Posted by Anjali Kaur on Oct 16, 2020

Monopolistic Market

A monopolistic market contains the features of the perfect competition and monopoly market. Monopolistic competition (market) refers to a market situation in which there is a large number of firms that sell closely related but differentiated products.

In this post, we will learn about the monopolistic market in an easy way. Let’s learn.

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Features of Monopolistic Market

1. Large number of buyers and sellers

There is a large number of firms selling closely related but not homogeneous products. Each firm has limited control of the market.

For example, in the toothpaste market, we have brands like Close-up, Colgate, Pepsodent, etc.

2. Product differentiation

The product of the seller are differentiated but close substitutes of one another.

The buyers can make choices as the same product produced by 1 firm is different from the product produced by the other firm.

3. Freedom of entry and exit

Under a monopolistic market, firms are free to enter into or exit from the industry.

However, it must be noted that it is not as easy and free as perfect competition.

4. Price Policy

A firm under monopolistic competition is neither a price taker nor a price maker as such.

However, it is able to exercise partial control over price by differentiating their products.

5. Selling Cost

Under this, products are differentiated and these differences are pronounced to the buyer through selling cost.

Since there is a large number of buyers and sellers and all of them have imperfect knowledge of the product, selling cost plays a very important role in this firm.

6. Lack of perfect knowledge

Buyers and sellers do not have perfect knowledge about the market condition.

7. Non- Price competition

It refers to competing with other firms by offering free gifts, extra quantity, etc. without reducing the prices.

8. Elastic AR and MR curve

Since monopolistic competition has little control over prices, their AR & MR curves are elastic in shape.

Thank You!

You can read the related concepts:

  1. Perfect Competition
  2. Monopoly Market
  3. The price elasticity of supply
  4. The supply curve
  5. What is the production function?
  6. Terms related to production concept
  7. Law of diminishing returns to a factor
  8. Total cost, Total variable cost, and total fixed cost
  9. The relation between TC, TVC, and TFC
  10. Average total cost
  11. The demand curve

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