. How does the demand curve for monopolistic firm differ from the demand curves for firms...

. How does the demand curve for monopolistic firm differ from the demand curves for firms in competitive market structures?

Expert Solution

The firm in the perfect competition is a price taker, that is it has no control over the market price. The firms cannot influence the market price by changing their output decisions. So the firms has not got any market power , so the demand curve of a perfectly competitive firm is perfectly elastic (horizontal straight line parallel to the X axis), if any firm increases the price the quantity demanded would fall to zero because the products are identical in the perfect competition. The consumers has similar products to choose from different buyers this makes the demand curve perfectly elastic.

The monopoly firm is the sole supplier of a particular good in the market so he can set any price he wants. The demand curve of a monopoly firm is downward sloping showing the negative relationship between the price and the quantity demanded. If the monopolist want to increase the quantity demanded he should decrease the price.

Rahul Sunny answered 1 year ago

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