Tuesday, 2 July 2013

Fast-food chain are compete with each other-- MONOPOLISTIC COPETITION

Fast-food chain- Monopolistic Competition

        According to the survey released by Consumer Reports, McDonald’s Corp, Burger King, KFC and Taco Bell are the biggest US fast-food chains, but they lag smaller rivals like In-N-Out Burger and Chick-fil-A when it comes to taste.  All of these fast-food chains are going to compete with one another in order to get demand from the consumers. They are trying to differentiate themselves in terms of promotion, services, products attribution, brand names and packaging. The competition among these fast-food restaurants is known as monopolistic competition.
     Unlike perfect competition, in order to seek maximizing profit, the monopolistically competitive firms should juggle three factors:
-           Price
-          Product
-            Advertising

     More than of the survey participants said that they preferred to go to the fast food restaurant with a lower price. Therefore, there are many fast food restaurant are doing promotion. Besides, let us take an example, McDonald is doing advertising everywhere to attract customer or to inform the consumer about a product. Besides, each firm should have a product that is distinguishable in some way from those of the other products.  

     Although product differentiation and advertising will add to the firm’s cost, they also increase the demand for its products. When demand increases by more than enough to compensate for the added cost, the firm is earning profits [TR> TC, AR> ATC].

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9 comments:

  1. Anonymous9 July 2013 at 16:33

    Nice post, it makes me understand even i'm not a business student.

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  2. Unknown10 July 2013 at 06:47

    Well explained!

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  3. Unknown11 July 2013 at 03:08

    Nice article! The information provided is really useful.. It helps me a lot!

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  4. Unknown11 July 2013 at 03:45

    Good article! Can I ask a question? Is there any barriers to enter monopolistic competition???

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    Replies
    1. Unknown11 July 2013 at 05:15

      Hi,Wong Chee Voon. Sure. Unlike monopoly,there is no barrier to enter monopolistic competition.

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  5. Unknown11 July 2013 at 03:46

    Love your graph provided~

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  6. Unknown11 July 2013 at 07:22

    Interesting! A short article already sufficient for me to understand the whole main economics concept of monopolistic competition! Seems there are various types of fast food restaurants in the market f US, I'm so curious how would affect the demand of consumers ?

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  7. Unknown11 July 2013 at 07:56

    Thank you, Danny Chow. Because of there are many choices in a monopolistic competition, the customers will tend to switch brand which benefit them more. Besides, the demand of customers for a certain brand is also affected by the desire of customers. For example, if the customers want to save money, they would like to choose the one with lower price. If the customers want to consume more delicious food, they would like to buy the one with higher quality.Hope this explanation is comprehensive to you. :)

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  8. Unknown11 July 2013 at 08:02

    Wah,,nice worr!!
    Add oil ya!!;)

    ReplyDelete

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