Monopolistic competition can be defined as a competitive scenario where close substitutes are offered to consumers in the market. For example, there is variety of formal shirt offered by different organisations / brands, such as Peter England, Indian Terrain, Arrow, Zodiac etc. These products are sold in monopolistic …show more content…
There are large number of sellers and buyers. This market is an open market where there are multiple number of sellers selling products that are similar in nature and there are a large number of buyers
2. The products offered differentiation in one way or the other. Although the products are similar they are not same. The ultimate result or purpose of these products are same but will differ in make, quality, service …show more content…
moistly the demand is inelastic in this case, and if the customer has a specific preference to a product then he would still buy it irrespective of its pricing. For example, an Iphone user will pay a premium price to continue using an Iphone.
2. Selling cost – price at which these products are sold is another important characteristic of monopolistic competition. Under monopolistic competition, organisations do not have much control over the price of the product. If the prices of products are higher, then the buyers would switch to other sellers due to close substitutability of products. Therefore, the price policy of competitors greatly influences the price policy of an organisation.
Pricing of products that fall under monopolistic competition are very sensitive. If the products are not priced appropriately then it would be substituted by its competitor product.
An example of real world under this category would be various types of cool drinks available in the market, such as Pepsi, thumps-up, coco cola, 7UP etc. these cool drinks are priced very competitively to each other and in most of the cases they are similarly priced. In the past we have seen new sellers with similar come up but with higher pricing and they could not sustain the