Question

Selling cost of toothpaste monopolistic competition

Answer 1

Selling costs refer to those expenses which are incurred for popularizing the differentiated product and increasing the demand for it.  Selling cost is a special feature of monopolistic competition.  Under perfect competition due to homogeneous product and under monopoly because of absence of substitute, the selling costs become unnecessary.

The most important instrument by which a firm can convince its buyers about the differentiating nature of its product is advertising.  Such expenditure which is incurred by a firm under monopolistic competition to persuade customers to prefer its product to that of its rivals is known as ‘selling costs’.  According to famous American economist, Edward Chamberlin, Selling Costs are Costs incurred in order to alter the position or shape of demand curve for a product.  Such selling costs may be incurred in any form such as advertising, sales promotion, samples to potential customers etc.  Whatever be the form, selling costs aim at raising the demand for the product and changing the position and the shape of demand curve.