Competition and monopoly, their characteristics

Competition and monopoly are related economic concepts. Often they are even called antonyms, since the symptoms of one are the opposite of the characteristics of the other. Each manufacturer would like to be a monopolist in its market, but only units can do it. The economies of all countries differ, but they have much in common.

Consider such concepts as competition and monopoly in detail. Perfect competition is the ideal model of the market. There is absolutely no monopoly in it. On the market there are many similar goods by properties from different manufacturers. Buyers in the choice of products are guided by its cost. Demand is almost entirely dependent on the level of prices. Competition in the market is very high, and numerous participants can enter without much cost and barriers. The output process is also quite simple. All producers are equal, because there are no brands and brands on the perfect market. In today's world it is impossible to meet this kind of competition.

Monopoly is the antipode of the model discussed above. It is inherent in the presence of only one seller, who offers consumers a unique product for the properties. The firm itself controls the prices of products, the volume of supplies. Competition is completely absent in the conditions of monopoly. The leader initially dictates impracticable conditions for entering the market. With this form of economy, there may be a deficit. Competition and monopoly are interrelated as follows: the greater the percentage in the market of firms, the less is its monopolization.

In today's economy, we should not regard monopolists as enemies of society. They are simply necessary in a number of industries. For example, communication, water, gas and so on. These companies usually belong to the state, it is called to monitor the activities of monopolists. Such players are needed on the market, as resources are saved at the same time. Large companies have large capacities, high labor productivity and low costs.

Artificial monopolies are created in the market. They arise when an enterprise tries to protect its know-how. However, it introduces restrictions in the form of patents or licenses. Other firms no longer have the right to use the invention and award their authorship. But it is worth considering that for the natural functioning of the market, competition and monopoly are necessary. It is their combination that is observed in the modern economy.

Monopolistic competition is a situation in the market when there are many manufacturers offering a similar but not identical product. In this situation, only a few companies producing differentiated products are sufficient. The difference is about quality, prices, after-sales service, advertising intensity, proximity to customers, etc. From the monopoly in this model, the following feature exists: each firm has a relative power to set a price on its product. In this case, there are small, medium and large enterprises-players.

Oligopoly - there are a small number of participants in the market. Usually their number is limited to a dozen firms. Manufacturers dominate a certain market for goods (services). The products can be either homogeneous or differentiated. The first include semi-finished products (oil, ore, cement, steel, etc.), raw materials, materials. Differentiated are the markets of consumer goods. Firms agree among themselves about the price level. They try to minimize competition as much as there are very few manufacturers. As a result, the oligopoly is extremely close to monopoly.

So, we examined how important competition and monopoly in a market economy are, what economic systems they form.