Economics Paper Essay Example | Topics and Well Written Essays - 750 words

Economics Paper - Essay Example The product or service a firm offers is usually the only one present in the market, therefore, the distinction between a firm and an industry becomes blurred. The firm becomes synonymous to its product/service and to the industry. Monopolistic market deviates from a perfect competition market. A perfect competition market is characterized by infinite number of competing firms, many product/service offerings, and perfectly elastic demand, to name a few. Monopolistic market, on the other hand, has a single firm, limited number of product/service, and a relatively inelastic demand. The differences between the two are greatly felt from the point of view of the consumer in a monopolistic market who has a limited choice of product/service, supply, and unregulated price. Since the product/service offered by a firm in a monopolistic market is usually the only available choice, product/service substitutes are usually absent. It is difficult to find a product/service that closely resembles the one offered by a firm in a monopolistic market. Consumers are left with a choice of either buying the product the firm offers, buy a poor substitute (if a competition is present), or not buy at all (which is unlikely since the product/service offered in a monopolistic market is usually a basic need or commodity). A firm in a monopolistic market determines the price since it is the only supplier present. As opposed to a perfect competition environment where buyers/consumers dictate the price, a firm in a monopolistic market has the solitary control of price (i.e. price maker). Where there are more players in the market, more choices are offered to consumers; hence, the power to control the price is left at the hands of consumers. In a monopolistic market, the power lies in the hands of a single firm. Monopolistic competitive market is occupied by many competing firms while