Monopolistic competition or monopolistic competition, is the market where the majority of companies currently exist, each one produces a product that differs from the others . Therefore, the same companies have the power to determine the prices of their products, this difference in products means that when they are put on the market, they have a small relationship in prices with other products. This is where we come to see transnational corporations .
The perfect competition is one in which neither the market nor the agents can determine the price of their products. In other words, the sellers and buyers of the product are price-takers. It is a competition in which the curve is perfectly elastic, and the price of the product is born from a law of supply and demand. When we name perfect competition, we speak of an almost perfect economy .
The imperfect competition is one where companies can determine the price of a product, ie, one or more companies can influence the cost of this, either higher cost or lower cost, as they offer a differentiated product. The fewer companies in this competition, the greater the ability to determine the price. This is where you get to see individual businesses the most .
Differences between each competition
The differences are not very noticeable differences , that is, it is very easy to get confused between an imperfect competition and a monopolistic one, since it is almost impossible for there to be perfect competition. They are as follows:
Differences between imperfect competition and perfect competition
- Costs are the determining difference . In imperfect competition prices fall, while in perfect competition prices always remain.
- There are no barriers of any kind when entering products, likewise there are no problems with the entry and exit of companies, which is the opposite of what happens in imperfect competition.
- The perfect competitive market offers quality products, identical products to what the buyer or seller is looking for. While in imperfect competition these conditions are not met.
Differences between perfect competition and monopolistic competition
- In perfect competition, companies do not determine prices , nor do they influence between some companies and others. Whereas in monopolistic competition this does not happen. The perfect competition has sources of financing , the imperfect does not.
- In perfect competition, we speak of a perfect curve and perfect economy, which is why it is said that it does not apply in reality. While monopolistic competition is being applied in reality.
- In perfect competition the products are usually authentic , there are no problems or copies of one another. In monopolistic competition, products are usually differentiated or homogeneous.
Differences between imperfect competition and monopolistic competition
- In both competitions, the producer finds a demand that is not elastic at all . However, in monopolistic competition by having so many sellers, it is not fully faced with this demand.
- In terms of graphics, imperfect competition is much more vertical than monopolistic competition, this is due to its bad economics, and how much they affect some companies among others.
- In imperfect competition, market power rests with a single person or a single producer. In monopolistic competition it does not fall on just one.
- Monopolistic competition shares a characteristic with the perfect one, and that is that both have freedom in terms of entering and leaving the market.
Examples of competencies
The following examples are examples that could be in our reality , so a much more realistic approach than usual is sought:
Perfect competition
Let’s imagine a flour company, if perfect competition is applied, there are a large number of producers and buyers. The flour produced is the same as the others, so buyers do not have to choose one brand or the other.
Monopolistic competition
Let’s imagine a shoe company, companies differ according to quality, size, design and above all price, forcing the buyer to choose.
Imperfect competition
The electricity service is managed by a single company , due to lack of capital , as this is the case, imperfect market competition is being created.
