If a firm in monopolistic competition increases its price above the market equilibrium, what is the likely effect on its sales and why?

In monopolistic competition, many firms sell similar but not identical products, which gives them some control over their prices. If a firm raises its price above the market equilibrium, it is likely to lose customers because buyers can choose similar products from other firms that are still at lower prices. For example, if a coffee shop increases the price of its specialty latte, customers might decide to go to a nearby café that offers a similar drink for less money. This price increase can lead to a decrease in sales, as consumers will be more price-sensitive when alternatives are available. Therefore, the firm must be careful when setting prices to avoid losing market share to competitors.