An increase in competition from economic integration may create an increase in price competition as well as innovative competition. What is the impact on the demand curve as countries face more rigorous price competition from trade?
A) the demand curve becomes more elastic.
B) the demand curve becomes more inelastic.
C) the demand curve shifts in (to the left) the demand curve is not affected.

Question

Quizplus · Accepted Answer

When there is an increase in price competition due to economic integration, consumers have more options to choose from, which makes the demand curve more elastic as they can easily switch to substitute products or even opt out of the market entirely. Therefore, the answer is A.

An Increase in Competition from Economic Integration May Create an Increase