Features of monoploy in monopolistic competition, Managerial Economics

Features of Monoploy in Monopolistic Competition

Monopolistic competition has the following features from monopoly:

As the products are differentiated substitutes, each brand or type has its own sole seller e.g. each brand of toilet soap is produced by only one firm.

If one firm raises its price it is likely to lose a substantial proportion of its customers to its rivals.  If it lowers price it is likely to capture a proportion of customers from its rivals.  But in the first case some of its customers will remain loyal to it and in the second case some customers will remain loyal to their traditional suppliers.  Hence, as in monopoly the demand curve for the firm slopes downwards but it is more elastic than in monopoly.  Thus the revenue for the firm in monopolistic competition is as follows:

385_monopolistic competition.png

Posted Date: 11/28/2012 5:30:09 AM | Location : United States







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