Short run output and price, Managerial Economics


In monopolistic competition, it's the product differentiation that permits its price without losing sales. 

Due to brand loyalty consumers will continue buying a particular product as preferred to all other brands in spite of increases in the price of that product.

If one firm lowers its price it may capture a few more customers therefore expanding its sales over and above the traditional customers.  Besides the product differentiation need not be physical, only the customers need to feel the products are different.

Generally the demand for one seller's product will be price elastic due to close substitutes.  If one firm raises its prices, TR will go down.  If the price is reduced there are possibilities of substantial increase in revenue because of capturing some customers from rivals.

The level of elasticity will depend on the strength of product differentiation.

Posted Date: 11/28/2012 5:30:54 AM | Location : United States

Related Discussions:- Short run output and price, Assignment Help, Ask Question on Short run output and price, Get Answer, Expert's Help, Short run output and price Discussions

Write discussion on Short run output and price
Your posts are moderated
Related Questions
Case studies and research papers on williamsons model of managerial discretion

Mrs John Robinson- 'Oligopoly is market situation in between monopoly and perfect competition in which the number of sellers is more than one but is not so large that the market pr

In the national income analysis, investment refers to the value of than part of the aggregate output for any given time period which takes the form of construction of new structure

The theory of consumer's behavior seeks to explain the determination of consumer's equilibrium. Consumer's equilibrium refers to a situation when a consumer gets maximum satisfacti

The gap between theory and practise and the role of managerial economics: We have noted above that application of theories to the process of business decision making contributes a

is the sales maximization applicable

Define the term understanding oligopoly. Understanding Oligopoly; One possibility when the two companies will engage into collusion, Sellers engage into collusion while t

Advertising expenditure must remain the same If advertising expenditure of a firm increases, consumers may be tempted to buy more of its product. Hence the advertising expendit

Question 1: 1 Explain the importance of barriers to entry in the control of Monopoly rents. 2 Discuss the extent to which competition leads to market promotion? Questi