What is Monopolistic Competition ? Its Meaning ↓
Pure monopoly together with perfect contest are 2 extreme cases of marketplace lay structure. In reality, in that location are markets having large issue of producers competing amongst each other inwards gild to sell their production inwards the market. Thus, in that location is monopoly on 1 manus together with perfect contest on other hand. Such a mixture of monopoly together with perfect contest is called equally monopolistic competition. It is a illustration 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 amid them is real keen. Since issue of sellers is large, each seller produces a real pocket-size business office of marketplace lay supply. So no seller is inwards a lay to command cost of product. Every draw of piece of employment solid is express inwards its size.
2. Product Differentiation
It is 1 of the around of import features of monopolistic competition. In perfect competition, products are homogeneous inwards nature. On the contrary, here, every producer tries to give-up the ghost along his production different than his rival's production inwards gild to hold his split identity. This boosts upwards the contest inwards market. So, every draw of piece of employment solid acquires or together with thence monopoly power.
3. Freedom of Entry together with Exit
This characteristic leads to rigid contest inwards market. Free entry into the marketplace lay enables novel firms to come upwards amongst closed substitutes. Free entry or instruct out maintains normal net turn a profit inwards the marketplace lay 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 draw of piece of employment solid has to incur or together with thence additional expenditure inwards the shape of selling cost. This cost includes sales promotion expenses, promotion expenses, salaries of marketing staff, etc.
But on draw of piece of employment concern human relationship of homogeneous production inwards perfect contest together with nix contest inwards monopoly, selling cost does non be there.
5. Absence of Interdependence
Large numbers of firms are different inwards their size. Each draw of piece of employment solid has its ain production together with marketing policy. So no draw of piece of employment solid is influenced past times other firm. All are independent.
6. Two Dimensional Competition
Monopolistic contest has 2 types of contest aspects viz.
- Price contest i.e. firms compete amongst each other on the terra firma of price.
- Non cost contest i.e. firms compete on the terra firma 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 agency a issue of firms producing identical product. Influenza A virus subtype H5N1 grouping agency a issue of firms producing differentiated products which are closely related.
8. Falling Demand Curve
In monopolistic competition, a draw of piece of employment solid is facing downward sloping postulate crease i.e. elastic postulate curve. It agency 1 tin dismiss sell to a greater extent than at lower cost together with vice versa.
