Monopoly and Control over Price

Monopoly is a market structure where a single seller or a group of sellers controls the market for a particular good or service. In this market structure, the degree of control over price is very considerable. Let us understand why.

One Seller

Under a monopoly, there is only one seller in the market, which means that the seller has complete control over the supply of the product. This control over supply gives the seller the power to control the price of the product.

No Close Substitutes

In a monopoly market, there are no close substitutes for the product being sold. This means that the seller has a virtual monopoly on the market, and consumers have no other option but to buy the product at the price set by the seller.

Barriers to Entry

Monopolies are often created due to barriers to entry. These barriers can be in the form of patents, economies of scale, or government regulation. These barriers make it difficult for new firms to enter the market and compete with the existing monopolist. As a result, the monopolist can set the price of the product without the fear of competition.

Conclusion

Thus, under monopoly, the degree of control over price is very considerable. The monopolist has complete control over the supply of the product, and there are no close substitutes or competition. Therefore, the monopolist can set the price of the product at a level that maximizes its profits.