Monopolistic Competition

Having now studied perfect competition and Pure Monopoly, we will now step back towards the competitive end of the spectrum of market structures and examine monopolistic competition. A monopolistically competitive market is one with many small firms each selling differentiated products. The entry barriers are low, but firms do have some price making power. Since each firm's output is slightly different from each other firm's, the individual sellers will face a downward sloping demand curve, much like a monopolist. But since entry barriers are low, the chance of an individual firm earning economic profits in the long-run is small.
This lesson will introduce the characteristics of monopolistic competition and provide a detailed graphical analysis of an individual firm in a monopolistically competitive market. We will look at the market for restaurants, which shows may of the characteristics of the market structure.
In the end we will determine whether monopolistically competitive markets are efficient by examining the firm's average total cost and its marginal cost compared to the price in the long-run equilibrium.
Want to learn more about economics, or just be ready for an upcoming quiz, test or end of year exam? Jason Welker is available for tutoring, IB internal assessment and extended essay support, and other services to support economics students and teachers. Learn more here! econclassroom.com/?page_id=5870

[@whoagloria]

I can't tell you how much I appreciate you putting up this video.

[@VicSMeIsTeR]

Much obliged, Jason. It helped me a lot.
Wish you all the best,
Cheers!

[@MsAlimajeed]

Thank you so much. My economics teacher sucks. You taught me this in 20 minutes and my teacher can't explain it in two whole lessons. What's the point of college if you're self teaching everything. Sigh

[@koyoali65]

Feel you, bro.

[@gollavillihari2516]

The don't go to college. Study at home by watching these tutorials.

[@koyoali65]

@@gollavillihari2516 yup the RUclips degree has a lot of clout I heard...clown!

[@XxGeminiAngelx]

This is great!!!! Thank you for the explanation!

[@acsas5973]

Thank you for this, super detailed and easy to understand. you just earned a new sub

[@cyanabernathy3446]

extremely helpful, easier to comprehend now. Thanks :D

[@joytie7009]

this exactly my reporting in our school this a lot of helps thank you prof.for sharing

[@damithSL]

Brilliant - simply brilliant!

[@MegaDillpill]

Great video, thank you. Subscribed.

[@lakhamameir7885]

This is awesome, thank you for helping me 😙

[@AcidicLyricz]

very difficult to teach without physically being there, but this video was very clear and concise. Good Job! i got all my questions answered and i didnt have to raise my hand

[@mickel1470]

This is fantastic. Thanks so much!

[@mthlaxer]

These videos have saved me on my final!

[@ermiaikenjr7457]

I'm having my mocks in a few days lol. Thank you for the explanations

[@Thebennageserric]

Very insightful. thank you!

[@gulnaarturiyan7499]

ur lectures are simply great please keep on uploading more lectures on curves its a very sincere request please upload

[@yugendranmurugiah7705]

Thank you Sir. It was really helpful

[@nanciesta8678]

This is great,,, thanks for the explanation

[@FutureAttorney80]

This helped me out so much. Thanks.

[@shuyuzhong7692]

thank you. your video helps a lot!

[@franceszhang1999]

ur the best!! This helped me so so much. :) THANKS

[@exlc16]

Very good vids, Jason! :)

[@smshahriar997]

wonderful presentations!

[@xXAmoureXx]

THANK YOU SO MUCH!!!

[@thelstan8562]

Thank you, very helpful!!!

[@miamu7593]

Thank you very much. This is really helpful. :)

[@zippylopp7314]

you sir is beautifu! keep making videos!!

[@mrmalone9316]

your a life saver . big up you

[@harshbhushan7094]

I would just like to say- Thank you sir

[@ayahassanfadl7898]

It's more than perfect , Thank you :D

[@josiahzhou6382]

you make economics more interesting, you are great,

[@shikebhashimi6430]

thank you very much: it really helped me

[@JoshTizza1]

Very Helpful Thanks!

[@shramayen9512]

Excellent keep it up

[@jaypalsharma3011]

this helped a lot, thanks!

[@camille_vrd]

That really helped me thank you

[@sujayshegde]

Excellent teaching sir. Thank U .

[@aakashpatel2755]

Thanks! helped alot!

[@gadz8843]

thanks for the help!

[@AshokSingh-mm5lw]

Excellent

[@kip99283]

Best economics teacher

[@javeedmohammadvlogs2124]

I learned a lot from this videos

[@mandlangobeni2185]

Thank you so much !!!!!!!!!!!!!!!!!1

[@nancybutola5473]

Thank you so much !

[@emperoroffinance7496]

Love it! 🇿🇲❤️🇿🇲👌.

[@yuanchi9662]

THANK YOU!

[@stepfen1]

this video rocks!

[@chedbeckford8067]

Really helpful thanks mate

[@lokkahou5489]

thx for the help!!!

[@smiilee2001]

Thanks you saved my life

[@SaCrunch]

Thank you so much

[@musicluver95100]

thank you so much! :)

[@yaoifangirlful]

Very helpful: it was descriptive, audible, and to the point. Thanks

[@bsr1068]

Thank you very much, you made the topic so easy to understand.

[@Love-Thyself.]

thank you so much

[@gabriella5425]

thank you!!!!!

[@alyssawong8750]

great vid

[@spikirifx7060]

thats awesome

[@bobbydelorisconrad3733]

Thank you...

[@lifewithlana4604]

Great video! Thank you! :)

[@momohuntshar]

good explaining (: better than my teacher

[@directto05]

hmm, doesnt the entry of new mexican restaurant causes like increase of supply rather than decrease of demand? please i need your answer to this. thanks.

[@MsBash99]

sir is it wrong to take MR on y axis rather thn price?..what is the point in taking price when u r comparing MR to output...for eg in demnd curve v take price n qty in y n x axis respctvly..which makes sense as there exit a indirect relationship btwn the two.

[@alexandroadoe5398]

Thanks a lot

[@odanetaylor-hue5836]

what about efficiency in the short run?

[@mellyp6969]

but what if the firm continuously differentiates its products, would it avoid the flattening of its demand curve?

[@ashleytisdoll]

Thankyou !

[@apekshakumar5878]

such efficient useful amazing video

[@zephyrus057]

thank you

[@Ecoinspire2023]

sir please make a series of mathematical economics

[@nkingp23]

When it comes on the market it is the only mex restaurant, and it works on monopolistic principle, but when other restaurants start producing mexican food, the demand for our particular restaurant has fallen. This graph describes the demand for our mex.r. But on the whole food market it increases supply of food. but this isn't what this graph represents

[@NeverGetThisBOOMm]

What is the intro song?

[@daoujadd9141]

but could the initial Mexican restaurant find a way to gain profit by re-monopolizing itself? IE: innovating it's product?

[@subinraj100]

Thanks

[@lucasmatarazzo6428]

An increase in supply will then cause a decrease on demand. This is because the restaurants are substitutes to each other.

[@stan5250]

Merci Vielmal

[@sjarimartokusumo8083]

Thanks... it's really helpful

[@Havanawoodscigars]

I love you bro!!!!!!! All your help is excellent!!
One Thing,,, & I know it's awful,, please keep in mind people have trouble with videos over 20 minutes long!! I cannot download it and listen!!

[@zainfarooqzainfarooq]

why would there be no profits in the long run? :s

[@bananian]

what's accounting profits?

[@mtvrdeich]

i get everything, just not the reason why mr is below demand? and also why in perfectly competitive markets does P=MR=D, and here theres two different lines for it, when in perfect competition there was only one line

[@kenleykerr1158]

p=mr=d reason- this is because of the horizontal demand curve. im a perfect competitive market, the price is set where supply meets demand which is the equilibrium. therefore the demand curve is going to stretch across from price through the equilibrium horizontally. firms produce where price = marginal revenue

[@mateocardoner8608]

oh la!

[@hhhsks]

What do you mean when you say that there will not be 'economic' profits? Does that mean super-normal profit?

[@vedantsood3848]

Yeah, profits above and beyond normal cost. economic and supernormal profits are the same.

[@hhhsks]

Thanks :)

[@JeremyCouitinho]

whats that song in the begining

[@JeremyCouitinho]

+Juan ignacio Bontá thanks :)

[@monicarutanhira8896]

life saver.....

[@chaneljonker773]

thank you this will help me ace my test :)

[@Superballer45able]

Does the demand curve shift left or simply change slope?

[@joshbird5204]

Changes slope due to consumers having more choice of products since there are more firms in the market in the long run

[@saifkhashoggi3481]

we get it enta cash ya zurich

[@mannyelizondo6721]

Is econ a good major?

[@benzola4808]

I don't know, bro.

[@alieumboge7946]

Yes bro.

[@bananian]

so why do ppl open restaurants if no profits can be made in longrun?

[@gollavillihari2516]

Because firms have no incentive to exit or to stay. Zero economic profit does not mean zero accountant profit.so firms continue to run.

[@sarasaeed1213]

ياريت لو كان مترجم

[@komalzehra7524]

why demand curve is above then Marginal revenue??

[@mahadiarian9093]

because marginal revenue will decrease as demand decrease but at a faster rate

[@bananian]

the video said so.

[@TrangHoang-nk7we]

Can you guys explain to me in a logical way: " Why does MC=MR in perfectly competitive market mean maximizing profit?" and " Why does P > MR = MC in monopolistically competitive market?". Thank you so much!

[@janetwilkinson5404]

MR=MC in perfect competition because that is the max point at which buyers are willing to pay. Firms in the perfect competition are price takers meaning they get there price from the market if a firm charges above the market price no one will be willing to buy the product and they will just go to another firm who is selling the same product as you.

[@janetwilkinson5404]

Thus meaning there would be no reason for a firm to sell below mc=mr because consumers will buy just as much at the market price.

[@janetwilkinson5404]

And P>MC because in monopolistic competition firm charge different prices for the same product depending on what category the firms puts you under this means the firm will make more than mr=mc because the items being sold are not easily resold so the consumer doesn't have much choice but to buy it from the company. An example would be airline tickets because business people are willing to pay more because they book flights last minute and dont mind paying extra to get on the next available plane asap.

[@janetwilkinson5404]

Also it is hard to resell airline tickets because they have the persons name on them and requires id when using the ticket that is why the consumer must buy ticket directly from company and the company can charge what ever they like because there are less options

[@TrangHoang-nk7we]

thank you!!!!

[@ceciliaway9810]

Noted don't open a restaurant

[@alicelala2194]

No chill

[@jaminabegum123]

hello

[@InsulaTM]

Brad Sucks - Making me nervous

[@alicelala2194]

Od

[@arabellesss1990]

Thanks!! So helpful.