Distinguish between:

Perfect competition and Monopolistic competition.

Perfect Competition

Monopolistic Competition

1

A very large number of sellers. No seller can influence the price and supply.

1.

Number of sellers is fairly large but each seller has some control over price and supply.

2

Products are homogeneous.

2.

Products are differentiated.

3

No selling costs for promoting sales.

3.

Significant selling costs through various forms of advertisements.

4.

Firm is only pric^{e taker, i.e., firm} cannot influence price.

4.

Firm has limited control over price through product differentiation.

5.

Demand (or AR) curve of a firm is straight line parallel to X-axis.

5.

Demand (or AR) curve of a firm is a downward sloping curve from left to the right.

6.

Buyers and sellers are presumed to have perfect knowledge of market conditions.

6.

Lack of perfect knowledge since product differentiation influences taste and preferences.

7.

There is perfect competition among sellers.

7.

Both competitive and monopoly elements are present.