shift from monopolistic competition to perfect cocmeptition

Firms in a monopolistically competitive market compete using advertising, product development, and other marketing strategies to attract customers rather than relying on lower prices. Each firm has some control over the price of its product due to product differentiation, but this control is limited because there are many substitutes available to consumers. Each firm produces a product that is distinct from its competitors' products, either through quality, design, or branding. There are many firms operating in the market, none of which dominates the market.ĭifferentiated Products. Monopolistic competition is characterized by several key features:

Characteristics of Monopolistic Competition

However, because there are many firms producing similar but not identical products, consumers have a range of choices and can switch to another product if the price of one becomes too high.Īs a result, firms in a monopolistically competitive market must engage in non-price competition, such as advertising and product differentiation, to attract customers.

Unlike perfect competition, each firm has some market power due to product differentiation, which allows them to charge slightly higher prices than their competitors. Monopolistic competition is a market structure where there are many small firms that produce differentiated products.

Shift from monopolistic competition to perfect cocmeptition