Please I need help with this Question Thanks Explain how Mon

Please I need help with this Question, Thanks.

Explain how Monopolistically Competitive Firms develop A.) Market Power and B.) Firm\'s Control over Price. Also, describe and explain The Shape of the Monopolistic Competitive Firm\'s Demand Curve MacB

Solution

The main feature of the monopolistic competition is the differentiated products unlike perfect competition the firms monopolistic competition sells differentiated products. In this market the firms have some degree of market power due to the product differentiation. So when the firms rises prices the chance of switching consumers to other products is relatively low. The products in this market are imperfect substitutes so the consumers cannot switch much when the price of the products rises. In the perfect competition the the situation is different there is perfectly elastic demand curve. So if the price rises the consumers will switch to other products.

The demand curve in the monopolistic competition is downward sloping this indicates that the monopolistic firms can sell more of the quantity if they reduce the prices. At higher prices the quantity demanded will be relatively low. The demand curve shows the inverse relationship between the price and quantity.

The monopolistic firms has some control over the prices because they are producing differentiated products and this allows them to increase the prices of the products without losing all the customers.