Chapter-Forms of Market and Its Equilibrium Micro Economics class 11 in english Medium CBSE Notes

Monopolistic compectition:

• It is a market situation which has large number of buyers and sellers selling differentiated goods.
• In this market every seller is a monoplist of his differentiated products
• Example - toothpaste, automobile industry, cosmetics industry, etc.

Features of Monopolistic compectition:

(a) large number of sellers - In this market although there are a large number of sellers still do not become price taker. Due to differentiated product they are free to choose the price of their product.

(b) product differentiation - This is the most important feature of monopolistic compectition.

• This is the act of producing differential goods i.e. close substitute goods which may differ in packing, colour, quality, etc. e.g. colgate, perpsodent,babool, etc.
• Types of product differentiation:       

(i) Real - it arises due to change in raw material, colour packing, etc.

(ii) Imaginary - it arises due to imaginary differences in the form of brand, trade -marks, shape, size etc.

• Some important methods of product differentiation are: trade marks, brand names, size, packing , colour etc.

(c) selling expenses -

• Selling expenses are the outlays which are made to increase / create demand.
• Various froms of selling expenses are advertisement, show rooms, selling campaigns, offer discounts, incentives etc.
• Generally, average selling cost curve is " U "shaped but if the selling budget is given, it will be a rectangular hyperbola. (similar to afc curve).

(d) Concept of group - in a monopolistic competition,it is difficult to define a industry since the firm are selling differentiated goods. Hence they may be called as ''group '' of firms instead of industry.

(e) Average revenue curve -In this market, in order to increase the sales the seller should reduce the price (becouse of presence of close substitutes). hence the Ar curve, or the demand curve has a negative slope.

(f) Free entry and exit of firms -This market allwos free entry and exit of firms.

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