Benefits Or Advantages Of Monopolistic Competition
The main advantages of monopolistic competition can be described as follows:
1. Easy To Enter And Exit
The main benefit of monopolistic competition market structure is that new firm can enter the market without any barriers. Traders can exit or leave the market at any time without any restrictions and obstacles.
2. Product Differentiation
In this type of market, products are differentiated or varieties of products are available. So, it provides selection facility for buyers.
3. Advertising
In monopolistic market, products are identical or homogeneous like in perfect competition. So, firms advertise their products through different media which helps to provide information about quality, price and using methods to the customers.
4. More Profit
Companies are free to set price of their products. So, they can set higher price of goods and services which generates more profit.
Also Read:
Also Read:
5. Better Quality
Because of the ability to fix price and chance of more revenue, companies try to improve product quality. It helps to retain existing customers and attract potential customers.
3. No Economies Of Scale
6. Innovation
Monopolistic competition encourages innovation. Companies regularly perform research and development activities to add new features to their products which helps to increase quality and value.
Drawbacks Or Disadvantages Of Monopolistic Competition
The main disadvantages of monopolistic competition can be described as follows:
1. Higher Price
In this type of market, product price is higher than perfect competition because of the following reasons:
* Firm can set price itself
* Firm invests huge amount of money in advertisement and other promotional activities
* Wastage of resources such as excess packaging, marketing etc.
So, customers have to pay more money in monopolistic market.
2. Misleading Customers
Various promotional activities are conducted to provide information about the products and services. Sometimes wrong information can mislead the customers.
Because of larger number of traders, all companies cannot enjoy the benefit of economies of scale.
Pros And Cons Of Monopolistic Competition In Short
Pros:
- Customers get selection facility because of different alternatives
- Companies can easily enter or exit the market because of less barriers
- Customers get detail information about the products or services
- It promotes innovation
- Because of competition customer get quality products at lower price
Cons:
- Price of the product may become high because of high marketing budget
- There is no economies of scale
- False information about products may mislead customers
