Similarities & Differences of Perfect Competition and Monopolistic Competition

Perfect competition describes a commercialize structure in which thither is no single firm powerful or large overflowing to influence the price of the convergence. In monopolistic competition, numerous sellers differentiated products that atomic number 18 similar but not perfect substitutes for for each one other. There are some similarities that exist between these two market structures. Firstly, in twain market structures, the number of firms is huge. This is especially true for perfect competition, where the number of firms in the industry is numerous.Secondly, in both perfect competition and monopolistic competition, on that point are no barriers to entry. Firms are free to enter and leave the market as they see fit. Besides that, firms also put up to compete with each other. However, there are more dissimilarities than similarities between these two. The first conflict is the product offered. In perfect competition, the products offered are identical to those of othe r firms. Products are commonly perfect substitutes to each other. In monopolistic competition, companies use product distinction to set their product apart from their competition.Some differentiation strategies include daub names, design, and advertising. A good example to demonstrate product differentiation is the smartphone market. Samsung, Apple, Sony, and HTC parent smartphones that are similar to each other in terms of functionality and quality. However, there are some small differences in features, pricing, and design that will be the deciding factor for customers when they make their purchasing decision. Secondly, there is a difference in the pricing of the products.In perfect competition, firms are numerous and small, ensuring that no one firm has control over pricing. Thus, prices are influenced by forces such as supply and demand. In contrast, in monopolistic competition firms have some level of control over pricing due to product differentiation. Since products are n ot perfect substitutes for each other, it depends on the customer to answer to purchase the product at the selling price or not. For example, a t-shirt from Ralph Lauren is quite a bit more expensive than a t-shirt from GAP but there are still a lot of customers who choose to buy it.