Types of competition and marginal revenue | APⓇ Microeconomics | Khan Academy

TL;DR

Imperfect competition in economics refers to markets with differentiated products and barriers to entry, leading to unique demand curves and downward-sloping marginal revenue.

Transcript

• [Instructor] We've already had several videos where we talk about the types of markets that we might look at in economics. At one end, you might have perfect competition, let's write perfect comp, and this is where you have many firms, what they produce is not differentiated, there is no barriers to entry, and in that situation, we have looked at... Read More

Key Insights

• 💯 Perfect competition and imperfect competition are two different types of market structures in economics.
• ❓ Monopolistic competition is an example of imperfect competition where firms compete with differentiated products.
• ❓ In imperfectly competitive markets, each firm has its own unique demand curve.
• 📉 The marginal revenue curve in imperfectly competitive markets is downward sloping and steeper than the demand curve.

Questions & Answers

Q: What is the difference between perfect competition and imperfect competition?

Perfect competition involves many firms with undifferentiated products and no barriers to entry, while imperfect competition includes differentiated products and some barriers to entry.

Q: Can you provide an example of monopolistic competition?

The athletic shoe market is a good example of monopolistic competition, with brands like Nike, Adidas, and Reebok competing with differentiated products but still facing some level of competition.

Q: How does the demand curve differ in imperfect competition?

In imperfect competition, each firm has its own unique demand curve, reflecting the preferences of consumers for their specific product.

Q: Why is the marginal revenue curve steeper in imperfectly competitive markets?

The marginal revenue curve in imperfectly competitive markets slopes downward at a steeper rate because as firms increase production, they have to lower the price for all units sold.

Summary & Key Takeaways

• In economics, there are different types of markets, including perfect competition and imperfect competition.

• Imperfect competition includes monopolistic competition, where firms compete with differentiated products and some barriers to entry.

• The demand curve and marginal revenue curve in imperfectly competitive markets are downward sloping and not the same as the market price.