The lower prices will then imply that a firm has to come up with other non-price competing strategies such as product differentiation, advertising, monopolistic competition essay, promotions and so on, monopolistic competition essay. This company operates in an oligopoly because there are a few companies in the soft drinks market, which indicates that there are lots of barriers for a new company to enter the market. Monopolistic Competition essay. In order to increase the net income. Unlike the monopolistic market in South African chocolate industry with 2 dominant players, Cadbury and Nestle, in a monopoly market situation entry is restricted and there are no close substitutes for that particular product and the later exists in some cases like where; 1. Monopolistic Competition Monopolistic competition essay 28, Economics.
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The market for this company is fast food specifically, burgers. Each company advertises virtually the same product, but certain companies produce a product that is slightly better than the products produced by other companies, so these companies have a slight advantage, monopolistic competition essay. The presence of a large number of companies indicates that there are few barriers for a new company to enter monopolistic competition essay market. An example of a firm operating in an oligopoly is Pepsi Co. This company operates in an oligopoly because there are a few companies in the soft drinks market, which indicates that there are lots of barriers for a new company to enter the market. When we think of the soft drink industry, two of the names that immediately come to mind are the Coca-Cola Co.
and Pepsi Co, monopolistic competition essay. These companies are successful and have a world-wide consumer base due to their presence in the world-wide soft drink marketwhich makes it hard for newer companies to enter the industry and succeed. An example of a company that operates in a monopoly is ESPN, the sports news company. When looking for sports news, the channel everyone turns to is ESPN. They are the only company monopolistic competition essay has a world-wide reputation for being the premier channel for news on the sports world. Other news channels have time segments allotted for monopolistic competition essay relevant sports headlines, but ESPN has airtight control in this area since sports is their only focus, and they report on all different kinds of sport basketball, football, baseball, tennis, etc, monopolistic competition essay.
Thus, there is a sort of absolute barrier to new companies that wish to enter the market of sports news. Free Essays Topics Essay Checker Hire Writer Login. Free essay samples Competition Monopolistic competition. Monopolistic competition 7 July Hire verified writer. Monopolistic competition Essay Example. Related Essays. Monopolistic Competitive Market Monopolistic and Oligopoly Market Structures Competition Benefits Competition and People Competition Between Genders Analyzing Competition Conquering the Competition Bitter Competition Is Competition Good?
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Moreover, the price should be greater than or equal to the average cost. These conditions must be fulfilled in order to ensure that the firm is earning maximum possible returns. Competition from other firms or brand names producing similar products will deter firms from resorting to indiscriminate increases in price. They will have to monitor the pricing strategies of their competitors to establish their own optimal price. The customer is perhaps the most important decisive factor here. Order custom essay Monopolistic Competition essay with free plagiarism report. Since the consumer has a variety of choices, he will be indifferent to any of the several brands. The firm must create brand loyalty amongst the consumers by offering quality at affordable prices. Advertising plays a major part here as customers are induced into purchasing products through these advertising and marketing campaigns.
If the customer senses that he can get a similar or better product of another brand, for a cheaper price, he will shift to that brand. Oligopoly is a market structure in which there are a few companies selling a particular product so that there is intense competition amongst them. The price determination under oligopoly is similar to that of monopolistic competition. Nonetheless, the most significant factor at play here is competition owing to the existence of only a few companies in the market. Even the slightest change in pricing strategies of one company will have an impact on the pricing policy of others. Walmart operates under monopolistic competition as it faces competition from such other stores as Target, Kmart, etc. Walmart always ensures that it has the least possible prices, as compared to other discount stores and this pricing strategy has helped it to establish itself in various regions of not only the United States, but also the world.
Other discounters are forced to be more price competitive as they seek to retain their market share, even beating Wal-Mart on selected items, and 3. Wal-Mart has higher prices when it doesn't face other discounters in a highly competitive situation. In order to attract the most number of customers, it ensures that its prices are lower than those of its competitors. On the other hand, it fixes a higher price for its products when not faced with excessive competition. It sets prices bearing in mind the degree of competition and the needs of the customer more than the costs. References Discount Store News. Studies reveal dual pricing strategies - comparison of Wal-Mart Stores Inc.
prices with other discount stores in six U. Venkatesh, R. Optimal Bundling and Pricing under a Monopoly: Contrasting Complements and Substitutes from Independently Valued Products. Journal of Business, 76 2 , This essay was written by a fellow student. You can use it as an example when writing your own essay or use it as a source, but you need cite it. Explore how the human body functions as one unit in harmony in order to life. Monopolistic Competition essay. Free Essays - PhDessay. com, May 24, Accessed January 7, com , May Every one set up the concern for the interest net incomes. Firms sell goods and services through a assortment of direct and indirect channels.
Below is the diagram of complementary goods: Perfect complement Indifference curve for perfect complements A perfect complement is a good that has to be consumed with another good. The indifference curve of a perfect complement will exhibit a right angle, as illustrated by the figure at the right. Few goods in the real world will behave as perfect complements. One example is a left shoe and a right; shoes are naturally sold in pairs, and the ratio between sales of left and right shoes will never shift noticeably from — even if, for example, someone is missing a leg and buys just one shoe. In marketing, complementary goods give additional market power to the company.
It allows vendor lock-in as it increases the switching cost. However, complementary goods have got minimal or no effect at all on chocolate companies such as Cadbury and Nestle. Question 2. The usefulness of any model is related to the purpose of analysis. One of the main concerns of Central Banks around the world is to understand the dynamics of the inflation process and to forecast as accurately as possible the future path of this variable. With respect to the former objective, New Keynesian Dynamic Stochastic General Equilibrium DSGE models have recently been the more popular choice. These provide a more structuralist approach to the inflation process. A structural model is synonymous with a model which is made up of equations that are derived from or at least consistent with modern macroeconomic economic theory, i.
Accusations from COSATU and SACP of narrowed scope of policy changes effects indicate that there was a perception that there was no structural interpretation to inflation targeting. It would appear that when it comes to forecasting, on the whole DSGE models appear to do better in explaining the longer-term evolution of variables while atheoretical time-series approaches have been shown to forecast better in the short-term. The reasons for using the structural frame of the New. Keynesian Phillips Curves NKPC within models are twofold: i to afford a role for inflation expectations in forecasting models ii There is some evidence that the present-value form of the NKPC equation, in conjunction with forecasts for future marginal costs, is somewhat successful at forecasting inflation.
Because interest rates and the inflation rate tend to be inversely related, the likely moves of the central bank to raise or lower interest rates become more transparent under the policy of inflation targeting. This usually but not always has the effect over time of cooling the economy and bringing down inflation. This usually again, not always has the effect over time of accelerating the economy and raising inflation. Under the policy, investors know what the central bank considers the target inflation rate to be and therefore may more easily factor in likely interest rate changes in their investment choices. This is viewed by inflation targeters as leading to increased economic stability.
As an example, since South Africa increased interest rates by five percentage points to track a rise in inflation based on CPIX even though the rise in CPIX was due to the supply shocks of worldwide fuel and food price increases. Following the global financial crisis of — the prime lending rate was decreased to levels, but it still remained high at 7. The reduction also came too late for the housing market and motor manufacturer and retail industry all of which suffered heavy losses due to the pressure on consumer borrowing. This in turn led to job losses in these sectors. According to a speech made by the then Governor of the Reserve Bank of South Africa, Mr T T Mboweni on the 2nd of September at a Management dinner advantages of inflation targeting outweigh the disadvantages.
Although Mr Mboweni did mention that inflation targeting, if pursued at any costs, ran the risk of inefficient output stabilisation. Significant supply shocks to the economy such as sharp oil price movements, can require very large monetary-policy adjustments to bring inflation back inside the target range within the stated time horizon. For such exceptional events, some discretion and patience in re-achieving the target range should therefore be allowed for. Firstly, transparency — the concept is easily understandable, with the ultimate policy objective translated into an explicit target value.
Secondly, inflation targeting provides enhanced clarity about the objective of monetary policy, which is conducive to sound planning in both private and public sectors. Thirdly, the framework provides for improved accountability of the Reserve Bank. It eliminates the need to rely on a stable relationship between the money stock and inflation, which has become increasingly difficult to identify; inflation targeting enhances economic policy co-ordination with government and the central bank both publicly committed to the same inflation target. And lastly inflation targeting provides an anchor for inflation expectations and price and wage setting, thus reducing the friction which arises from widely divergent inflation expectations.
Carbaugh, Robert Contemporary Economics: An Applications Approach. Cengage Learning. Mankiw, Gregory Principle of Economics. Steven M. Sheffrin Economics: Principles in action. Upper Saddle River, New Jersey Pearson Prentice Hall. MANCOSA Economics Module, I'm Amanda. Would you like to get a custom essay? How about receiving a customized one? Press enter to begin your search. Monopolistic Competition August 28, Economics. No Comments. order now. Related essay samples: Elasticity of Demand and Its Factors for Mb Mba The Theory of Monopolistic competition Plc Cadbury Features Characteristics Of Perfect Competition Economics Essay? Classification of Price Elasticity of Demand Questions regarding competitive business Oligopoly And Monopolistic Competition Economics Essay The types of competition and competition policy Market Power Q1.
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