discrimination, the monopolist classifies all the customers in the
market according to their demand prices. The price charged from each group of customers is
equal to the minimum demand price for the product in that group. In second degree price
discrimination, some consumer’s surplus is left.
10. Third Degree Price Discrimination
In third degree price discrimination, the customers are classified into different groups and sub
groups on the basis of specific characteristics such as income, elasticity of demand, asset
holding etc. After the classification of customers into different groups, higher and lower prices
are charged from the customers including different groups and sub groups.
11. Monopoly Power
In monopoly market structure, the producer exercises some control over the supply or price of
the product. The power of the monopolist to determine the supply or price of a product in the
market is known as degree of monopoly power.
12. Learner’s Index of Monopoly Power
The economist, Learner attempted to measure the degree of monopoly power on the basis of
the gap between price (P) and marginal cost (MC). According to Learner’s index, the degree
of monopoly power can be measured by using formula M = (P-MC)/P. The gap between P and
MC is greater; larger is the degree of monopoly power and lower the gap between P and MC
lower will be the monopoly power of the firm.
13. Monopsony
The concept of monopsony was introduced by Joan Robinson. It is defined as a market situation
in which there is a single buyer of a commodity or service. In contrast to the monopoly market,
where the aim of monopolist is to secure the maximum monopoly profit, the aim of
monopsonist is to maximise utility.
14. Bilateral Monopoly
The bilateral monopoly is a market situation in which a single seller (monopolist) is confronted
by a single buyer (monopsonist). In other words, it is a market in which monopolist seller faces
Dr Ratheesh C, Assistant Professor, Dept. of Economics, FMNC, Kollam Page 2
1. Perfectly competitive market
A market in which there exists large number of buyers and sellers and the individual buyer or
seller cannot affect the price of the product. All units of the product sold in the market are
homogeneous, resources are perfectly mobile and knowledge of market is perfect.
2. Monopoly
A market in which there exists a single seller of a commodity for which there are no close
substitutes. There exist barriers to entry and exit of new firms into the market. The seller in
monopoly market can influence the price or supply of the commodity. Therefore the seller in
monopoly market is called price taker.
3. Natural monopoly
Sometimes a particular raw material, minerals, petroleum and gas are primarily found in a
specific country or in a region. Such natural endowments give monopoly power to particular
region or country. This form of monopolies is termed as natural monopolies.
4. Legal monopoly
Sometimes certain firms are granted patent rights or copyrights by the governments granted
patent rights to certain firms for the production or distribution of specified materials or
products. The monopoly resulting from the patent or copyright laws is termed as legal
monopoly.
5. Social monopoly
In many countries the governments set up undertakings in the public sector to protect the social
interest like electricity, water, gas, and public transport etc. The private operators are not
allowed to venture in these activities. Such monopolies created by the government to serve the
social interest of the community are called as the social monopolies.
6. Dumping
Dumping is a special case of price discrimination. It is a practice of selling a large quantity of
the product in the foreign market at a lower price than the price charged in the home market.
In dumping, any loss sustained by the monopolist in foreign market due to lower price is
compensated through the high or monopoly price in the home market.
7. Price discrimination
Price discrimination is practice of monopolist by charging different prices for the same product
from different categories of customers. The monopoly firm that take resort the practice of price
discrimination is called discrimination monopolist. The aim of practice price discrimination by
monopolist is to earn maximum profit.
Dr Ratheesh C, Assistant Professor, Dept. of Economics, FMNC, Kollam Page 1
, 8. First Degree Price Discrimination
The price discrimination is said to be of the first degree, when the monopolist can sell each unit
of his product to each customer at a separate price. In the first degree price discrimination, the
monopolist charges different price from each one of the customer in such a way that the price
charged is exactly equal to the demand price i.e., the price which he is willing to pay of the
consumer.
9. Second Degree Price Discrimination
In the second degree price discrimination, the monopolist classifies all the customers in the
market according to their demand prices. The price charged from each group of customers is
equal to the minimum demand price for the product in that group. In second degree price
discrimination, some consumer’s surplus is left.
10. Third Degree Price Discrimination
In third degree price discrimination, the customers are classified into different groups and sub
groups on the basis of specific characteristics such as income, elasticity of demand, asset
holding etc. After the classification of customers into different groups, higher and lower prices
are charged from the customers including different groups and sub groups.
11. Monopoly Power
In monopoly market structure, the producer exercises some control over the supply or price of
the product. The power of the monopolist to determine the supply or price of a product in the
market is known as degree of monopoly power.
12. Learner’s Index of Monopoly Power
The economist, Learner attempted to measure the degree of monopoly power on the basis of
the gap between price (P) and marginal cost (MC). According to Learner’s index, the degree
of monopoly power can be measured by using formula M = (P-MC)/P. The gap between P and
MC is greater; larger is the degree of monopoly power and lower the gap between P and MC
lower will be the monopoly power of the firm.
13. Monopsony
The concept of monopsony was introduced by Joan Robinson. It is defined as a market situation
in which there is a single buyer of a commodity or service. In contrast to the monopoly market,
where the aim of monopolist is to secure the maximum monopoly profit, the aim of
monopsonist is to maximise utility.
14. Bilateral Monopoly
The bilateral monopoly is a market situation in which a single seller (monopolist) is confronted
by a single buyer (monopsonist). In other words, it is a market in which monopolist seller faces
Dr Ratheesh C, Assistant Professor, Dept. of Economics, FMNC, Kollam Page 2
