The main characteristics of monopolistically competitive markets
Monopolistic competition describes a market where many firms sell similar but slightly different products. No significant barriers stop new firms from entering, so each firm has only limited control over its price.
Real World
The UK restaurant industry — with thousands of independent eateries serving similar but distinct cuisine — exemplifies monopolistic competition: easy entry, differentiated menus, and no single firm controlling the market.
Exam Focus
Always link low barriers to entry to the long-run normal profit outcome; examiners reward explicit cause-and-effect chains.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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