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Because of product differentiation under monopolistic competition, price tends to be higher than what it ought to have been in real terms and hence consumers suffer. How? |
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Answer» Solution :(i) PRODUCT differentiation is created by artificial differences such as change in colour, fragrance, CERTAIN features etc. (ii) But as such all the products are close substitutes to each other. (iii) This feature of product differentiation results in the downward SLOPING demand curve because of which prices tend to be more and hence the CONSUMERS suffer. |
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