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Monopsony Application and

Features

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Group 7

Group members

Abhishek Paul

Ritesh SabaleHitesh Suryavanshi

Miheer Shinde

Faisal Mohammad

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Definition

Monopsony is a state in which demandcomes from one source. If there is only one

customer for a certain good, that customerhas a monopsony in the market for thatgood.

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Monopsony and Features

A situation in which there is only

one customer for a company's product also

called buyer's monopoly.

In economics, a monopsony is a market

with only one buyer in the market, often

an input market. This is analogous to

the case of a monopoly in which thereis only one seller in a market.

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A market characterized by a single buyer of a

product. Monopsony is the buying-sideequivalent of a selling-side monopoly.

While monopsony could be analyzed for anytype of market it tends to be most relevant forfactor markets in which a single firm is theonly buyer of a factor.

Two related buying side market structures areoligopsony and monopsonistic competition.

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Monopsony power in essence gives a

business the ability to control their unit

cost of paying for an input, similar to how a

monopoly can control their price.

Sometimes with monopoly power in

markets comes monopsony power

because as well as selling the most theybuy the most.

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Effects

Since the buyer has many different options when

it comes to making purchases, it is possible todemand lower pricing from any of the suppliers.

If the pricing is too low, then some of thesuppliers will be unable to earn enough profit offthe sales to cover the costs of production. When

this happens, the suppliers go out of business,

and thus increase the rate of unemployment inthe locations where the company maintainedoperations.

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Single Buyer

Single Buyer: First and foremost, a monopsony

is a monopsony because it is the only buyer in

the market. The word monopsony actually

translates as "one buyer." As the only buyer, a

monopsony controls the demand-side of the

market completely. If anyone wants to sell the

good, they must sell to the monopoly.

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No Alternatives

No Alternatives: A monopsony achieves single-

buyer status because sellers have no

alternative buyers for their goods. This is the

key characteristics that usually prevents

monopsony from existing in the real world in

its pure, ideal form. Sellers almost always have

alternatives.

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Barriers to Entry

A monopsony often acquires and generally maintains

single buyer status due to restrictions on the entry of

other buyers into the market. The key barriers to entry

are much the same as those that exist for monopoly.

Government license or franchise

Resource ownership

Patents and Copyrights High start-up cost

Decreasing average total cost

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This can be illustrated with the example

of a hair salon in a small town.

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The monopsonist's marginal cost of labour and supply curve

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What if a union fixes a minimum

wage?

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THANK YOU