Each firm in a monopolistically competitive firm faces a downward-sloping demand curve because

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In a monopolistically competitive market, each firm produces a product that is slightly different from the other firms. Therefore, each firm faces a downward-sloping demand curve because consumers perceive their product as somewhat unique, and thus they are willing to pay a slightly higher price for it. However, because there are many other firms producing similar products, consumers also have many alternatives to choose from. This means that firms cannot charge too high of a price, or else consumers will switch to a different brand. Therefore, firms in monopolistically competitive markets face a trade-off between differentiating their product and keeping the price competitive.

Each Firm in a Monopolistically Competitive Firm Faces a Downward-Sloping