The Monopolistic Competition Of The Shampoo Market Economics Essay
The demand curve shows the relationship between price and quantity demanded and is one of the most basic and important tools for analyzing consumer’s side of the market.
In price competition, the firm’s try to capture the market by lowering the price since lower price will increase demand. Hence firms try to beat each other in prices. Consumers usually shift to the lowest priced brand hence price competitors will usually have prices very near to each other.
Non - Price Competition
In Non –Price Competition firms try to increase sales and market share by competing with rivals in areas like branding and advertising.
The firm builds loyalty towards the brand by emphasizing product features, service, quality etc. The firm make sure that the consumer must be able to distinguish brand through unique product features and perceive the differences in brands and view them as desirable .Another form of non-price competition is patents through which the firm makes it difficult for competitors to emulate the differences between firms and there product. The firm tries to eliminate its price difference with its competitors through non-price competition, where by it off-sets the price difference by the perceived benefits of its product.
Demand Curve for two different brands of the same product
The above picture shows the demand curve of two competing firms where one firm’s demand curve is shifted out to the right by stressing distinctive attributes, hence consumers perceive and desire particular attributes thereby having a greater demand for one firms product at the same prices.
Example which differentiate Price and Non- Price Competition
For instance, two restaurants selling the same kind of cuisine and located right next to each other will have very similar or may be exactly same prices on their Menu Cards. Hence, these restaurants are engaging in price competition. Since...