Imperfectly competitive markets may be classified as:
Ø Monopolistic Competition,
Ø Oligopoly and
Monopoly refers to the market situation where there is one seller and there is no close substitute to the commodities sold by the seller. The seller has full control over the supply of that commodity. Since there is only one seller, so a monopoly firm and an industry are the same.
· Single seller and large number of buyers: Under monopoly there is one seller and therefore a firm faces no competition from other firms. Though there are large numbers of buyers, no single buyer can influence the monopoly price by his action.
· No close substitute: Under monopoly there is no close substitute for the product sold by the monopolist. According to Prof. Boulding, a pure monopolist is therefore a firm producing a product which has no substitute among the products of any other firms.
· Restriction on the entry of new firms: Under monopoly new firms cannot enter the industry.
· Price maker: A monopoly firm has full control over the supply of its products and hence it has full control over its price also. A monopoly firm can influence the market price by varying it supply, for eg., It can make the price of its product by supplying less of it.
· Possibility of Price Discrimination: Price discrimination is defined as that market situation where a single seller sell the same commodity at two different prices in two different markets at the same time, depending upon the elasticity of demand on the two goods in their respective market. Under such circumstances a monopolist can incur supernormal loss then firms would leave the industry, thus reducing the supply. As a result, price will again rise and the loss will wiped out.