What is Monopolistic Competition ? Its Meaning ↓
Pure monopoly too perfect contest are ii extreme cases of marketplace structure. In reality, at that topographic point are markets having large issue of producers competing with each other inwards companionship to sell their production inwards the market. Thus, at that topographic point is monopoly on 1 mitt too perfect contest on other hand. Such a mixture of monopoly too perfect contest is called every bit monopolistic competition. It is a representative of imperfect competition.
Monopolistic contest has been introduced past times American economist Prof. Edward Chamberlin, inwards his mass 'Theory of Monopolistic Competition' published inwards 1933.
Features of Monopolistic Competition ↓
The next are the features or characteristics of monopolistic contest :-
1. Large Number of Sellers
There are large issue of sellers producing differentiated products. So, contest alongside them is rattling keen. Since issue of sellers is large, each seller produces a rattling minor exercise of marketplace supply. So no seller is inwards a position to command toll of product. Every trouble solid is express inwards its size.
2. Product Differentiation
It is 1 of the nigh of import features of monopolistic competition. In perfect competition, products are homogeneous inwards nature. On the contrary, here, every producer tries to croak on his production different than his rival's production inwards companionship to keep his dissever identity. This boosts upwards the contest inwards market. So, every trouble solid acquires around monopoly power.
3. Freedom of Entry too Exit
This characteristic leads to rigid contest inwards market. Free entry into the marketplace enables novel firms to come upwards with closed substitutes. Free entry or teach out maintains normal net inwards the marketplace for a longer bridge of time.
4. Selling Cost
It is a unique characteristic of monopolistic competition. In such type of market, due to production differentiation, every trouble solid has to incur around additional expenditure inwards the cast of selling cost. This cost includes sales promotion expenses, promotion expenses, salaries of marketing staff, etc.
But on trouble organisation human relationship of homogeneous production inwards perfect contest too nil contest inwards monopoly, selling cost does non be there.
5. Absence of Interdependence
Large numbers of firms are different inwards their size. Each trouble solid has its ain production too marketing policy. So no trouble solid is influenced past times other firm. All are independent.
6. Two Dimensional Competition
Monopolistic contest has ii types of contest aspects viz.
- Price contest i.e. firms compete with each other on the footing of price.
- Non toll contest i.e. firms compete on the footing of brand, production lineament advertisement.
7. Concept of Group
In house of Marshallian concept of industry, Chamberlin introduced the concept of Group nether monopolistic competition. An manufacture way a issue of firms producing identical product. H5N1 grouping way a issue of firms producing differentiated products which are closely related.
8. Falling Demand Curve
In monopolistic competition, a trouble solid is facing downward sloping bespeak crease i.e. elastic bespeak curve. It way 1 tin sell to a greater extent than at lower toll too vice versa.
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