what is monopolistic competition? it's characteristics

What is Monopolistic competition? It's Characteristics

Definition - Monopolistic competition is a situation of market in which many firms produce and sell products in large number of amount but not so large as to create the situation of perfect competition. It means there may be many firm in the market with similar product with slightly difference to each other.

In a monopolistic competitive market farms have some degree of market power, which means they can influence and control  the price of there goods and services. 

Monopolistic competition allows firms to differentiate their products through branding, design, quality and other factors. this differentiation creates some level of product diversity and consumer choice. 

In monopolistic competition market consumers have several benefits such as better quality product under range, choice of price, choice of product. 

In Monopolistic competition firms compete on the basis of quality of the product, price of the product, advertising, providing offers, and some other factors to attract consumers. There may be some excess capacity and excess profits in the short run in the market  in monopolistic competition. which means market  is not perfectly efficient. However, in the long run, excess profits tend to attract new entrants to the market, with the result Monopolistic competition increases and profit of the firms reduces. 

Characteristics of monopolistic competition

1.Existence of large number of firms:- In Monopolistic competition there are many small firms in the market,  No one dominates  the market. Which means all firms run the market together. 

2.Product differentiation:- There are products produced by the firms that are similar but not Identical to their competitors. 

3.Easy of entry and exit :- There is no barrier in the monopolistic competition, Hence  firms can easily enter and exit from the market. 

4.Limited Market power :- As firms have some market power, it is limited by the existence of close substitutes produced by their  competitors. 

What is Monopoly in economics? Characteristics and types.