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Non-Competitive Markets — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsNon-Competitive Markets6 Marks
Question
Compare between perfect competition and monopolistic competition.
✓

Answer

S. No
Basis
Perfect Competition
Monopolistic Competition
1.
Meaning
It refers to a market situation where there are very large number of buyers and sellers dealing in a homogeneous product at a price fixed by the market.
It refers to a market situation in which there are large number of firms selling closely related but differentiated products.
 
2.
Nature of Product
The products sold are homogeneous. So, buyers are willing to pay same price for all products, which leads to uniform price in the market.
Products are differentiated on the basis of brand, size, colour, shape etc. So, a firm is in a position to influence the price.
3.
Demand Curve
Demand curve is perfectly elastic as price remains the same at all levels of output.
Demand curve slopes downwards as more output can be sold only at less price.
4.
Price
Firm is a price-taker as price is determined by the industry.
Firm is neither a price-taker nor a price-maker but has partial control over price due to product differentiation.
5.
Level of Knowledge
Buyers and sellers have perfect knowledge about market conditions.
Sellers and buyers do not have perfect knowledge due to product differentiation and selling costs incurred by the sellers.
6.
Selling Cost
No selling costs are incurred as buyers and sellers have perfect knowledge about market conditions.
Heavy selling costs are incurred on sales promotion due to lack of perfect knowledge among buyers and sellers.

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