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a. Contrast the general price elasticity of demand for alcohol and tobacco in Australia. b. What...

a. Contrast the general price elasticity of demand for alcohol and tobacco in Australia.

b. What is the level of competition faced by firms in each market?

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Answer #1

Chacaterstic of Monopolistic competition:

market with large number of sellers
the products of individual firms are not at all homogeneous
the firm has some freedom to fix the price
The demand curve of monopolistic competition is less than perfect elastic (slopes downwards) as no single firm dominates the industry and due to product differentiation (close substitute but not a perfect substitute). Therefore, the greater the price elasticity of the demand curve that the firm faces in monopolistic competition.

Only part A .

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