The perfectly competitive demand curve for a commodity product is:
A)upward sloping.
B)downward sloping.
C)horizontal.
D)vertical.

Question

Quizplus · Accepted Answer

In perfect competition, there are many firms producing identical products and consumers have no preference for one seller over another. Therefore, the demand curve faced by each individual firm is perfectly elastic or horizontal at the market price. If a firm raises its price even a little, buyers will switch to another firm's product. Conversely, if a firm lowers its price just a little, it will capture the entire market demand because buyers do not have a preference for one seller over another. In perfect competition, there are many buyers and sellers of the product and the product is homogeneous, meaning it is identical from all sellers. Therefore, each seller has no market power to influence the price and must accept the market price. This results in a horizontal demand curve at the market price because any increase in price will cause buyers to purchase from other sellers and any decrease in price will cause other sellers to offer a lower price. Thus, the demand curve is perfectly elastic.

The Perfectly Competitive Demand Curve for a Commodity Product Is