Knowra Monopolistic competition Monopolistic competition A market structure with many firms selling differentiated products and relatively open entry. Each firm has some control over its price, but competition limits that power.
Product differentiation : A strategy or market condition in which products are made or perceived as distinct from competing products. Differences in features, quality, location, or branding give each firm some customer loyalty.
Market structure : The organization of a market, including the number of firms, product differences, and barriers to entry. Monopolistic competition is classified by its many firms, differentiated products, and relatively open entry.
Restaurant industry : The sector of businesses that prepare and serve food and beverages to customers. Restaurants often compete through cuisine, atmosphere, service, and location while new firms can enter.
Oligopoly : A market structure dominated by a small number of firms whose decisions affect one another. Unlike monopolistic competition, a few large rivals make strategic interdependence central.
Price elasticity of demand : A measure of how strongly quantity demanded changes when a good’s price changes. Differentiation makes a firm’s demand less than perfectly elastic, but substitutes still matter.
Perfect competition : A market structure with many firms selling identical products and facing free entry and exit. It shares numerous firms and open entry, but assumes identical products and no individual pricing power.
Hair salon : A business that provides hair cutting, styling, coloring, and related services. Salons offer differentiated service and convenience, with relatively accessible entry in many areas.
Monopsony : A market structure in which one buyer faces many sellers. It concerns concentrated buying power, rather than differentiated sellers competing for customers.
Short-run equilibrium : A market outcome in which firms’ choices are mutually consistent before longer-term adjustment occurs. A firm can earn economic profit or incur losses before entry and exit respond.
Monopoly : A market structure in which one seller controls the supply of a product with no close substitutes. It clarifies how far a differentiated firm’s limited market power falls short of a sole seller’s.
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