Unit 2.11 · Market Failure: Market Power
Monopolistic Competition
AO2AO3AO4HLDiagram required
Syllabus Requirement
Many firms, product differentiation, free entry. Firms face a more elastic demand curve. Profit outcomes vary between short and long run. Less inefficiency, more variety.
Assessment Objectives
AO2Application and Analysis
AO3Synthesis and Evaluation
AO4Use of Appropriate Skills
Summary
Monopolistic competition is a type of market structure characterized by many firms competing with differentiated products. It is important in IB Economics because it illustrates how firms can have some market power while still facing competition, leading to different pricing and output decisions compared to perfect competition and monopoly.