Monday, 24 February 2020

Monopolistic Competition

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Monopolistic Competition


Monopolistic competition is a form of market structure in which a large number of
independent firms are supplying products that are slightly differentiated.
When firms are competing only through price changes, there are three cases of long run
equilibrium of a typical firm under monopolistic competition.
The long run equilibrium can be seen under three situations: when competition takes
place only through the entry of new firms, when competition takes place only through
price variations and when competition arises through price variation and new entry.


Actual demand: The actual changes in demand arising from simultaneous reduction in price.
Equilibrium: Condition when the firm has no tendency either to increase or to contract its
output.
Product differentiation: Differences among competing products.
Profit: Difference between total revenue and total cost.

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