Monopolistic competition is a blend of monopoly and perfect
completion. It is a market situation in wile there are relatively large number
of small firms which produces similar but not identical commodities e.g. a firm
sell “lux soap”, but there are firms which also sell similar product (not
identical) with deferent brand names like rexona, safeguard etc. the firm
supplying lux soap enjoy a monopoly over the sale of its own product.
This is the most famous form of markeet model, because
majority of the markeet produce goods under this markeet.
Characteristic:
Following are the salient feature of monopolistic completive
market:
1.
Sellers and buyers:
There
are large number of buyers and sellers, but not a much an in perfect
competition. Generally the numbers of firms are within 25 to 50.
2.
Small share of supply:
The
firms perform individually and produce a small share out of total market.
3.
Differentiated products:
The
product of each firm can be differentiated with different trade market, packing
and labeling. So every firm charge different price from others.
4.
Entry of new firms:
A new firm can easily enter without any
hesitating in industry.
5.
Control over price:
A firm
has a limited control over the price, because the products of each firm are
closely substitution for one another.
6.
Elastic demand curve:
The
firm demand curve is negatively slopped. There are many firms which are
producing smaller products. Thus the demand for each firm product is highly
elastic and the case is vice versa if the firms are small.
7.
Advertisement and propaganda:
In
monopolistic competition firms spent a lot of money on advertisement and
propaganda, in order to attract more and more customer.
8.
Stiff competition:
There are
stiff competitions among the firms for the stiff of particular product, not
only in price but also in quality of the product.
0 comments:
Post a Comment