Comment on the following statement: "The demand facing a firm in perfect competition is less elastic than the demand facing a firm in monopolistic competition."
What will be an ideal response?
The statement is false. Firms in perfect competition face a large number of perfect substitutes for their products. Thus, the demand facing a firm in perfect competition is perfectly elastic (horizontal). While firms in monopolistic competition face a number of close substitutes, they are the only producers of their particular products. This gives them some ability to set the prices of their products without losing all demand. Thus, the demand curve faced by a firm in monopolistic competition is downward sloping and less elastic than that faced by a firm in perfect competition.
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Discuss the correct and incorrect economic analysis in the following statements
"If a disease kills a large number of turkeys, the supply of turkeys will decrease. This will result in a price increase, which will then cause the supply of turkeys to increase."
Regarding the price elasticities of demand, which of the following statements is true?
a. Price elasticities vary considerably from product to product b. Luxurious goods are generally less price elastic. c. Necessities are generally more price elastic. d. All of these statements are true.