Monopolistic Competition

Monopolistic competition means competition among the large groups, product differ from each other but close substitute, advertising and selling cost is high. Market in which firms can enter freely, each producing it's own brand or version of a differentiated product.
Features of Monopolistic Competition-

• Many firms.
• Freedom of entry and exit.
• Firms produce differentiated products.
• Firms have price inelastic demand; they are price makers because the good is highly differentiated
• Firms make normal profits in the long run but could make super normal profits in the short term
• Firms are productively inefficient.

For example, if you need a hair spa, there are likely several salons near JP Nagar that could satisfy your need. Each business’ goal is to attract the customer to use their business instead of their competitor’s business. There is freedom to enter or leave the market, as there are no major barriors of entry or exit.