Monopoly. Of marketing which will help ful for bba , b.a and bcom students

I have uploaded monopoly ppt

1. Monopoly Characteristics Price Output Determination in Short run and Long run Price Discrimination

2. Monopoly Monopoly can be described as a market situation where a single firm controls the entire supply of a product which has no close substitutes. The market structure characteristics of monopoly are listed below: 1. Presence of large number of buyers and single seller 2. Single product 3. Restricted entry 4. No difference between industry and firm 5. Monopolist has the power to control prices

3. Reasons for Monopoly Restriction by Law : Such a barrier emerges when the government makes it a law not to allow any competition. Control Over Key Raw Materials : When the strategic raw material to produce a particular commodity is scarce and is fully controlled by a single firm Specialised know how : the specific techniques of production of a particular commodity may not be available to any other firm. Economies of scale : the large size firms find profitable to eliminate competition in the long run through price cutting in the short run.

4. Demand And Marginal Revenue Curves for a Monopoly Firm Monopoly firm faces demand curve which is highly inelastic, AR curve would be downward sloping, and MR curve lie below the AR curve. This is because the monopolist has to lower the price if it wants to sell an additional unit. For a linear demand curve, the slope of MR is twice that of AR and the MR curve would lie halfway between the AR curve and price axis.

5. Price and output decision in short run T o maximise profit a monopoly firm follows the rule of MC = MR, and MC curve cutting MR curve from below. The equilibrium output of monopoly firm is Q and Price = P. A monopoly firm may earn super normal profit or normal profit or even losses in the short run. In the figure, at equilibrium output Q, Average revenue is greater than Average cost. Hence firm makes profits in short run.

6. Losses may occur in short run Economic loss or negative profits is earned by a monopolist when cost is greater than revenue. In this figure at equilibrium output Q, Average cost is MQ and Average Revenue is TQ. Thus there is a loss equal to MT per unit. Total loss= PNMT

7. Price and Output Determination in Long Run In the Compared long run, a monopolist firm can expand the size of its firm subject to market conditions. In the long run also firm follows LMC = LMR rule. Compared to short run, a monopolist in Long run produces larger output charges a lower price earns Economic profit A monopoly firm produces lower output in long run as compared to perfectly competitive market. The firm’s plant size may not be optimal and existing plant may be underutilized depending on market demand.

8. Equilibrium in Long run in Monopoly In Long Run a Monopolist Earns abnormal or Super normal Profit. In the given figure PP 1 AB is the Super normal profit earned.

9. Price Discrimination The practice of charging different prices for identical product is called price discrimination. Examples: differentiated ticket prices charged by railways, airlines and cinema halls etc. Necessary Conditions for Price Discrimination

10. Degree of Price Discrimination First-degree Price Discrimination: It occurs when a business charges the maximum possible price for each unit consumed. T he firm captures the entire available consumer surplus. The market size has to be small.eg: lawyer’s fees Second-degree Price Discrimination :It occurs when a company charges a different price for different quantities consumed, such as quantity discounts on bulk purchases. This is also called as tiered pricing structure. Example: Phone Plans, economy packs etc Third-degree Price Discrimination : It occurs when a company charges a different price to different consumer groups. For example, a theatre may divide moviegoers into seniors, adults, and children.This discrimination is the most common.