Author: luna
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Product Differentiation: Sources and Importance | Economics
In this article we will discuss about the sources and importance of product differentiation. Product variation refers to any change that alters ‘the physical characteristics of a product’ or ‘the conditions under which it is sold’ like changing the colour of a toothpaste tube. This is done by firms to raise their market share of…
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Monopolistic Competition and Oligopoly | Economics
The upcoming discussion will update you about the difference between monopolistic competition and oligopoly. The traditional categorisation of market structures into purely competitive, monopolistically competitive, oligopolistic and monopolistic is both worthwhile (since static processes are easier to present from a teaching perspective) and dangerous (since the dynamic process of structural change is the main issue…
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Effect of Taxes on the Equilibrium of the Monopolist Type # 3. Imposition of Specific Tax:
Effect of Taxes on the Equilibrium of the Monopolist Type # 2. Imposition of Profit Tax: The effects of taxes on the monopoly profits are the same as in the case of a lump-sum tax The profits tax reduces the monopoly profits, but the equilibrium of the market is not affected so long as the tax…
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the long-run equilibrium position under monopolistic competition
Figure-4 shows the long-run equilibrium position under monopolistic competition: In Figure-4, P is the point at which AR curve touches the average cost curve (LAC) as a tangent. P is regarded as the equilibrium point at which the price level is MP (which is also equal to OF) and output is OM. In the present…
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Chamberlin’s Concept of Excess Capacity:
Prof. Chamberlin’s explanation of the theory of excess capacity is different from that of ideal output under perfect competition. Under perfect competition, each firm produces at the minimum on its LAC curve and its horizontal demand curve is tangent to it at that point. ADVERTISEMENTS: Its output is ideal and there is no excess capacity…
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Theory of Excess Capacity under Monopolistic Competition Theory of Excess Capacity under Monopolistic Competition!
The concept of excess capacity is found in the earlier works of Wicksell and Cairnes. P. Sraffa and Mrs. Joan Robinson also outlined it. But it was Chamberlin who expounded it in a most systematic manner followed by Kaldor, Kahn, Harrod and Cassels. The doctrine of excess (or unutilised) capacity is associated with monopolistic…
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Characteristics or Main Features of Monopolistic Competition: Important characteristics of monopolistic competition are as follows: 1. Less Number of Buyers and Sellers:
In this market neither buyers nor sellers are too many as under perfect competition nor there is only one seller as under monopoly. Mostly, it is a situation in between. Every producer for his produced commodity has some special buyers. Every consumer and seller can influence demand and supply in the market. 2. Difference in the…
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. Meaning of Monopolistic Competition 2. Concept of Monopolistic Competition 3. Characteristics of Monopolistic Competition. Meaning and Definition of Monopolistic Competition: Before 1933, the traditional Marshallian theory of value was prevalent.
But in 1933 a revolution in the approach to price theory was initiated by the publication of two works of modern economists, Chamberlin and Mrs. Joan Robinson. ADVERTISEMENTS: E.H. Chamberlin’s work was entitled “The Theory of Monopolistic Competition” and Mrs. Robinson’s “The Economics of Imperfect Competition”. Both economists challenged the concept of perfect competition and…
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Effect of Taxes on the Equilibrium of the Monopolist Type # 2. Imposition of Profit Tax:
The effects of taxes on the monopoly profits are the same as in the case of a lump-sum tax The profits tax reduces the monopoly profits, but the equilibrium of the market is not affected so long as the tax does not exceed the normal profits of the monopolist, since, in this case the monopolist…
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The following points highlight the effects of three types of taxes on the equilibrium of the monopolist. Effect of Taxes on the Equilibrium of the Monopolist Type # 1. Imposition of a Lump-Sum tax:
In this case we need not distinguish between the short-run and the long-run because, in general, the monopolist always realizes some excess profits — both in the short-run and in the long-run. Under these conditions, the imposition of a lump-sum tax will’ reduce the excess profits of the monopolist because it will increase his total…