Question

Compare the demand curve under monopolistic competition and monopoly.

Distinguish between monopoly and monopolistic competition.

Answer 1

Sr. No.	Basis	Monopoly	Monopolistic Competition
1.	Shape of Demand Curve	In a monopoly market, the demand curve is downward-sloping and less elastic.	In a monopolistic competition market, the demand curve is downward-sloping and more elastic.
2.	Reason for Elasticity	In a monopoly market, the demand is less elastic because there are no close substitutes and consumers must buy from the monopolist.	In a monopolistic competition market, the demand is more elastic because there are many close substitutes and consumers can switch brands.
3.	Nature of Control over Price	In a monopoly market, the monopolist has greater control over price and acts as a price-maker.	In a monopolistic competition market, each firm has only limited control over price due to competition from similar products.
4.	Slope	In a monopoly market, the demand curve is steeper, reflecting inelastic demand.	In a monopolistic competition market, the demand curve is flatter, reflecting more elastic demand.
5.	Consumer Choice	In a monopoly market, consumers have limited choice because there is only one seller.	In a monopolistic competition market, consumers have a wider choice because many firms sell differentiated products.
6.	Example:	Examples of monopolies include Indian Railways and local electricity boards.	Examples of monopolistic competition include toothpaste brands, restaurants, and clothing companies.