What is a Monopolistic Competition?

 

A monopolistic competition is a type of imperfect competition where there are many sellers in the market who are competing against each other in the same industry. They position their products, which are near substitutes of the original product.

In a monopolistic competition, the barriers of entrance and exit are comparatively low. The companies try to differentiate their products by offering price cuts for their goods and services. The examples of such industries are hotels, e-commerce stores, retail stores, and salons.

The following table will help students grasp the most critical points of difference between monopoly and monopolistic competition.



Monopoly
Monopolistic Competition


 What does it mean?


A monopoly is the type of imperfect competition where a seller or producer captures the majority of the market share due to the lack of substitutes or competitors.
A monopolistic competition is a type of imperfect competition where many sellers try to capture the market share by differentiating their products.


Number of players


One
Many


Degree of competition


No competition exists, as only one seller is present in the market.
A very high competition exists, as there are many sellers.


Barriers to entry


High barriers to entry
Low barriers to entry


Demand curve


Steep
Flat


Price control


Due to steep demands and only one seller, the price is controlled by the seller.
Some level of price control is exercised by buyers, as many sellers are available in the market.



This article helps the students to gain a clear understanding of a monopoly and a monopolistic competition, and the key differences between them. For more such exciting articles, stay tuned to BYJU’S.