Affordable Housing in India: Policies and Challenges

Running Head: POLICIES IN HOUSING
AFFORDABLE HOUSING IN INDIA
Name
Professor
Institution
Course
Date

POLICIES IN HOUSING 2
Monopolistic competition
This is the model of a defective rivalry which is marked by numerous makers distributing
recognized items. The products are not perfect substitutes.in this kind of competition, a firm is a
price maker as it makes prices. Given that there is a coercive business, a monopolistic
competitive market will have some market power due to the differentiation of products. (Frazer,
2014).
A monopolistic competition has a demand curve that is downward sloping. The MR for a
pure monopoly is hence always not higher than the prices in the market since it can only
heighten the demand through bringing down the prices. Monopolistically competitive firms
maximize their gains or minimize their losses through the production of goods up to the point
whereby the marginal revenue will be equal to the MC in both the short run and also the long run
(Sharkey, 2012).
In the short run, a monopolistic market which is competitive will minimize its losses
through the production of the quantity that gives correspondence when marginal revenue is equal
to marginal cost. Given that average total cost is not above the market price, then there will be
some economic gains (Dimitrova & Schlee, 2013).

POLICIES IN HOUSING 3
(Dimitrova & Schlee, 2013)
(Dimitrova & Schlee, 2013)

POLICIES IN HOUSING 4
Given that the ATC is not below the market price, the industry will then be operating
under a loss which is equal to the ATC subtract from the price in the market then multiplied by
the quantity of the product. There will still be the minimization of losses through the production
of goods where the marginal revenue is equal to the marginal cost. However, in the long run the
industry will be required to either reverse the losses or exit the industry. The coal India Company
is an example of a company that enjoys the power of monopolistic competition (Dimitrova &
Schlee, 2013).