A monopolist is the single seller of a good or service

Monopoly and Market Power

Macroeconomics emphasizes the interactions in the economy as a whole. It deliberately simplifies the individual building blocks of the analysis in order to retain a manageable analysis of the complete interaction of the economy.

Microeconomic analysis offers a detailed treatment of individual decisions about particular commodities.

Microeconomics and Macroeconomics

A market is a set of arrangements by which buyers and sellers are in contact to exchange goods or services.

sss

1. What do markets do with buyers and sellers?

2. Do buyers and sellers meet on the markets physically?

3. Comment on the above definitions of markets. Which one appeals to you? Why? Try to explain what market stands for in your own words.

4. What is the function of prices on the market according to the text?

Many economists specialize in a particular branch of the subject. Labour economics deals with problem of the labour market as viewed by firms, workers, and society as a whole. Urban economics deals with city problems: land use, transport, congestion, and housing. However, we need not classify branches of economics according to the area of economic life in which we ask the standard questions what, how, and for whom. We can also classify branches of economics according to the approach or methodology that is used. The very broad division of approaches into microeconomic and macroeconomic cuts across the large number of subject groupings cited above.

As macroeconomic concepts are intended to refer to the economy as a whole, they tend to receive more coverage on television and in the newspapers than microeconomic concepts, which are chiefly of interest to those who belong to specific group.

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1. What branches of the subject are mentioned?

2. What other branches do you know? Which of them is the most interesting from your point of view?

3. What are criteria to classify economic branches?

4. Comment on the definitions given above.

5. What are macroeconomic concepts intended to do?

6. Why do you think macroeconomic concepts are more popular and widespread?

Competitive markets generally work well, but markets where either buyers or sellers can manipulate prices generally do not. In particular, too little output will be produced and price will be too high in a market where a single seller controls supply.

Monopolists can earn high profits by restricting the quantity sold and raising the price. Because they are the only sellers, they have no fear of being undercut by competitors – and consumers end up paying more than they should.

Some monopolies are almost unavoidable. Most public utilities (gas and electricity, for example) are potential monopolies. The government can regulate such companies by controlling the prices they are allowed to charge, or it may elect to supply the products involved itself. Other monopolies may be artificial, brought about through manipulation by firms. Here governments intervene with competition laws, seeking to make competition more vigorous and to prevent monopolies or other attempts to control supply.

Any buyer or seller who has the ability to affect market price significantly is described as having market power or monopoly power. Government intervention to limit market power, for instance by preventing firms with market power from charging high prices, can improve the allocation of resources.

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1. How much can buyers and sellers manipulate prices on the market?

2. What is a monopolist?

3. Give examples of unavoidable monopolies.

4. Can governments control monopolies? In what ways?

5. Do monopolies negatively affect markets? Prove your point of view.

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