Role of Advertising under Monopolistic Competition
Role of Advertising under Monopolistic Competition: Advertising is information about a business’s product or operation distributed by the firm, generally via media such as television, radio, newspapers, magazines, and the Internet, in order to increase or sustain sales, income, and/or profit.
Monopolistic rivalry usually use advertising to achieve two related goals: product differentiation and market domination. Product differentiation grows to the degree that a company can tell purchasers about physical differences or create the impression of such differences.
Furthermore, market domination comes with product differentiation. A corporation may charge a greater price if advertising persuades purchasers that a product is different (and better) than similar ones.
Role of Advertising under Monopolistic Competition
The example to the right shows how advertising may influence the demand faced by a monopolistically competitive corporation. This is the scenario that Manny Mustard’s House of Sandwich is in when it comes to making his renowned Deluxe Club Sandwich. Manny believes that advertising will help him increase his sales and profits.
The equilibrium situation of supply and demand gives birth to perfect competition. In perfect competition, a business sells the same undifferentiated product as other companies, and its demand is determined entirely by market equilibrium forces. As a result, marketing is unnecessary since the firm will remain and demand will endure as long as the market mandates.
Role of Advertising under Monopolistic Competition
Everyone is attempting to acquire market share under monopolistic competition, and all enterprises offer distinct goods. As a result, businesses must promote their unique selling points in order to attract more customers. For example, a fast food restaurant would market its extensive morning menu to attract consumers who want breakfast food quickly, as opposed to a company that just advertises its cheap costs. In monopolistic competition, a company must market its advantages to boost demand for its product.