What is a Monopolistic Competition Market? Meaning, features, and more.

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There are many types of markets, one of them is the monopolistic market. A large number of buyers and sellers come to this market. All sellers sell similar goods and services, but these goods and services differ from each other in some way or the other. Most buyers purchase goods and services from brands of their choice.

Due to increasing globalization and privatization, the number of monopolistic competition in the market is increasing. The second main reason for the increase in the number of monopolistic markets is the government, because the government is trying to create competition in the market. Market is considered healthy only when there is competition because competition helps in maintaining quality, quantity and price.

What is a monopolistic competition market? Meaning, features, and more.

Table of Contents

What is a Monopolistic Competition Market?

Meaning of Monopolistic Competition Market

Monopolistic competition is a market situation in which there are a large number of buyers and sellers of the same type of goods and services, but all the goods and services are different from each other, this difference can be price, colour, quality, quantity and anything else. Restaurants, cinema houses, consumer products etc. are examples of monopolistic competition markets.

In simple language, where there are a large number of buyers and sellers and all the sellers sell similar goods and services, but all the goods and services are different from each other in some way or the other, is called a monopolistic market.

Definition of Monopolistic Competition Market

According to Professor Leftwich – “Monopolistic competition (or imperfect competition) is the condition in the industrial market in which a particular product of one seller creates in the minds of consumers the idea of being different from other sellers.”

According to own word – “where there are a large number of buyers and sellers and all the sellers sell similar goods and services, but all the goods and services are different from each other in some way or the other, is called a monopolistic market.”

Features of Monopolistic Competition Market:

Following are the features of monopolistic competition market:

What is a monopolistic competition market? Meaning, features, and more.

1. Large number of buyers and sellers:

In monopolistic competition there are a large number of buyers and sellers. In this competition the company has limited control over the market.

2. Product differentiation:

In monopolistic competition each product is different from the other. These differ from each other in some way or the other in name, price, quantity, quality etc.

3. Incomplete knowledge:

In this competition, the consumer does not have complete information about the goods, because all the goods are different from each other in some way or the other.

4. Freedom of entry and exit:

In monopolistic competition any firm can freely enter and leave the market. There is no restriction of any kind in this.

5. Price setter:

In this competition, the firm is the price setter and not the price taker. But the company decides the price keeping its competitors in mind.

6. Selling Cost:

In this competition all the goods are different from each other, and more advertising is required to reach the information to the consumer. That is why selling costs are higher in this competition.

7. More elastic demand:

Even a small change in the price of a product affects the demand more, that is why demand is more elastic in monopolistic competition. For example, if a seller reduces the price of a product, the demand for that product increases.

8. Brand value:

In this competition, all the sellers have their own brand values. It is because of this brand value that consumers trust goods and services.

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QNA/FAQ

Q1. What is a Monopolistic Competition Market?

Ans: Monopolistic competition is a market situation in which there are a large number of buyers and sellers of the same type of goods and services, but all the goods and services are different from each other, this difference can be price, colour, quality, quantity and anything else. Restaurants, cinema houses, consumer products etc. are examples of monopolistic competition markets.

Q2. Write the features of monopolistic competition market.

Ans: Following are the features of monopolistic competition market:

1. Large number of buyers and sellers
2. Product differentiation
3. Incomplete knowledge
4. Freedom of entry and exit
5. Price setter
6. Selling cost
7. More elastic demand
8. Brand value

Q3. Write examples of monopolistic competition market.

Ans: Consumer products, restaurants, cinema halls, malls etc. are examples of monopolistic competition markets.

Q4. What reason does monopolistic competition arise?

Ans: Due to increasing globalization and privatization, the number of monopolistic competition in the market is increasing. The second main reason for the increase in the number of monopolistic markets is the government, because the government is trying to create competition in the market. Market is considered healthy only when there is competition because competition helps in maintaining quality, quantity and price.

Q5. Is there a large number of buyers and sellers in monopolistic competition?

Ans: Yes, in monopolistic competition market there are large number of buyers and sellers of same type of goods and services, but all the goods and services are different from each other, this difference can be price, color, quality, quantity and anything else.

Q6. Write the monopolistic situation.

Ans: Where there are a large number of buyers and sellers and all the sellers sell similar goods and services, but all the goods and services differ from each other in some way or the other, that situation is called a monopolistic situation.

Q7. Is imperfect knowledge in monopolistic competition?

Ans: Yes, imperfect knowledge in monopolistic competition but not excessive. The consumer has general knowledge.

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