Question 19 of 20
Q.What is monopolistic competition ?
ChseodishaCHSE Odisha Plus Two (Class 12) Commerce Board 2023Subjective· 2mImportance★★★★★est
95% · 19/20 Questions
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Start your 14-day free trial to unlock the full solution →Monopolistic competition is a market with many sellers of differentiated products (e.g. different brands of soap or toothpaste), free entry/exit, and limited price control for each firm.
Monopolistic competition, a concept developed by E. H. Chamberlin, is a realistic market form combining features of both perfect competition and monopoly. Its main features are:
- Large number of sellers and buyers — but fewer sellers than under perfect competition, and each seller is fairly small.
- Product differentiation — firms sell similar but not identical products, differentiated by brand name, packaging, quality, or design (e.g. different brands of toothpaste, soap, or soft drinks). This is the defining feature.
- Free entry and exit of firms in the long run.
- Selling costs — firms spend on advertising and sales promotion to push their own brand.
- Some control over price — because each brand has no perfect substitute, every seller faces a downward-sloping demand curve and has limited power to set the price of his own product. …
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