Under Monopolistic competition the cross elasticity of demand for the ...
The cross elasticity of demand for the product of a monopolist with respect to a fall in the price of the other products in the economy is very low or zero.
In monopolistic competition the cross elasticity of demand for the product of a single firm with respect to a change in the price of other products made in the monopolistic ‘group’ is very high.
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Under Monopolistic competition the cross elasticity of demand for the ...
Explanation:
Monopolistic competition is a market structure where there are many firms selling differentiated products that are close substitutes for each other. Under this market structure, each firm has a certain degree of market power, but they face competition from other firms in the market.
Cross elasticity of demand measures the responsiveness of the quantity demanded of a particular product to a change in the price of another product. When the cross elasticity of demand is zero, it means that the products are not related to each other, and a change in the price of one product does not affect the quantity demanded of the other product.
Under monopolistic competition, the products of different firms are differentiated, and consumers perceive them as not perfect substitutes for each other. As a result, the cross elasticity of demand for the product of a single firm is likely to be zero. This means that a change in the price of a product of one firm is unlikely to have a significant effect on the demand for the products of other firms in the market.
In addition, the degree of product differentiation and the market power of each firm affect the cross elasticity of demand. If the products of different firms are highly differentiated, the cross elasticity of demand will be lower, as consumers will perceive them as distinct products with different qualities and features. Moreover, if each firm has a significant market power, the cross elasticity of demand will be lower, as consumers will have fewer alternative options to switch to if the price of one product increases.
In conclusion, under monopolistic competition, the cross elasticity of demand for the product of a single firm is likely to be zero, as the products of different firms are perceived as not perfect substitutes for each other.
Under Monopolistic competition the cross elasticity of demand for the ...
For a single firm it is negligible that is 0 and for industry it is elastic
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