Monopoly

Abstract

Imperfect competition occurs where there is a breach of the conditions of perfect competition:

• 1. Many small sellers and buyers. Where there are only a few sellers, they may each supply so large a part of the market that the amount supplied affects the market price. Such a seller is faced with a downward-sloping demand curve. Similarly, a large buyer may be faced with an upward-sloping supply curve.

• 2. Homogeneous product. Seller controls part of the market by ‘differentiating’ his product.

• 3. Perfect knowledge, free entry and perfect mobility of factors. Consumers may continue to buy at a higher price through lack of knowledge of prices elsewhere. Where factors are not mobile, they may be at the mercy of a single buyer. Both lead to less than perfectly-elastic demand and supply curves.