Question

Name at least 3 different ways firms in a monopolistically competitive market differentiate their products.

Answer 1

In monopolistic competition there are large number of firms and large number of buyers but each firm sells slightly differentiated products . So each firm enjoys slight pricing power in the market . The different methods by which firms in a monopolistically competitive market differentiate their products are as follows :

a) Marketting : Different strategies of marketting are followed by different firms to create an unique impression of their product among the consumers . The primary motive is to make their product more popular than its close substitutes

b) Brand name : Legally defending brand name , brand management , unique brand naming etc are other strategies for product differentiation .

c) Advertisements : This is the most important strategy followed . It is a kind of audio visual impact created in the minds of consumers which makes a product differentiated and unique from its other counterparts .