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Home Price and Output Determination Under Monopolistic Competition Monopolistic Competition


What is Monopolistic/Imperfect Competition?




Monopolistic/Imperfect competition as the name signifies is a blend of monopoly and competition. It is a systematic and realistic theory of price analysis in this imperfectly competitive world.


Monopolistic competition is a market situation in which there are relatively large number of small firms which produce or sell similar but not identical commodities to the customers.


According to Leftwitch:


"Monopolistic competition is a market situation in which there are many sellers of a particular product, but the product of each seller is in some way differentiated in the minds of consumers from the product of every other seller".


In the words of J.S. Bain:


"Monopolistic competition is found in the industry where there is a large number of small sellers selling differentiated but close substitute products".




In case the number of firms is small and the action taken by one firm is followed by rival firms in the market, it is then to be studied within a separate framework of monopolistic competition called Oligopoly.


According to Chamberlin, if all the firms produce identical goods, they can be easily categorized and called an industry.


In case, the number of firms is fairly large say 20, 40, 60 and they produce some what similar goods, it is then useful to group these firms together and call them a 'product group' of industry. We in this chapter, however, use 'product group' of 'industry' in the same sense to avoid complication.


Examples of Monopolistic Competition:


For example, a firm supplies branded good 'Lux Soap' in the market. There are many other firms in the market which sell similar soaps (not identical) with different brand names like Rexona, Palm Rose, etc., etc. The firm supplying 'Lux Soap' enjoys a monopoly position over the sale of its own product. It also faces competition from firms selling similar products.


Same is the case with many other firms in the market like plywood manufacturing, jewellery making, wood furniture, book stores, departmental stores, repair services of all kinds, professional services of doctors, technicians, etc., etc. These firms and others which have an element of monopoly power and also face competition over the sale of product or service in the market are called monopolistically competitive firms.

Relevant Articles:

Historical Background of Monopolistic Competition
What is Monopolistic/Imperfect Competition
Characteristics of Monopolistic/Imperfect Competition
Short Run Equilibrium Under Monopolistic/Imperfect Competition
Equilibrium Price and Output in the Long Run Under Monopolistic/Imperfect Competition
Wastes of Monopolistic/Imperfect Competition

Price and Output Determination Under Oligopoly

Pricing and Output Determination Under Duopoly
Three Important Models of Oligopoly

Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
Theory of Supply
Elasticity of Demand
Elasticity of Supply
Equilibrium of Demand and Supply
Economic Resources
Scale of Production
Laws of Returns
Production Function
Cost Analysis
Various Revenue Concepts
Price and output Determination Under Perfect Competition
Price and Output Determination Under Monopoly
Price and Output Determination Under Monopolistic/Imperfect Competition
Theory of Factor Pricing OR Theory of Distribution
Principles and Theories of Macro Economics
National Income and Its Measurement
Principles of Public Finance
Public Revenue and Taxation
National Debt and Income Determination
Fiscal Policy
Determinants of the Level of National Income and Employment
Determination of National Income
Theories of Employment
Theory of International Trade
Balance of Payments
Commercial Policy
Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
Theories of Economic Growth
Agriculture and Economic Development
Monetary Economics and Public Finance

History of Money

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