Why is the demand curve of a firm under monopolistic competition more elastic than under monopoly? Explain.
Why is the demand curve of a firm under monopolistic competition more elastic than under monopoly? Explain.
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Under monopoly there are no close substitutes of the goods but under monopolistic competition there are close substitutes of the goods in the market. Therefore, monopoly consumers have no choice other than buying the product whereas in the monopolistic competition, close substitution provide a variety of options for the consumer. It makes the demand under monopolistic competition more elastic than under monopoly.
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