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Topic 6 Notes Imperfect Markets
Economics (Coronation Secondary School)
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Economics/Grade 12 Imperfect markets Nkangala District/2025
ECONOMICS NOTES
TOPIC: DYNAMICS OF IMPERFECT MARKETS
GRADE: 12
YEAR: 2025
1
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Economics/Grade 12 Imperfect markets Nkangala District/2025
TOPIC 6: IMPERFECT MARKETS
Imperfect market is any market which does not meet the requirements of a perfect
market. Three imperfect market structures are: monopoly, oligopoly and monopolistic
competition.
MONOPOLY: (Possible essay: discuss monopoly in details with/ without the aid of
graphs- concept, characteristics short run economic profit & economic loss & long run
economic profit)
Monopoly is when a single firm and its product offering dominate a market. An
example in South Africa is ESKOM.
CHARACTERISTICS/MARKET STRUCTURE
• Number of businesses
− A monopoly market has only one seller of a product. Therefore, the firm faces no
competition.
− The seller is also responsible for the industry output.
• Nature of the product
− Monopolist’s product is unique with no close substitutes, therefore there is no
competition.
− The consumer can only buy the monopolist’s product or go without it.
• Market entry
− Barriers prevent other businesses from entering the market.
− Natural barriers such as exclusive ownership of scarce natural resource provide a
barrier. For example, De Beers had sole ownership of diamond for years.
− A natural monopoly is created when there are natural barriers to entry into the market.
This can be due to the large amount of initial capital needed to develop such
businesses. For example, to provide electricity needs power stations that are
expensive to build. Government is usually the only entity with large amount of capital,
therefore natural monopolies are often owned by governments.
− When barriers to entry are not economic in nature, an artificial monopoly is created.
Example of such artificial barriers are patents which give the patent holder the right to
be the exclusive manufacturer of a particular product. Licensing is another way in
which artificial monopoly is applied, e.g. TV and radio licenses. Licenses protect
operators against entry of other competitor.
• Control over price
− A monopoly firm has a considerable control over price, as such the firm is regarded as
a price maker.
− However, monopoly does not have control over demand, so demand will affect the
monopolists ‘price.
2
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Topic 6 Notes Imperfect Markets
Economics (Coronation Secondary School)
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, lOMoARcPSD|67655710
Economics/Grade 12 Imperfect markets Nkangala District/2025
ECONOMICS NOTES
TOPIC: DYNAMICS OF IMPERFECT MARKETS
GRADE: 12
YEAR: 2025
1
messages.downloaded_by
, lOMoARcPSD|67655710
Economics/Grade 12 Imperfect markets Nkangala District/2025
TOPIC 6: IMPERFECT MARKETS
Imperfect market is any market which does not meet the requirements of a perfect
market. Three imperfect market structures are: monopoly, oligopoly and monopolistic
competition.
MONOPOLY: (Possible essay: discuss monopoly in details with/ without the aid of
graphs- concept, characteristics short run economic profit & economic loss & long run
economic profit)
Monopoly is when a single firm and its product offering dominate a market. An
example in South Africa is ESKOM.
CHARACTERISTICS/MARKET STRUCTURE
• Number of businesses
− A monopoly market has only one seller of a product. Therefore, the firm faces no
competition.
− The seller is also responsible for the industry output.
• Nature of the product
− Monopolist’s product is unique with no close substitutes, therefore there is no
competition.
− The consumer can only buy the monopolist’s product or go without it.
• Market entry
− Barriers prevent other businesses from entering the market.
− Natural barriers such as exclusive ownership of scarce natural resource provide a
barrier. For example, De Beers had sole ownership of diamond for years.
− A natural monopoly is created when there are natural barriers to entry into the market.
This can be due to the large amount of initial capital needed to develop such
businesses. For example, to provide electricity needs power stations that are
expensive to build. Government is usually the only entity with large amount of capital,
therefore natural monopolies are often owned by governments.
− When barriers to entry are not economic in nature, an artificial monopoly is created.
Example of such artificial barriers are patents which give the patent holder the right to
be the exclusive manufacturer of a particular product. Licensing is another way in
which artificial monopoly is applied, e.g. TV and radio licenses. Licenses protect
operators against entry of other competitor.
• Control over price
− A monopoly firm has a considerable control over price, as such the firm is regarded as
a price maker.
− However, monopoly does not have control over demand, so demand will affect the
monopolists ‘price.
2
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