Page 281 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes In the non-price competition, the main aim of firms is also to increase its profit and sale. This competition
works till customer demand is not fulfilled. By this, consumer gets various products in attractive terms.
But sometimes this non-price competition starts Cut-Throat Competition in mutually against firms and
the social cost of these competition gets higher. In monopolistic competition, the unusual profit gets
zero in long run due to independency of firm to get in. But sometimes the firms deny to get into the new
firm by differentiating their production.

14.10 Selling Costs

The monopolistic firms spend more of their money in advertising to sell more of its product. The
cost which goes into publicizing and advertising the product, in economics this is called selling
cost. The selling cost is main necessity in monopolistic competition. In perfect competition, all the
products of all the producers are homogenous. So they do not need advertisement of product. In
monopoly condition also, there is only one producer of product. When he starts production, then
he may be spending some money to give information about product to consumer. This money is
only an information which is spent in advertisement. When the consumer gets knowledge about the
product, the advertisement technique has no need. In monopolistic competition, it is not enough to
give information of the product only but to remember the quality of product is very necessary. So in
monopoly condition, this selling cost is not only for informative purposes, but also for manipulative
demand and sales promotion. In brief, the selling cost has all the processes which a producer uses
for manipulative demand or to increase his demand of product. So the selling costs are those
which are spent on advertisement, salesmanship, commission given to the shopkeepers, gifts and
benefits etc.
According to Chamberlin, “Selling costs are costs incurred in order to alter the position or shape of
the demand curve for the product.”
According to Meyers, “Selling cost may be defined as costs necessary to persuade a buyer to buy one
product rather than another or to buy from one seller rather than another.”

14.11 Summary

· The main characteristic of monopolistic competition is that under it different firms without changing
the costs of products compete with each other like the companies producing ‘Surf’ and ‘Ariel’. For
example, if you take a box of ‘Surf’, you will have a glass utensil similarly, with the box of ‘Ariel’
you will get the steel spoon. In this way firms, by providing different types of facilities and products
etc. to customers, attract them toward their products. This type of competition is called as non-price
competition.

14.12 Keywords

· Monopolistic: Full rightful
· Selling Cost: Cost of Selling
· Price Control: Limited control on price
· Imperfect Knowledge: Half Knowledge

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