Monopolistic competition is the most common as well as the most realistic type of market; it has several producers and customers. In the following paragraphs, a brief yet comprehensive elaboration of monopolistic competition, essential features, and some of its important examples have been discussed.
What is Monopolistic Competition?
- Classical and neo-classical economists propagated several market models, which were based upon the two most important dimensions of the market, namely, supply and demand. All market models and market types are classified as per the demand and supply behavior.
- A monopolistic competition is the one, which has several producers and almost countless consumers. The products that are sold in the monopolistic competition are non homogeneous and differentiated in features, but the same in actual purpose. That is, there is a difference in what is known as external features, such as branding of commodity or features such as packaging.
- The actual commodity or the purpose of the commodity remains the same.
- There are two characteristics of monopolistic competition, which are exceptionally important. These include - independent decision-making and market power.
- There are no restrictions within one market in any manner, and the decision to buy or sell a product is independent and not influenced by any factor, which makes price fixation and decision-making highly independent and fair. In economics, this form of market is the earliest form and has a universal existence.
- Products or services that have been around for several centuries together tend to have a monopolistic competition.
- The reason for such a phenomenon is simple, goods such as clothing have been around for centuries together, have an everlasting demand, and are needed by every consumer as means of proper living.
- Hence, there are more producers, and though not congruent, the products are similar and dissimilar at the same time.
Monopolistic Competition Examples
Here are some of the common examples of monopolistic competition:
- The first one is of course the example of clothing. Even if we take any specific item of clothing, such as a simple shirt, then we will see that there are several producers and almost the entire world population as consumers. The goods produced, though not congruent, tend to have similarities in them.
- Among all the examples of monopolistic competition, this one is also universally applicable. Simply put, all the restaurants that serve burgers, or for that matter, any kind of food. There is similarity but no congruence.
- Another prominent and classic example, is stationery manufacturers. They produce the same thing, but there is no congruence.
- A very nice example for monopolistic competition is farmers. Farmers produce crops for the entire world population, but again, they have different characteristics by virtue of things like size and quality.
On the whole, if you take a look at the goods and services that are required for our survival, all are classic monopolistic completion examples. As mentioned above, the reason is simple, their production is needed and almost the entire world population uses these goods. Such goods and services have been around for several centuries. In fact, as a writer and reader, we too are currently a part of a certain monopolistic competition.