Comparing Perfectly competitive model with the monopolistic model!

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    Market is a place where buyers & sellers meet for some kind of transaction. There are three different types of market structure perfect competition, monopoly and imperfect competition.

    Perfectly Competitive – In perfect competition the product sold by different firms is identical. It’s a market structure where there are various sellers who offer similar products or services which are manufactured by using a standard method and every firm has details about the market as well as price. The entry and exit to a perfectly competitive market is free and in this situation the competition is at its peak. In this case the firms are the price takers because of which they do not have their pricing policy (Mahoney, & Weyl, 2017). The individual buyers and sellers have no control over the prices due to which the sellers have to accept the price according to the demand and supply forces of the market.

    Monopolistic – This is a type of market structure where there are number of sellers selling the same kind of product but are somewhat different. Basically the service or products which are offered in this type of competition are like substitutes for one another (Kirzner, 2015). In Monopolistically competitive market the firms are the price makers due to which every firm has their own pricing policy which gives a right to the sellers to make free decisions regarding the output & price.

    Points of Comparison between them-

    In perfectly competitive, the product offered is standardized but in monopolistically competitive product differentiation is present.

    The demand and supply forces in perfectly competitive model determine the price for the complete industry which also gives a right to every form to sell the product at their price but in monopolistically competitive different firms offer different price.

    The entry and exit of firms are comparatively easy in perfectly competitive than in monopolistically competitive

    In perfectly competitive the slope of the demand curve is horizontal, which represents the perfectly elastic demand but in monopolistically competitive, the demand curve is sloping downwards which shows the relatively elastic demand.

    In perfectly competitive the average revenue and marginal revenue curve coincide but. In monopolistically competitive, average revenue is higher than the marginal revenue (Bogoviz et al, 2017).

    In reality it’s difficult to find a situation like a market which is perfectly competitive as most of the markets are monopolistically competitive.


    Kirzner, I. M. (2015). Competition and entrepreneurship. University of Chicago press.
    Bogoviz, A. V., Lobova, S. V., & Bugai, Y. A. (2017, July). Effective Import Substitution in the Agro-industrial Complex: Competition or Monopoly?. In International conference on Humans as an Object of Study by Modern Science(pp. 30-36). Springer, Cham.
    Mahoney, N., & Weyl, E. G. (2017). Imperfect competition in selection markets. Review of Economics and Statistics99(4), 637-651.

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