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The equilibrium analysis of a firm under monopolistic competition is based on the following assumptions that are peculiar to monopolistic competition. (i) The firms here produce products of the product-group, each producing one particular product. (ii) They share the total market for the product-group equally. ADVERTISEMENTS: (iii) They are equal in respect of cost of…

  The competitive aspect of monopolistic competition lies in the fact that in this model, a large number of producers compete with each other in producing and selling close-substitute products belonging to a product-group, and there is also a large number of buyers competing for buying the products. On the other hand, the monopolistic aspect…

“The impact of product differentiation on market structure depends on the ability of some firms to secure strong advantages over others in this field. This may be the result of heavy advertising and other forms of sales promotion.” Importance of Product Differentiation: Regarding the importance of ‘product differentiation’ the following two points may be noted:…

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…

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…

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…

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…

  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…

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…

  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…