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What is meant by product differentiation in monopolistic competition?

Answer»

Product differentiation is a unique feature of monopolistic competition. Products of different firms are similar in nature but are differentiated in terms of brand name, shape, size, colour etc. For example, different brands of toothpaste vary on the basis of colour, taste, packaging etc. The essence of product differentiation is to create an image in the minds of buyer that the product sold by one seller is different from the product sold by another seller. It allows producers to determine the price policy for their goods independently.



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