Disadvantages (Demerits) of oligopoly
- There are high costs of production involved in form of persuasive advertisement. This leads to wastage and misallocation of resources.
- There is consumer exploitation. Under oligopoly, firms may restrict output and end up charging high prices.
- It distorts the choice of consumers. This is due to persuasive advertisement
- It leads to unemployment. This is due to collapse of the small firms as a result of being out competed by the large scale firms.
- It leads to income inequalities. This is because the incomes are concentrated in the hands of the few rich individuals who own large firms.
- There is duplication of goods and services. This leads to resource wastage in the economy.
- Large oligopolistic firms operate on a large, scale. Because of this, they have economic power and can therefore influence the government in their favour and in the disfavor of the population.
- Firms under oligopoly are characterized by high levels of uncertainty, This limits the ability of individual firms to make independent decisions because they are influenced by other firms.
- There is underutilization of resources. This is because firms under oligopoly operate at excess capacity hence low levels of economic growth and development.
CATEGORIES Economics
TAGS Dr. Bbosa Science
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