Write down any two characteristics of monopolistic competition.
Answers
Less Mobility:
Under monopolistic competition both the factors of production as well as goods and services are not perfectly mobile.
More Elastic Demand:
Under monopolistic competition, demand curve is more elastic. In order to sell more, the firms must reduce its price.
Large Number of Buyers and Sellers:
There are large number of firms but not as large as under perfect competition.
That means each firm can control its price-output policy to some extent. It is assumed that any price-output policy of a firm will not get reaction from other firms that means each firm follows the independent price policy.
Selling Cost:
Another feature of the monopolistic competition is that every firm tries to promote its product by different types of expenditures. Advertisement is the most important constituent of the selling cost which affects demand as well as cost of the product. The main purpose of the monopolist is to earn maximum profits; therefore, he adjusts this type of expenditure accordingly.
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The two characteristics of monopolistic competition are: Decision Making is independent and free enter and exit.
What are the characteristics of monopolistic competition?
- In this market, there are many buyers and sellers are present and the price is not determined by the business
- The buyers and sellers do not know the information about the quality and price of the product
- Many technologies are used in the firm
- There is a certain goal in this market to earn a high profit
- In this market, prices are changed easily because there is competition among the firm