Monopolistic Competition Essay

1204 words - 5 pages

Are you an extensive traveller? Do you love music? Then your answer is a MP3 Player, a device that allows you to listen to your favorite music on the go. There is nothing like putting on the head set, laying back and listening to some refreshing music when you are exhausted. This is when a MP3 player comes in handy.
MP3 players have dominated the market in a huge way and companies would be ready to pay a handsome amount for some off the basket innovation that would lead their company all the way the top. Any company producing MP3 players faces one of the tightest competitions in the market.

MONOPOLISTIC COMPETITION
In a monopolistic competitive market the product of different sellers are discerned on the basis of brands. Here the product differentiation given rise to an element of monopoly to the producer over the competing product. As such the producer of the competing brand could increase the price of the product knowingly well that the brand loyal customers are not going to leave them. This is possible as here the products have no effective substitutes. How ever since all the brands are of close substitutes to one another the seller would lose some of their customers to these competitors. In the past many companies have faced the trouble of having a bag full of customers and due to close-fitting .competitors they end up only having a few. Most entrepreneurs fell that fronting their competitors is the toughest part of running a business in a monopoly market. Thus the monopolistic competitive market is a mixture projecting out both monopoly and perfect competition.
MP3 PLAYERS AN EXAMPLE FOR MONOPOLISTIC COMPETITION
An mp3 player is a type of digital audio players that falls under the broader category of pmp devices. It is small often weighing less than announce. Being a handy device that uses flash memory for storing, mp3 players are also capable of supporting WMA, WAV, MIDI, AAC format files. Due to the entry of mp3 player the physical audio players have been vanished from the market sector. The latest mp3 player features huge storage capacity with both audio and video optioned. The presence of famous companies like Apple, Sony, Samsung, Moser Baer, SanDisk, etc. mp3 players aggravates the competition.
There is large number of independent firms in the monopolistic competition. Some companies like Apple, Sony, Philips, Transcend, iball etc. have been entering in to the market with identical product line and to the existence of large number of firms. The product would bear slight difference in style, color, display and texture. This smoothness the entry of competitive firms to the market.
The firms in monopolistically competitive industries might not earn economic profits in long runs; because economic profits attract competitors whose presence might eliminate profits here. In the long run firms in the monopolistic competition could not attain allocates efficiency because they are not operating where price equals marginal cost. Since...

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