Monopolistic competition

with respect to large number of sellers contributing discriminated product large number of buyers
makes this competition different.

The market for lipstick is monopolistically competitive because lipstick from different firms differs
slightly. But there are a large number of firms who can enterar exit without restriction.

Market structure
Monopolistic competition differs from perfect competition in the sense that the products of the
different firms in the market are not identical. The firms differentiate their products from those of the
other firms in terms of quality, features or marketing.

Market for lipsticks

 Some lipsticks are low end while others are considered hight end depending upon the
materials that go into making the lipstick.
 Some lipsticks claim to have vitamin e, jojoba butter and so on and therefore are priced
highter than the other lipsticks available in the market.
 Again some claim to have features like extra creamy or highly glossy etc.
 The firms in monopolistic competition market structure have elastic demand (but not
perfectly elastic) and therefore have downward sloping demand curves.
 You are not likely to switch so easily if the price of your favorite lipstick goes up over a
certain range.barriers to entry in a monopolistic competition are low.