The demand curve faced by a dominant firm in an oligopoly model is the difference between the market demand and the supply that the fringe will produce at each price.

Question

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In an oligopoly model with a dominant firm, the firm's demand curve is derived from the market demand curve and the supply curve of the fringe firms. The dominant firm's demand curve is downward sloping and reflects the inverse relationship between price and quantity demanded by consumers in the market. The supply curve of the fringe firms represents the quantity that will be produced at each given price, and is assumed to be perfectly elastic. Therefore, the demand faced by the dominant firm is the difference between the market demand and the quantity supplied by the fringe at each price level.

The Demand Curve Faced by a Dominant Firm in an Oligopoly