The demand curve for a monopolistic competitor slopes downward because:
A) quantity demanded drops to zero after a slight price increase.
B) there are close, but not perfect, substitutes for the product.
C) customers have no loyalty to the product.
D) the product is not differentiated in any way from those offered by other sellers.

Question

Quizplus · Accepted Answer

The downward slope of the demand curve for a monopolistic competitor suggests that there are close but not perfect substitutes for the product. This means that as the price of the product increases, consumers can switch to a substitute and decrease their demand for the monopolistic competitor's product. However, if there were perfect substitutes for the product, the demand curve would be perfectly elastic (horizontal) at the market price, and any small price increase would result in zero quantity demanded.

The Demand Curve for a Monopolistic Competitor Slopes Downward Because