Case study on monopolistic competition ppt

features of monopolistic competition ppt and monopolistic competition examples ppt
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Published Date:25-07-2017
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CPT Section C General Economics Chapter 4 Unit 3 Monopolistic Competition & Oligopoly Ms.Prem J.Bhutani Definitions and Descriptions of Monopolistic Competition Product Differentiation Profit Maximization in Short-Run and Long-Run Meaning of Oligopoly competition Types and Characteristics of Oligopoly Kinked Demand Curve Analysis •Meaning •Features Meaning • On one extreme is the Perfect Competition model • On the other extreme is the Monopoly Model Monopolistic Competition & Oligopoly are competitive scenarios that lie between these two extremes Features of Monopolistic Competition and Oligopoly will emulate either Perfect Competition or Monopoly • Power to set prices somewhat like a monopoly • Face competition like perfect competition Large number of firms • Each firm has relatively small market share • Each firm must be sensitive to average market price of its product • Collusion is not possible due to the number of firms No barriers to entry or exit Product Differentiation Each firm makes a product that is slightly different from the products of competing firms Close substitutes but no perfect substitutes An attempt to increase price will normally results in a lower volume sold Competition on Quality, Price, Marketing: • Quality is design, reliability, service provided to buyer and ease of access to product • Price – downward sloping demand curve • Marketing – firm must market = promotion, distribution, packaging Product differentiation is crucial to monopolistic competition People value variety, even if it is not material (real) Product differentiation takes place in buyer’s mind Variety is useful but costly – we pay for it Physical differences Convenience Ambience Reputations Appeals to vanity Unconscious fears and desires Snob appeal Customized products Banks Sporting Goods Radio Stations Fish and Seafood Clothing Jewelry Computers Health Spas Frozen Foods Apparel Stores Canned Goods Convenience Stores Short-run Equilibrium Long-run Equilibrium Product differentiation It does not face a perfectly elasticity of demand Price maker for the product Downward Sloping demand curve The monopolistic competitor can make a profit or take a loss As only one firm in a crowded industry it has a very elastic demand curve No one firm can get too far out of line on price because buyers can always purchase a substitute from some one else Meaning Features Forms Oligopoly is an important form of imperfect competition Oligopoly is often described as ‘competition among the few’ • Consider the example of cold drinks industry or automobile industry • There are a handful firms manufacturing cold drinks industry or automobile industry Pure and Differentiated Oligopoly Open and closed oligopoly Collusive and Competitive Oligopoly Partial or full oligopoly Syndicate and Organized Oligopoly

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