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Economic for Business: Monopoly and Oligopoly - Essay Example
This study will explore the issues in economics and will focus on the article of Sloman and Sutcliffe entitled Economic for Business. The article explores two main issues in economy particularly in political economy and these are monopoly and oligopoly. According to the study Monopoly is a market situation characterized by: 1…
the existence of blocked entry resulting to lack of competitors because of market barriers (Sloman and Sutcliffe, 2001).
Relative to monopoly, an oligopoly is a market situation that exists when: 1. there are a limited number of sellers; 2. the relationship between the limited sellers are interactive because the decision of one affects the others; and 3. the sellers may control price and market entry through collusion or they may engage in price wars (Sloman and Sutcliffe, 2001)). UK supermarket industry where Tesco, Sainsbury, Morrisons and Asda comprise a firm-concentration ratio of 70 percent and the UK brewery industries with a firm-concentration ratio of 85 percent are examples of Oligopoly.
Compared to monopoly and oligopoly, a cartel is comprised of legally independent sellers and producers grouped together to control price, limit supply and limit competition. If a centralized institution is created to coordinate the actions of several independent local or regional monopolies then the arrangement creates a cartel. If there is a formal agreement to collude in order to fix price by oligopolies then this creates a cartel. (Sloman and Sutcliffe, 2001) De Beers diamond, 1999 Vitamin cartel, MLS service, and OPEC are some of the known cartels.
Monopolies are expected to sell their goods at a higher price due to lac ...