What is Monopolistic Competition?
Monopolistic Competition, simply put, is when multiple companies compete to sell similar products to consumers. Using product differentiation to show how one company's product is different and better than the competition's and price competition to gain more profit from consumers are both techniques used by businesses in monopolistic competition.
The Four Major Types of Monopolies
What is a Monopoly?
A monopoly is a type of business which is the only business that controls the supply and demand of a certain product and thus controls the price at which the product is sold.
What are the Advantages and Disadvantages of a Monopoly?
Technically speaking, the only advantage of monopolies goes to the actual business as it means they are the only ones receiving profit and do not have any competition, which may help in that consumers may only have to pay the same price constantly. On the other hand, monopolies mean that the business can charge as much as they want as people can only buy the product from them and thus people will buy the business's product anyway.
Geographic Monopoly: A type of monopoly that involves a business having complete or nearly complete control over a product due to the circumstances of having no other seller in the region.
Government Monopoly: A type of monopoly that is maintained by the government who uses law to dictate that only they can control the market of a certain product.
Natural Monopoly: Type of monopoly in which a company is responsible for the cost of the factors of production other businesses use.
Technological Monopoly: A type of monopoly where only one business can sell a certain method of production or a type of invention.
What is an Oligopoly?
An oligopoly is a form of competition where there are only a few sellers who sell a certain kind of product that is typically in high demand. Because of the few amount of sellers, there is less competition between the businesses and thus any price changes a business makes will affect the entire market as a whole. This type of competition also makes it so that the possibility of another business entering the market is slim to none.
What are the Advantages and Disadvantages to an Oligopoly?
On the one hand, an oligopoly allows for few price changes for a product and thus consumers will not have to worry about choosing a business via their price over another business. On the other hand, this means that these small amount of businesses control the market and may band together (officially or unofficially) to set the market price of the product as high or low as they want.