Examples of monopolistic competition

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Assignment:

Discuss some products and markets that are good examples of Monopolistic Competition.

Like the market structure of perfect competition, monopolistic competition assumes inexpensive entry into the market and thus many small sellers. Like the market structure of monopoly, monopolistic competition assumes a downward sloping demand curve. This is because, unlike the identical products found in perfectly competitive markets, the products in monopolistically competitive markets are differentiated and not perfect substitutes for one another. Therefore each monopolistically competitive seller has some degree of brand loyalty and would not lose all of its customers if it slightly raised its price above that of its competition. While not facing perfectly elastic, or horizontal, demand, the monopolistically competitive firm still faces a more elastic demand than the monopolist, whose product has no substitutes.

Can you think of examples of markets where there are many choices among products, yet we all tend to have some brand loyalty for our favorite products? In other words, we do not perceive all firms' products as perfect substitutes for each other.

Everyone should post and discuss at least two examples of products where you think the market is structured as monopolistic competition. Why did you select these examples? If you like you could even include some of the advertising you have seen for this product that helps to distinguish it from its competition. Cite the source of any information found.

Reference no: EM133334791

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