GROUP 9

Monopolistic Competition

Group Members Nikhilesh Pyati Anirudh Pai Sachin Jadhav Ankita Vichave Suhit Sarode 11-740 11-7 11-717 11- 7 11-746

Definition

It is a market which has the characteristics of both monopoly and perfect competition. In this 1 producer has a monopoly over the market but has rivals producing close substitutes to the product. In this the producer is neither the price maker nor the price taker completely

Features of Monopolistic Competition

Many Sellers Close Substitute Products Selling Costs Free Entry and Exit

Monopoly

Perfect Competition
P R I C E

P R I C E

Demand

Demand

Highly Inelastic

Perfectly Elastic

Nature of Demand Curve

Downward Sloping Relatively Elastic

P R I C E

D D o
DEMAND

Product Differentiation

Brand Name Size Design Color Taste and Perfume Good Salesmanship After Sales Service

Group Equilibrium
In this, the product is a close substitute in technical and economic sense It has two assumptions 1) Uniformity assumption Demand and Cost Curves are the same for the product 2) Symmetry assumption Price and output adjustment will have negligible effect

Short Run Equilibrium

Profit Maximization U shape average cost curve Factor prices and technology remains constant Downward sloping demand curve No further variation in product

Wastages under Monopolistic Competition

Excess Capacity Unemployment Cross Transport Wastage of resources Consumer Exploitation

Conclusion

Thus even though Perfect Competition is an ideal form of market it is actually Monopolistic Competition which actually takes place