Competition and monopoly are related economic concepts. Often they are even called antonyms, since the signs of one are opposite to the signs of the other. Each manufacturer would like to be a monopolist in its market, but only a few succeed. The economies of all countries vary, but also have much in common.
Consider concepts such as competition and monopoly in detail. Perfect competition is the perfect market model. There is absolutely no monopoly in it. On the market there are many similar products in properties from different manufacturers. When choosing a product, customers are guided by its cost. Demand is almost entirely dependent on price levels. The competition in the market is very high, while numerous participants can enter it without high costs and barriers. The exit process is also quite simple. All manufacturers are equal, since in a perfect market there are no brands and brands. 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 product that is unique in its properties. The company itself controls the prices of products and the volume of deliveries. Competition is completely absent in a monopoly. The leader initially dictates impossible conditions for entering the market. With this form of economy, a deficit may occur. Competition and monopoly are interconnected as follows: the higher the percentage on the market of firms, the less its monopolization.
In the modern economy, monopolists should not be regarded as enemies of society. They are simply necessary in a number of industries. For example, communications, water, gas and more. These companies are usually owned by the state, it is designed to control the activities of monopolists. Such players in the market are necessary, as this saves resources. Large companies have large capacities, high labor productivity and low costs.
Artificial monopolies are being created on 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 it their authorship. But it is worth considering that for the natural functioning of the market, both competition and monopoly are necessary. It is their combination that is observed in the modern economy.
Monopolistic competition - a situation in the market when there are many manufacturers offering similar, but not identical products. In this situation, just a few companies that produce differentiated products are enough. The difference in this case relates to quality, prices, after-sales service, advertising intensity, proximity to customers, etc. The following feature exists from the monopoly in this model - each company has the relative power to set a price for its product. At the same time, there are small, medium and large enterprises-players.
Oligopoly - 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). Products in this case can be both homogeneous and differentiated. The first includes semi-finished products (oil, ore, cement, steel, etc.), raw materials, and materials. Differentiated are consumer goods markets . Firms agree among themselves on the price level. They try to minimize competition as there are very few manufacturers. As a result, oligopoly is extremely close to monopoly.
So, we examined how important competition and monopoly are in a market economy, and what kind of economic systems they form.