Why selling cost have to be incurred in case of monopolistic competition?
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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 Costsare 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.
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 Costsare 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.
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The selling cost is incurred in case of monopolistic competition because the firms are interested in promoting their products by various methods of advertising and marketing. The selling costs are part of the promotion of the product for enticing the end users
Explanation:
- In the monopolistic competition the firms find various methods for selling their products. Advertising and marketing are important features which create a demand for the goods. This helps the firm to sell their goods by increasing their sales.
- The selling price has an important role to play within the monopolistic conditions since the firms are interested in increasing their profits. For that they work through different methods in the competitive markets to entice the consumers.
- Selling costs are involved in the marketing and advertising of the product for the consumers. These in turn create the demand for the goods by the consumers in the monopolistic competitive economy
To know more about monopolistic competition
What is Monopolistic Competition? Explain the equilibrium of a firm under Monopolistic competition.
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