Answer to Question #323785 in Microeconomics for rubaiya

Question

a. Name a product that has a price that adjusted very frequently in the last year. Explain why.                 

b. What is the difference between monopolistic competition and oligopoly? Explain with local   examples. 

Answer 1

a. Oil is a valid example. This is because its supply and demand are inelastic. There is a high dependency on petroleum products in the transport and manufacturing sector. For instance in response to Covid 19 versus the ongoing war. These factors probe inflationary threats to growth. Fluctuations in prices of oil raise inflation and give a general rate of prices across the economy.

b. Monopolistic competition is when a single firm exists as a producer. They can change the prices of the goods. It consists of differentiated products with the freedom of entry and exit into the market. Their products are differentiated either by marketing or branding. Examples include consumer electronics and clothing

Oligopoly refers to a market structure consisting of a small number of firms that jointly are influential over a given market. They possess market power, and no firm within the group can undermine the market share. Thus moderation of prices coexists due to competition amongst the firms. Examples are airlines, oil, gas, and automobiles.