PRICE AND NON PRICE IN MONOPOLISTIC COMPETITION and ELASTICITY

MONOPOLISTIC COMPETITION

Monopolistic competition is the market construction in which there is acute competition, but neither perfect nor pure, among big figure manufacturer or provider. Monopolistic competition is the mixture of perfect competition and a certain grade of monopoly. Monopolistic competition lies between two utmost points ‘ perfect competition and monopoly.

Features of monopolistic competition:

big no of marketer

Merchandise distinction: it is the distinguish characteristic of monopolistic competition, that merchandise of each marketer is branded and identified.

A house has limited grade of control over the market as comparatively little per centum of entire market is shared by the single house.

big figure of purchasers

there is free entry of houses

two dimensional competition

monetary value competition

non- monetary value competition

negative inclining demand curve: houses demand curve ( or AR curve ) slopes downward to compensate

Monetary value competition:

Price competition occurs when houses compete by selling indistinguishable or similar merchandise. Seller compete each other on the footing of take downing the monetary value. Price competition happens chiefly in three types of market monopolistic, duopoly & A ; oligopoly. The other two types of market does non vie with monetary value because in monopoly the house is equal to industry hence it decides the monetary value of merchandise where as in perfect competition the monetary value is decided by the market and an person can non impact the monetary value of the merchandise.

Price snap of demand in different market with regard to market

Monopolistic market: the demand snap in monopolistic competition is extremely elastic in long tally. Because a little alteration in monetary value may alter the demand of merchandise in long tally.

Oligopoly: there are merely few Sellerss in the market which does non impact the market. Therefore the snap of demand is comparative elastic in this type of market.

Duopoly: there are merely two Sellerss in the market which does non impact much of demand therefore the demand is comparative elastic.

CROSS PRICE ELASTICITY OF Demand:

Cross monetary value snap step the reactivity in the measure demanded of one good to alter in the monetary value of another good.

Substitute has positive cross monetary value snap. It exist in monopoly, duopoly and oligopoly as the merchandise are close replacement to each other in the market and there is little alteration in the monetary value of the merchandise will increase the monetary value for another merchandise.

NON PRICE COMPETITION: non-price competition depends on doing a merchandise different from those of rivals and by giving it typical qualities that are valued by the mark HE market. These might include stigmatization, styling, particular characteristics or higher degrees of client service. Such factors can let a premium monetary value to be charged while still offering mark clients Competitive value-for-money.the houses are engage in non monetary value competition, the most outstanding signifier being advertisement.

The market which is affected by non monetary value factors is monopolistic competition and oligopoly. This happens because most houses are engaged in non monetary value competition in malice of the extra cost involved, because non monetary value factors normally more profitable than selling for a lower monetary value and avoid the hazard of a monetary value war.

NON PRICE FACTOR AFFECTING Demand

Income of the consumer

Monetary value of related goods

Change in gustatory sensation of consumer

The outlook of purchaser may alter

Change in the figure of purchaser.

NON PRICE FACTOR AFFECTING SUPPLY

Change in the input cost

Change in the engineering

Change in outlook of consumer

Change in the figure of marketer.

NON PRICE COMPETITION AND ITS EXISTANCE

PERFECT COMPETITION: all the merchandises are homogeneous in nature & A ; there is no point of non-price competition as it will non do a difference.

Monopoly: there is merely one manufacturer in monopolistic competition therefore the construct of non-price competition does non use.

In Monopolistic competition & A ; oligopoly non-price competition is applicable.

Merchandise distinction: a state of affairs where a manufacturer or house attempts to win over the market or increase its market portion by adding certain characteristics to the merchandise so that it becomes different signifier the other merchandises.

Features of merchandise distinction.

Technical standards-this refer to the facet s to how progress is the merchandise in footings of the current province of engineering. For illustration if you ‘re buying Personal computer so this point would play a really critical function in the consideration.

Quality standards- this refers to the quality of natural stuff used in the merchandise whether it be related to the fabrication r the piecing if the merchandise, as this straight effects the lastingness if the merchandise and therefore its utility and life. Therefore the quality of the merchandise plays a really of import function in non-price competition.

Design standards-it refers to the overall construction of the merchandise that is provided in the market by a client. This can play a critical function in pulling the clients. As the merchandise provided has to be aesthetically good. Thus the manufacturers can seek and do a better design criterion of their merchandise.

Service standards-this point by and large refers to the after services given to the clients after the purchase has been made them and therefore if the after gross revenues provided to a client is good by any company so the degree of satisfaction besides will be high.

Advantages of non-price competition

The quality of the merchandise is in focal point which helps companies to go alone and diffentiate from other rival companies.

The design and separating characteristics of goods and services offered in the market place matches the demand and demands of the people in that country.

The location of distribution for targeted clients is given importance. Goods range purchasers fiting their ain convenience and demands.

Offers invention like online shopping. Good for people that merely halt during repasts and kip

Sellers think “ out of the box ” in order to pull clients to be interested in what they are offering alternatively of their rival.

Types of merchandise distinction:

Vertical merchandise differentiation- this can be defined as “ where a merchandise differs from the merchandise that its rival house produces in footings of quality. ”

Horizontal merchandise differentiation- this can be defined as “ when a merchandise differs from the challenger ‘s merchandises, although the quality of the merchandise seems to be of the similar nature.

Guided By: RUPA KORDE Submitted By: Pankaj Kumar Yadav