Which of the following describes the difference between the demand faced by a firm and the demand faced by an industry?
A)The demand facing individual firms tend to be more price-elastic than those for the entire industry.
B)The elasticity of demand for a firm and for an industry is the same.
C)The demand facing individual firms tend to be less price-elastic than those for the entire industry.
D)The income elasticity of demand faced by a firm is higher than the income elasticity of demand faced by an industry.

Question

Quizplus · Accepted Answer

The demand facing individual firms tends to be more price-elastic than that for the entire industry. This is because consumers have more substitute products and options available when considering purchasing from an individual firm, whereas when considering the industry as a whole, there may be fewer alternatives. Therefore, a small increase in price by an individual firm may lead to a significant decrease in demand, whereas a similar increase in price by the industry as a whole may not have as much impact on the overall demand.

Which of the Following Describes the Difference Between the Demand