Conditions of Monopolistic Competition In Economics

Conditions of Monopolistic Competition In Economics:

Following are the important conditions of monopolistic competition.

Competition In Economics


Sellers & buyers: – there are a large number of buyers and sellers in the monopolistic market. Generally, the number of firms is within 25-50.

Small share of supply: – each firm acts independently and produces a small share of the total output.

Differentiated products: – the product of each firm can be differentiated by trade mark or packing.

Entry of new firms: – in a monopolistic competition, new firms can easily enter into the market.

Inefficient firms in the market: – inefficient firms also live in the market side by side & sell the defective products.

Control over price: – a firm has only limited control over the price of the product according to its supply.

Elastic demand curve: – the demand curve of the firm is negatively sloped, and because there are many firms in the market which are producing a similar commodity. Therefore, the demand for products of each firm is elastic.

Advertising: – in a monopolistic competition, firm spends a lot of money on advertisement, to attract the consumers.

Stiff competition: – there is a stiff competition among the firms for the sale of a particular brand, not only in price but also in quantity of the product.


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