The monopolistic firm's demand curve

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A monopolistic firm's demand curve is less elastic than a perfectly competitive firm's demand curve. This is because a monopolistic firm has some degree of market power and can raise its price without losing all its customers, while a perfectly competitive firm faces a horizontal demand curve and must sell at the market price. However, a monopolistic firm still faces some competition and may lose some customers if it raises its price too much, so its demand curve is not perfectly inelastic. The marginal revenue curve of a monopolistic firm lies below its demand curve, reflecting the fact that the firm must lower its price to sell additional units of output.

The Monopolistic Firm's Demand Curve