Monopolistic Competition

Business economics encompasses issues such as the theory of scarcity, commodity factors, allocation, and consumption. We all also know what monopolistic competition is, which is characterised by numerous firms or companies proposing almost identical but not entirely similar, substitute commodities or services. There is also a monopolistic competition example provided here, along with features of monopolistic competition

In its wider understanding, Business economics pertains to the observation of the elements and purposes of a specific market or economy, such as the supply, demand, and the consequence of the theory of scarcity. In Business economics, components of generation or production, diffusion procedures, and consumption are crucial study subjects. Business economics concentrates on the components and aspects of business undertakings and how they associate with this economy entirely.

Business Economics

The arena of business economics works with financial doctrines, policies, legal business practices, permitting important capital, revenue production, productivity, and all-around administration policies. Business economics furthermore encompasses the analysis of exterior economic components and their consequences on business judgments, for instance, modifications in industry ordinance or abrupt modifications in raw material costs.

Types of Business Economics

Mainly two types of Business Economics : they are Managerial Economics and Business Economics for the non-profit organisation sector.

Managerial Economics – Managerial economics is an area of research in business economics that concentrates on the microeconomic elements that affect a company’s judgement making procedure. 

Business Economics operate to impede trash and maximise the all-around utility of their accessible reserves to conserve their viability as industries. The non-profit and profit-making institutions must retain the essential capital to proceed with their functioning in the economy and this compels them to utilise several of the identical principles.

What is Monopolistic Competition 

Monopolistic competition is a market configuration where there are numerous corporations in the market, but every corporation proposes a scarcely unique commodity. It is distinguished by meagre entry and exit boundaries and intense rivalry. With meagre barriers to entry, fresh competitors retain arriving in the market, deterring incumbents from attaining incredible revenues. An instance of monopolistic competition in the market is hairdressing. Several corporations are delivering little differentiated assistance, and the rivalry is equally intense.

Identical to a monopoly, a corporation can give rise to incredible revenues in the brief term. But at the same time, market entrance and exit are simple, with limited obstacles to the entrance, it is very much similar to a perfect competition market. Simply put, monopolistic competition is a configuration of the market where numerous competitors peddle narrowly varied commodities. In turn, they strive on components other than costs, such as integrity and dependability.

Monopolistic Competition examples

Cloth market – Several apparel manufacturers distinguish themselves for their technique, style, but also retain some market strength. At a similar time, cloth manufacturing is moderately reasonable, with meagre obstacles to entry and exit of new firms.

Features of Monopolistic Competition

  • The most important feature of a monopolistic competition market is that there are numerous buyers and sellers which implies customers have a large variety of choices that is not there in a Monopoly or oligopoly market.
  • The enterprises that function in a monopolistic competitive market sell relatively the same products but are not completely identical, which is the main purpose that expands value to their business.
  • Enterprises in a monopolistic competitive market attempt to maximise revenues or profits. In economics, this is where marginal expense parallels marginal revenue. In this way, the enterprise maintains production to the juncture where it becomes unprofitable to generate more goods. 
  • New enterprises can enter and exit the market at any time because the expense to start a new business is low and also the risk involved while leaving the market is low.
  • If a monopolistic competition can take advantage of a market rift, it can generate tremendous profits. In the example of clothing, a corporation may establish a current design that has never been discerned before.


We can learn from this article that the study of business economics assists to formulate analytical abilities, which furthermore benefits in rational allotment and crisis solving situations. Therefore, business economics pertains to the methods of microeconomics to negotiate with macroeconomic determinations. Also, we further gained the knowledge that a monopolistic competitive market is further productive than a monopoly market but insufficient and inefficient than a perfectly competitive market and this implies it is less productive in diffusion and production.