Restaurants are a monopolistically competitive sector; in most areas there are many firms, each is different, and entry and exit are very easy. Each restaurant has many close substitutes—these may include other restaurants , fast-food outlets, and the deli and frozen-food sections at local supermarkets.
Economists identify four types of market structures: (1) perfect competition , (2) pure monopoly , (3) monopolistic competition , and (4) oligopoly .
Clothing : The clothing industry is monopolistically competitive because firms have differentiated products and market power. Monopolistic competition is different from a monopoly. A monopoly exists when a person or entity is the exclusive supplier of a good or service in a market.
Pizza is in the monopolistic competition range.
When the competition between purchaser and seller is localised and limited at a specific market then it is called Local Market . In this market mostly perishable goods are purchased and sold. For example: Sale of vegetable, fish, eggs, milk etc.
While gas stations are not truly an example of perfect competition , they come closer than any other kind of firm that most of us buy from in real life.
Example 1 – Fast Food Company The Fast Food companies like the McDonald and Burger King who sells the burger in the market are the most common type of example of monopolistic competition . The two companies mentioned above sell an almost similar type of products but are not the substitute of each other.
Examples of monopolistic competition The restaurant business. Hotels and pubs. General specialist retailing. Consumer services, such as hairdressing.
Perfect competition is an ideal type of market structure where all producers and consumers have full and symmetric information, no transaction costs, where there are a large number of producers and consumers competing with one another. Perfect competition is theoretically the opposite of a monopolistic market .
Types of Markets Physical Markets – Physical market is a set up where buyers can physically meet the sellers and purchase the desired merchandise from them in exchange of money. Non Physical Markets /Virtual markets – In such markets , buyers purchase goods and services through internet.
Summary. There are four basic types of market structures: perfect competition , imperfect competition , oligopoly, and monopoly. Perfect competition describes a market structure, where a large number of small firms compete against each other with homogenous products.
Monopolistic competition is a market structure defined by four main characteristics: large numbers of buyers and sellers; perfect information; low entry and exit barriers; similar but differentiated goods.
Zara , Topman, and Gap are all well-known and respected brand names. However if prices were to exceed what people are willing to pay, then the consumers would alter their preferences and buy from another brand. Therefore we are dealing with a monopolistic competition.
Monopolistically competitive industries are those that contain more than a few firms, each of which offers a similar but not identical product. The fast food market is quite competitive , and yet each firm has a monopoly in its own product. Some customers have a preference for McDonald’s over Burger King.