Monopolistic Competition

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Contents
Question 1.1 – Monopolistic Competitors 3
Question 1.2 Non-price competitors 5
Question 1.3 – Substitutes & Compliments 6 Perfect substitutes as in the Chocolate Industry: 7
Perfect complement 8
Question 2.1 - Structuralist model of the inflation process 9
Question 2.2 - Inflation targeting approach 9
References 9

Question 1.1 – Monopolistic Competitors
Monopolistic competition is a market situation in which there is a large number of sellers and large number of buyers whereas monopoly means a market situation in which there is only a single seller or supplier of goods and services in the entire market and large number of buyers. South Africa’s chocolate market is a monopolistic market situation since it has got more than one
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extensive financial resources or expertise is required to enter a market. (MANCOSA, Economics Study Guide, 2010)
The impact of monopolistic competition upon the chocolate industry in South Africa is that; there may be flooding of companies into the market and the firms’ individual share of the market may be drastically reduced resulting in lower profits or economic profits instead of the supernormal profits that firms so much desire in order to expand or grow. On the other hand, monopolistic competition compels firms to invest in research and development in order to increase production and operational efficiency a factor which support economic growth in the country. The quality of service within the industry will be generally increased not mentioning the lower prices that firms will have to charge on the chocolates in order to remain in business. The lower prices will then imply that a firm has to come up with other non-price competing strategies such as product differentiation, advertising, promotions and so on.

Question 1.2 Non-price competitors
Non-price competition is a marketing strategy "in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship" (McConnell-Brue, 2002, p. 43.7-43.8). The firm can also distinguish its product offering through quality of service, extensive distribution, customer focus, or any other sustainable competitive
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