monopoly means a market situation in which there is only a single seller and large no. of buyers. whereas monopolistic competition is a market situation in which there is large no. of sellers and large no. of buyers.
in monopolistic competition, close substitutes are there in the sense that products are different in terms of size, colour,packaging,brand,price etc. as in case of soap,toothpaste etc.but in monopoly, there is no close substitute of the good,if any, it will be a remote substitute like in India, Indian railways has its monopoly but its remote substitutes are present like bus and air service.
in monopolistic competition, there is aggressive advertising but in monopoly, there is no advertising at all or a very little.
in monopolistic competition,demand curve faced by the firm is more elastic because of availability of close substitutes. it means if a firm raises its price, it will loose its large market share as customers in large will shift to close substitutes present in the market.but in monopoly, the demand curve faced by the firm is less elastic because of no close substitutes. if means if the firm raises its price, demand will not fall in a large quantity as it is only one in the market.
· 1 decade ago