In: Economics
Explain the distinction in perfect competition between the market demand curve and the demand curve facing a single firm.
The demand curve in a perfectly competitive market is a horizontal straight line as the firms are price takers so the price = marginal cost = marginal revenue = demand.It shows that the firm cannot charge any price and the demand curve is perfectly elastic
The demand curve in a monopoly or a market with a single firm would be downward sloping as the firm is a price maker sets its own price.As it the sole seller, it sets its own price and a downward sloping demand curve means that it can charge a different price to change the demand and revenue.