i. One seller and large number of buyers: Monopoly is said to exist when there is only one seller of a product. A monopolist may be the only person, a few partners or in the form of ***** stock company. The demand for the monopolist is the market demand. In simple monopoly the number of buyers is assumed to be large. No single buyer can influence the price by his individual actions.
ii. No close substitute: The second condition of monopoly is that there should not be any close substitute of the product sold by the monopolist. If it is not so, the monopolist cannot charge a price according to his own **. So he cannot be a price maker. That means, monopoly cannot exist when there is competition.
iii. Restriction on the entry of new firms: In a monopoly market, there is a strict barrier on the entry of new firms. Monopolist faces no competition. For example, in India, production of atomic energy is to be done only by Government. The private entrepreneurs are restricted from entering that market.
iv. Nature of Demand Curve: The aggregate demand of all buyers of the product of a monopolist is the demand of monopolist. We also know that the demand curve of an individual slopes downward from left to right. Since the demand curve of a monopolist is the summation of the demand curves of all the buyer of the product sold by the monopolist, demand curve of a monopolist slopes downward, it means that a monopolist can sell more of his output only at a lower price. On the contrary, if he raises the price of this product, his sales will be reduced.
v. No difference between Firm and Industry: The existence of single seller of one product rules out or eliminates the difference between the firm and the industry. The monopolist is a firm as well as an industry.
vi. Price Maker: The monopolist is a price maker which means that he sets price for his own goods agd services without any external pressure. His fixation of price is not influenced by any other factors which do not fall in his purview.
vii. Perfect knowledge: In monopoly market, the monopolists will be having perfect knowledge about the market conditions. So, they have control over the price and the quantities supplied. They also know about the demand in the market.
viii. Price discrimination or Uniform price: As the monopolist has complete control over the market supply, he can charge either different prices or uniform prices for different groups of consumers.
