The_Pro’S_and_Con’S_of_Two_Opposing_Markets

Monopolies cannot exist in a perfect market as they do not allow anyone to join the market. A company or group having exclusive control over a commodity or service. Since the firms tend to have complete control over the market they have do not have to compete with other companies to dominate the market meaning that the product may not develop as fast as it would in another market. Also it means there is no incentive to produce goods and services that are most valued by the consumer over all other companies. The fact that there is only one producer in the monopoly means that there is no competition for products which means they are unable to switch to an alternative and this then means that resources that the company use are not beinmg allocated to the products that the consumer wants this means that there is allocative ineffiency. This then means that the market has failed. The difference is in a highly competitive market suppliers have to create a product that the consumer would rather buy over another product in order to be a profitable company and survive. However in a monopoly the goods and services provided by the supplier are pre determined by the supplier rather than the consumers demand and needs. Therefore in a monopoly market the consumer can only consume the product but they cannot define what happens to the market. Another disadvantage of a monopoly market is that firms are not restricted to a certain price to retail the product at and therefore do not have to produce goods or services at minimum cost. Monoplies can restrict their supply and this in turn raises the price as the Figure i shows below. This is only as long as the demand remains the same for the monopoly. Figure i Ina competitive market a business is constantly in competition to keep control of costs to have the lowest retail price for their product or service otherwise the company would risk losing their share in the m arket. There is no incentive to cuts costs as there is no competitors forcing them to do so. This means that the monopoly are unlikely to be productively effiecient once again this is market failure. Although there are con’s to a monopoly market there are also pro’s. The first of which companies that are highly profitable are more likely to do more research and development projects. The high profits allow them to allocate resources to the projects. This is a positive because the reserach can sometimes overlap with other areas and the can allow for faster innovation and delevelopment of improved products for the consumer market. Another pro for monopolies is because they usually supply goods on a large scale, leading to a fall in average costs in production. Lower costs might well lead to an increase in profits but the gains in productive effiency may potentionally be passed onto consumer s through lower prices. This is a ‘natural monopoly’ situation. One other pro of monopoly economies. There are several advantages of a competative market. A high level of competition in a market will drive companies to perform to beat competitors in the market. The potential benifits of a competitive market are lower prices for the consumer due to the high levels of competition. The high competition keeps the price of production down to reduce the retail price in order to stay in comepetition with the other suppliers. A competitive market can also help the producers advance the production process in order to help reduce production time and cost. The competitive market allows for a wider variety of products in the market becuase the companys are trying to give a USP and help increase their profit by selling more of their product. The competitive nature of the market allows for a fast pace of innovation and invetion of the product making the market grow rapidly into a highly advandced sophistocated products. In order to maintain a good customer base and keep the profit margins acceptable. This means companies strive to provide the best service for customers so that they will use the company again. Companies try to provide better information about their product to keep the consumer better informed and make them know ehy their product is better than other companies. The disadvantages of a competitive market are factors of production will only apply if it is profitable to do so. The nature of the competitive market means that it can sometimes fail to provide goods and services to the consumer. Another problem is that a competitive market can sometimes encourage the comsumption of harmful and dangerous products. A disadvantage is that in the competitive market drives the cost of production down meaning that the product has to be as cheap as possible so such social issues relating to production may not be taken in to consideration and ignored by the consumer and the supplier. This market also allocates more resources to consumers that have more money than others in order to make a higher profit margin. This means that underprivillaged groups couls suffer or loose out on products due to the allocation of resources in this group. Both these markets have their advantages however they do both have some disadvatages. In conclusion monopolies create a market that could potetially provide an unsatisfactory service and not be punish by the market as there is no competition. Although both markets argue that they can both provide suffiecient development for the market the competitive market provides a faster and more competitive R & D system that allows for a fast and competitive market with top of the range advandced producvts. The benifit of the monopolist market is that they can provide products for all as they are the only supliers for the market however in a competiitve market they have to try and compete for the best profiot which is with the people with the most money so they only supply to consumers with more money than others in conclusion I would say both markets are needed for a mixed market as some products need to be suppliued by one or the other.