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MICRO ECONOMICSFOR MANGERS

PRESENTATION FOR

ON

MONOPOLY

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Submitted To:-Mr. U.K Mahapatra

Submitted ByKrishnendu SahaGopabandhu NayakMd. IshtiyaqueRubina NizzarJaya Kumari

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Q: What is MARKET ????

Ans: Market is a place where buyer & seller meets.

Elements of Market:1. Buyers & Sellers 2.A product or service3. Bargaining for a price4. Knowledge about market conditions

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Types of Market

MONOPOLYIMPERFECT

COMPETITIONPERFECT

COMPETITION

MONOPOLISTICCOMPETITION OLIGOPOLY

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MONOPOLY::??

The word MONOPOLY means “Alone to Sell”

Term “Monopoly” is being derived from two words“Mono” & “Poly”

Mono refers to singlePoly to control

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Few Examples of

Monopoly Practices

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Features of MONOPOLY market :

1. Single seller.2. No close substitute.3. Anti-thesis of competition.4. Price maker.5. Downward slopping supply curve.6. Entry Barriers for others.

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Nature of Demand & Revenue under Monopoly

In the above fig. the monopolist slopes downward from left to right. MR also falls and Slopes downward from left to right. MR curve is also below AR showing that at OQ,AR (=price) is PQ where as Marginal Revenue is MQ

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Quantity Sold

Average Revenue(AR=P)

Total Revenue(TR)

Marginal Revenue(MR)

0 10.00 0

1 9.50 9.50 9.50

2 9.00 18.00 8.50

3 8.50 25.50 7.50

4 8.00 32.00 6.50

5 7.50 37.50 5.50

6 7.00 42.00 4.50

7 6.50 45.50 3.50

8 6.00 48.00 2.50

9 5.50 49.50 1.50

10 5.00 50.00 0.50

11 4.50 49.50 -0.50

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Marginal Revenue & Marginal cost Approach

According to this approach two conditions should be fulfilled

1. MC = MR2. MC must cut MR from below

This analysis can be conducted in both Short Run Long Run

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Short Run Under Monopoly

Three things possibilities can happen 1. Super Normal Profit2. Normal Profits3. Losses

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Super Normal Profit

In the above fig. ABDC is the shaded area where the companyEarns super normal profit

Here,AR>AC

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Normal Profit

The above fig. says that the monopolist incurs no loss nor enjoys any profit

AR =AC

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Losses

AC > AR

In the above fig.PP1AN is the shaded area where it incurred losses

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Long Run Under MonopolyIn long run the monopolist always enjoys super normal profit

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Sources of MONOPOLY

1.Natural Source2.Exclusive Possession of technical

knowledge 3.Exclusive ownership of raw materials4.Legal Sources5.Economies at large scale6.Business Reputation7.Business combines8.Barriers to new comers

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How to Measure MONOPOLY Power ??

Three important Ways to measure monopolyPower

1. Tradition Measure

2. Lerner’s Measure

3. Triffin’s Measure

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Traditional Measure: If the demand of the commodity isInelastic the monopolist can charge a high price & can earnMaximum profit.

Lerner’s Measure: It’s the oldest measure which is being Devised by a formula. Degree of monopoly power = (P - MC)/P

Triffin’s Measure: It suggests the cross elasticity of demand between productsFormula: exy = Qx/Qx * Py/ .py

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Benefits of MONOPOLY:

1. Workers may benefit2. Growth of R & D3. Innovation & Growth initiation4. Economies of Scale & Scope5. Capability6. Risk Spreading7. Availability of Finance8. Incentives9. Contribution to Public Revenue