The more product differentiation in the market, the ________ the firm specific demand curve. The less product differentiation in the market, the ________ the firm specific demand curve.

Question

Quizplus · Accepted Answer

When there is more product differentiation in the market, the firm specific demand curve becomes steeper because consumers have fewer substitutes available and are willing to pay a higher price for the unique features of the product. Conversely, when there is less product differentiation in the market, the firm specific demand curve becomes flatter because consumers have more substitutes available and are less willing to pay a higher price for the product.

The More Product Differentiation in the Market, the ________ the Firm