Market Structure

A monopsony is where there is a sole buyer of a product, but many sellers. This contrasts with the similarly named monopoly, whereby there is only one seller and many buyers.

Perfect Competition is a type of market structure. In short, perfect competition is a market structure whereby there are many firms that sell a similar product.

A market that has Monopolistic structure can be seen as a mixture between a monopoly and perfect competition. Whilst monopoly and perfect competition are at completely different ends of the spectrum; monopolistic competition is somewhere in between.

When looking at the causes of monopoly, it is important to first define what it is. The term monopoly originates from the Ancient Greek language. Monos, meaning “sole”. And Poleo, meaning “sell”. Roughly translated, it means “Sole Seller”. Any person or business who is the only seller in the market could be classified as having a monopoly.

A natural monopoly is a type of monopoly that occurs due to high fixed costs and a need to achieve extreme economies of scale. In other words, it is only economically viable for one business to serve the market.

Oligopoly is derived from the Latin ‘olígoi’ – meaning “few”, and ‘pōléō’ – meaning “to sell”. So loosely translated, it means ‘few sellers’. This is a key characteristic of oligopolistic markets as it is defined by a few firms dominating the market.