Differences Between Competitive and Monopoly Markets
A competitive and a monopoly market have differences that provide that have different implications. A monopoly market is characterized by a single entity providing or supplying the demand of a service or a commodity whereas a competitive market is characterized by the presence of competition which means that more than one supplier competes for the demand of a commodity or a service.
Because of the absence of competition in a monopoly market, the consumers are forced to buy at high prices since the producers are not compelled to bring prices down as the consumers have no other choice but to buy from them.
On the other hand, a competitive market allows for the scaling down of the price of a given commodity or improving on its quality as the producers compete against each other so that the consumers would buy from them.
An entity that has monopolized an industry controls the product or service within an area such that it dominates the entire industry while competitive markets provide the consumers with a choice.
Generally, a monopoly has been criticized because it allows for profit-maximization and is harmful to the consumers. Still, much debate has been circulating on proving which the better market is. Some argue that monopoly is better in certain scenarios while others argue that a competitive market is better. However, for a monopolized industry to be beneficial to the public, it must be controlled by legislation, such that the monopolist will not be allowed to charge profit-maximizing prices.
If the monopolist would stop the production of a monopolized commodity, especially if it is a commodity that the consumers cannot afford to lose, it will cause panic. A drug cartel may be classified as a monopoly since it controls all of the drugs being supplied in a certain locality. This is one reason why illegal drugs are priced exorbitantly. Generally, a monopoly is deemed beneficial to the business entity but not for the consumer while a competitive market is deemed beneficial to the consumer but not for the business entity.
The Linux Information Project. (1 December 2006). Monopoly: A Brief Introduction. Retrieved November 20, 2008, from http://www.linfo.org/monopoly.html
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