Exploring Market Dynamics: Natural Monopoly, Monopoly, Oligopoly

This presentation provides a comprehensive analysis of different market structures, focusing on natural monopoly, normal monopoly, and oligopoly. It defines each structure, highlighting their key characteristics, differences, and real-world examples. The presentation explains that a natural monopoly arises due to high startup costs and fixed costs, often requiring government permission, whereas a normal monopoly involves a single supplier controlling a significant market share, and an oligopoly consists of a few sellers offering differentiated products. It also explores why governments tend to regulate natural monopolies to prevent price gouging and ensure fair prices for consumers. The presentation concludes by emphasizing that natural monopolies are economically sensible businesses that eliminate resource wastage, distinguishing them from other market structures. Desklib offers a wealth of solved assignments and study materials for students.

Economics Assignment
Student’s Name
University Name

Introduction
The presentation will focus on:
• Natural monopoly
• Normal monopoly
• Oligopoly market structure
• Why do government tend on natural
monopoly market?

Monopoly
• Monopoly is the market condition which
exists when there is only one enterprise
or a specific person is there in the market
to supply a particular product or the
service.
• This condition explains that the control on
the market is only in the hand of the one
person.
• The market structure explains that the
market is characterized by a single seller

Natural Monopoly
• Natural monopoly market is built in that
situation when one producer or supplier is
enough for the market to sell the products and
the services.
• This kind of monopoly is existed due to high
start up and fixed cost of starting the business
in a particular industry (Mosca, 2008).
• Natural monopolies could arise in the industry
because of special raw material requirement,
technology advancement etc.

Example of Natural Monopoly
• Water services are among the best examples of
natural monopoly. A company which offers the
water which is used to drink and used in the
kitchen is the perfect example of natural
monopoly.
• Existing of two, three or four companies of
water supply in one city would cause the waste
of money and the inefficiency of operations as
one company could easily supply the water
throughout the city (Vikharev, 2013).

Natural Monopoly
• At the same time, this business also applies additional cost
to lay the proper machineries and the infrastructure,
proper treatment facilities, hiring the enough qualified
staff etc which leads to huge set up and starting cost to
the company.

Difference of natural monopoly from
normal monopoly and oligopoly
• Natural Monopoly:
It is the type of monopoly which exists because of
high start up cost and this kind of monopoly is
created with the permission of the government.
• Normal monopoly:
Monopoly business are the one where only a single
supplier is existed in the market and supplying
the products and services to the customers. In
order to the regulations, it is the market structure
where power exists when the single trader
controls more than 25% of the market share.

Continued:
• Normal Monopoly Market structure:

Continued:
• Oligopoly market:
oligopoly is the market structure where few sellers
and traders are existed in the market and sells
the different products or substitute products or
the nearly differential products (Vikharev,
2013).

Difference:
Basis for comparison Natural Monopoly Monopoly Oligopoly
Meaning Natural monopolies could arise
in the industry because of
special raw material
requirement, technology
advancement etc.
Monopoly business are the one
where only a single supplier is
existed in the market and
supplying the products and
services to the customers.
Oligopoly is the market
structure where few sellers and
traders are existed in the
market and sells the different
products or substitute products
or the nearly differential
products.
Number of players One One Two to ten
Product differentiation Extreme Extreme None to substantial (Jain,
Panchal, and Kumar, 2014)
Competition Not exist Not exist Little competition

Continue:
Prices Fair prices High prices Fair prices
Control over prices No Very considerable Some
Basis of setting price Industry decided prices (Askar,
2013)
Depends on the demand of the
product
Competitors prices
Restriction to entry Due to the special raw material
requirement, technology
advancement etc.
Because of economical, legal,
institutional or any other
reasons.
Because of economies of scale.

Analysis
• On the basis of the study, it has been measured that
the natural monopoly is bit different from monopoly
and the oligopoly in context with their nature and
the characteristics.
• The natural monopoly, normal monopoly and the
oligopoly could be better understand through
different examples of the market which are
currently existed.
• The main example of natural monopoly is electricity,
normal monopoly is transport at a particular place
and the oligopoly is cold drink, telecommunication
etc.