Question

Please help,

4) Describe the demand curve facing a monopolistic competitive market and how it differs from that facing a firm in a purely competitive market.

5) How can a firm be able to sustain itself while differentiating itself from its competitors?

Answer 1

4. The demand curve of a monopolistic firm is downward sloping to the right because the firm has market power that is they are price makers not price taker.

In perfectly competitive market the demand curve of an individual firm is represented by a straight horizontal line which is parallel to the horizontal axis. Since, the price is constant.

5. When a firm is differentiating it self from its competitors then, the firm can differentiate their product in the following

Product differentiation - features, durability, reliability, performance wtc
Service differentiation - delivery, after sales wtc
Channel differentiation
Relationship differentiation
Reputation or image differentiation
Price differentiation
With price differentiation we can definitely expand our market outreach but in order to sustain in the long run we have to create a brand image that we are different for example When we hear about lowest price the first name that comes to our mind is Wal-Mart. They are able to do so through their differentiation strategy.