The flatter (more relatively elastic)is the residual demand curve is,________.

Question

Quizplus · Accepted Answer

A flatter (more relatively elastic) residual demand curve means that consumers are more responsive to changes in price, making it easier for firms to increase sales by lowering prices. This reduces the market power of individual firms and leads to lower deadweight loss in monopolistically competitive markets compared to a situation where the residual demand curve is steeper (more inelastic). The markup of price over marginal cost may still exist, but it will be smaller in magnitude when the residual demand is flatter.

The Flatter (More Relatively Elastic)is the Residual Demand Curve Is,________