Monopolistic competition in short run

on

  • 4,378 views

 

Statistics

Views

Total Views
4,378
Views on SlideShare
4,378
Embed Views
0

Actions

Likes
0
Downloads
68
Comments
2

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Monopolistic competition in short run Monopolistic competition in short run Presentation Transcript

  • Presented by,ANIMESH AMAL
  • Monopolistic competition Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes.
  • Perfect & MonopolisticCompetition Perfect competition Monopolistic competitionnumber of sellers many manyfree entry/exit yes yesthe products firms sell identical differentiatedfirm has market none yespower?Demand curve facing horizontal downward-slopingfirm
  • Monopoly & MonopolisticCompetition Monopoly Monopolistic competitionnumber of sellers one manyfree entry/exit no yesfirm has market power? yes yesDemand curve facing downward-sloping downward-slopingfirmclose substitutes none many
  • Characteristics & ExamplesCharacteristics:  Many sellers  Product differentiation  Free entry and exitExamples:  apartments  books  bottled water  clothing
  • A Monopolistically Competitive Firm EarningProfits in the Short RunThe firm faces adownward-slopingD curve. Price profit MCAt each Q, MR < P. ATC PTo maximize profit,firm produces Q ATC Dwhere MR = MC.The firm uses the MRD curve to set P. Q Quantity
  • A Monopolistically Competitive FirmWith Losses in the Short RunFor this firm,P < ATCat the output where Price MCMR = MC. losses ATCThe best this firmcan do is to ATCminimize its losses. P D MR Q Quantity
  • Effect of MonopolisticCompetition in short run  If profits in the short run: New firms enter market, taking some demand away from existing firms, prices and profits fall.  If losses in the short run: Some firms exit the market, remaining firms enjoy higher demand and prices.