Understanding Monopolistic Competition and Oligopoly
Learn about the characteristics of monopolistic competition and oligopoly in the marketplace. Discover terms like Monopolistic Competition, Differentiation, Nonprice Competition, and Oligopoly. Understand how monopolistic competition involves similar but not identical products, while oligopoly is dominated by a few large firms. Explore the concepts of product differentiation and nonprice competition to attract customers in these market structures.
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Monopolistic Competition and Oligopoly In this lesson, students will be able to identify characteristics of monopolistic competition and oligopoly. Students will be able to identify and/or define the following terms: Monopolistic Competition Differentiation Nonprice Competition Oligopoly
Do Now What is a monopoly and why is it bad for consumers?
The market for jeans is an example of monopolistic competition.
Monopolistic Competition Monopolistic competition is a market structure in which many companies sell similar but not identical products. Monopolistically competitive firms sell products that are similar enough to be substituted. Levi jeans can easily be substituted for Lee jeans.
One of these brands could easily be substituted for the other brand.
Differentiation Differentiation occurs when a good is produced slightly differently from another good. In monopolistic competition, differentiation is critical. Products are similar but not identical. The not identical part allows for a slightly higher price but just slightly higher.
Nonprice Competition Nonprice competition is using something other than price to attract customers. Convenience is an example Style, location, and service are examples of nonprice competition. Nonprice competition can help businesses attract customers.
Nonprice competition is using something other than price to attract customers. Convenience is an example.
Oligopoly An oligopoly is a market in which a few large firms dominate a market. Usually, the four largest firms produce at least 70 to 80 percent of the market s output. The government closely monitors oligolies.
Some markets are oligopolies. An oligopoly is a market dominated by a few sellers.
Barriers to entry can lead to oligopolies. High start-up costs can lead to oligopolies.
The government closely monitors oligopolies because a market dominated by a few sellers could act like a monopoly!
The Four Different Market Structures Perfect Competition Monopolistic Competition Oligopoly Monopoly
It is important to remember that competition benefits consumers.
Questions for Reflection: List two conditions of monopolistic competition. How do suppliers use differentiation to increase their sales? What is the difference between differentiation and nonprice competition? List two conditions of an oligopoly. Why does the government closely monitor oligopolies?
