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Question
Explain any four features of monopolistic competition
Solution
According to Prof. Chamberlin, “Monopolistic competition refers to competition among a large number of sellers producing close but not perfect substitutes”. He coined the concept in his book “Theory of Monopolistic Competition” published in 1933. In a monopolistic competition, there are a large number of sellers who sell similar products (not perfect substitutes).
The following are the features of monopolistic competition:
1. Fairly Large Number Of Sellers: There are a fairly large number of sellers in a monopolistic competition. However, it is not as large as the number of sellers in perfect competition. Due to this reason, sellers’ behaviour is like monopoly.
2. Fairly Large Number of Buyers: There are a fairly large number of buyers in the monopolistic competition. Therefore, an individual buyer is not in a position to influence the market price by changing his demand.
3. Product Differentiation: Product differentiation is the main feature of monopolistic competition. It means each product in this market is different from other products in some way or the other. The difference could be in the form of brand name, trademarks, shape, quality, ingredients used, packaging, design, colour, smell, etc. The products are different but they are close substitutes to each other, i.e., cross elasticity of demand is very high.
E.g.: Lee jeans, Levis Jeans, Wrangler Jeans, etc. are all jeans but they have certain differences which distinguish one from the other. At the same time, jeans of different brands are close substitutes for each other.
4. Free Entry And Exit: Under monopolistic competition there is freedom of entry and exit. It means new firms are free to enter the market if there is profit. Similarly, they can leave the market, if they find it difficult to survive.
RELATED QUESTIONS
Choose the correct option:
Classification of markets on the basis of place
a) Local market, National market, International market
b) Very short period market, Local market, National market.
c) Short period market, National market, International market.
d) Local market, National market, Short period market.
Choose the correct option:
Under Perfect competition, sellers are
a) Price makers
b) Price takers
c) Price discriminators
d) None of these
Give economic term:
The point where demand and supply curve intersect.
Give economic term:
The cost incurred by the firm to promote sales.
Give economic term:
Charging different prices to different consumers for the same product or services.
Characteristics of long period market:
- All factors of production and costs are variable.
- Firms are able to adjust all costs.
- It is for a few years, generally up to five years.
- Supply of commodity cannot be increased.
Monopoly: Price discrimination:: ______ : Product differentiation
Type of market showing some but not all the features of a competitive market –
Number of firms producing differentiated products which are closely related –
Find the odd word
Market on the basis of place -
The interaction of demand and supply to determine price of a commodity in perfect competition is ______.
Product differentiation is the main feature of ______.
Assertion (A): Product differentiation is the main feature of monopolistic competition.
Reasoning (R): Under monopolistic competition, all the products are perfect substitutes to each other
Identify & explain the concept from the given illustration.
Anoop Ayurveda produces unique herbal hair oil which has no close substitutes.
Identify & explain the concept from the given illustration.
Sunrise Cosmetic Company spends on advertisements, broadcasts on radio and television as well as distributes free samples of its shampoo product to in order to increase its demand.
Distinguish Between
Short period and Long period
Distinguish Between
Monopoly and Monopolistic competition
Explain any four features of perfect competition
Explain any four features of monopoly
State with reason whether you agree or disagree with the following statement:
There is product differentiation under monopolistic competition.
State with reason whether you agree or disagree with the following statement:
Selling cost is the only feature of monopolistic competition.
PASSAGE
Amul is the first choice of so many ice cream lovers in India among the top ice cream brand category. Amul brand, owned by Gujarat Co-operative Milk Marketing Federation, was established in 1946 in Anand, Gujarat.
The second on the list of top ice cream brands in India is Vadilal.
Cornetto and Magnum are one of the top ice cream brands in India owned by Hindustan Unilever. Mother Dairy is a very strong name in the Indian ice cream industry. This company is very similar to Amul, in terms of the products, they manufacture and sell. Another big player in the ice cream industry is Havmor. Havmor Company has been able to stand strong as one of the big fighters in the battle of top ice cream brands in India for very long. Ice cream market also has local and less popular brands apart from the top brands.
Amul was (and still is) in the Guinness record for running the longest- ever advertising campaign. The advertising strategy of Amul through digital marketing made the most of it through platforms such as Facebook, Twitter, Instagram, and others.
- Identify the most important feature of the ice cream market (1 marks)
- Identify the type of cost incurred by firms on advertising campaigns and strategies. (1 marks)
- Express your personal opinion about the ice cream market based on the above information (2 marks)
Explain the concept of perfect competition and price determination under perfect competition
What are the features of a market?
The Spot market is classified on the basis of ______.
Which one of the market deals in the purchase and sale of shares and debentures?
What is mean by Regulated Market?
What is meant by Spot Market?
What is meant by Spot Market?
What is meant by Commodity Market?
Explain the types of the market on the basis of time.
Assertion and reasoning question:
- Assertion (A): With a rising price, the supply of a commodity falls.
- Reasoning(R): Seller earns more profit at a higher price.
Find the odd word out:
Classification of markets on the basis of time:
Give an economic term:
Period in which supply is fixed and so the price is determined by demand only.
