MONOPOLY FORM OF MARKET

AND INDIAN RAILWAYS

 INTRODUCTION
What is a Market ??
Market refers to a place or locality where
commodities can be bought or sold.
But in economics:
Mechanism Buyers and Direct
Market Or Process sellers Competition

‘Market’ does not refer to a place but it is a

‘mechanism’ by which buyers and sellers of a
commodity are able to contact each other in
Direct competition for economic exchange.
 TYPES OF MARKET

Perfect
Competition
Imperfect
Competition
Monopoly

Monopolistic Oligopoly Duopoly

 MONOPOLY
 Derived from two Greek words:

‘Monos’ ‘Single’

meaning

‘Poles’ ‘Seller’
 Monopoly means existence of single
producer or seller who produces or sells
a product which has no close
substitutes.
 FEATURES OF MONOPOLY
 Single sellers and many Buyers- A monopoly firm may be owned by a
person, a few numbers of partners or a joint stock company.

 No close substitutes- Monopoly can not exist when there is competition.

 Closed entry-In a monopoly market there is strong barrier on the entry of

new firms.

 Price Marker- The seller controls the prices of that particular product or
service and is the price maker.

 Price Discrimination- Price discrimination refers to the practice of a

seller of selling the same good at different prices to different buyers. Price
discrimination is possible and profitable only when markets are imperfect.
MONOPOLY: EQUILIBRIUM
X
MC
AC E= Equilibrium Point,
where, MC=MR
P
Revenue/Cost

Pm= Price
Pm
Qm: Pm> AC, :. Excess
e profits

Y
MR Demand

Firm = Market
Short run losses are also possible
Qm shows abnormal, supernormal profits
PROFIT MAXIMIZATION
UNDER MONOPOLY
Afirm in the short run earns maximum
profit when it meets the following
conditions:-

* MR = MC and MC curve cuts MR from

below.

* Average Revenue is greater than

Average Total Cost.
PROFIT MAXIMIZATION
UNDER MONOPOLY
MC
ATC
Revenue/Cost

P
Profit AVC
e

AR

O
Output MR
 MONOPOLY- THE
INDIAN RAILWAYS
 State owned railway company of India and has monopoly
on country's rail transport.
 One of the largest and busiest rail network in the world,
transporting over 6 billion passengers and almost 750 million
tones of freight annually.
 World’s largest commercial or utility employer, with more
than 1.6 million employees.
 Railways was first introduced in 1853, the first passenger
train between Bombay & Thana.
Railways grows in India with the encouragement of British
Government.
WHY IR IS CONSIDERED
AS A MONOPOLY ??
 Single seller (Government) and many
buyers.
 No substitutes ‘NOT EVEN CLOSE

 Closed entry

 Price maker

 Price Discrimination
- Senior citizens
- Students
- Army officials, etc.
IMPACT OF GOVT.
MONOPOLY ON IR
BACKGROUND INFORMATION
Passengers:
-Operates over 9000 trains & over 5
billion annually across India.
-Preferred mode of transportation in
most of the countries.
-Overcrowding .
-Ticket-less passengers.
Production:
-Manufactures most of its Rolling
Stock and heavy engineering
components.
-Production units are managed
directly by ministers.
-Each unit was headed by GM.

Suburban Rails: Services

-Many cities have dedicated suburban Freight :
networks like Mumbai,
Chennai,Delhi,Hyderabad,Pune ,etc. -Carries variety of goods.
-Only Mumbai,Pune & Hyderabad -Contributes to 70% of revenues.
shares track with long distance trains. -Majority of earnings comes from
-Trains were mostly electric multiple carrying bulk goods like coal.
units.
 IR AT PRESENT
 World’s 3rd largest railway network.
 Contribute up to 2% to the gross
domestic product (GDP).
 Approximately 65,000 km of rail tracks
and over 7,151 railway stations.
 Operates 1,60,251 trains including
9,550 passengers trains, carrying
about 1.6 million tones of freight and
about 18 million passengers daily.
 Worlds largest commercial or utility
employer, with more than 1.5 million
employees on its payrolls.
 PROBLEMS FACED BY IR
 Some regions are beyond the reach of railways due
to unfavourable geographical conditions.
 Railways are facing stiff competition from road
transport and thus its share in passenger and goods
traffic is declining.
 Railways have huge outstanding payments to diesel
and electric power supply companies.
 The railways have to develop uneconomic projects
due to political pressures and interferences.
 Most of the equipment used by the railways are now
obsolete and need immediate replacements.
 CORRECTIVE MEASURES
 Modernization.

 Safety and security of passengers.

 Replacement and renewal of assets.

 Computerization of railway systems.

 Introduction of new technologies for

signaling and telecom.
 Prevention of leakages of Revenue.

 Increase in productivity and reduction

in Operating ratio.
 NEXT 5 YEARS GOALS
OF IR
1. To deliver a sustained and measurable
improvement in customer experience.
2. To make Rail a safer means of travel.
3. To expand Bhartiya Rail’s capacity
substantially and modernize infrastructure
i.e. to increase daily passengers carrying capacity,
increase track length and to grow the annual
freight carrying capacity.
4. To make Bhartiya Rail financially self-
sustainable.
 STRATEGIES TO
ACHIEVE GOALS…
 Quality of life in journeys- Cleanliness, 24x7
helpline, catering, e-ticketing, more coaches,
etc.
 Station Redevelopment.

 Improving train speed and introducing Bullet

trains.
 Safety- Train Protection Warning System etc.

 Transparency and Governance initiatives.

 Social initiatives like promotion of products

made by Self Help Groups.
 Tourism- Incredible Rail for Incredible India to
be launched.
 CONCLUSION
A monopoly is a
firm that is the
sole seller in its
market.
Better, cheaper It faces a downward
and faster than sloping demand curve
other means of for its product.
transports.
Monopolists can raise
Various schemes their profits by
like PPP for charging different
attracting more prices to different
investment. buyers based on
willingness to pay.

Indian Railways has Railways was first

launched a mobile introduced in 1853 and
application for grows in India with the
booking unreserved encouragement of British
tickets. Government.