Why is the demand curve of a firm in perfect competition perfectly elastic?
Date Submitted: 07/11/2003 10:59:26
Category: / Business & Economy / Economics
Length: 5 pages (1429 words)
Category: / Business & Economy / Economics
Length: 5 pages (1429 words)
Theoretically speaking four different market structures exists in today's world. Monopoly, oligopoly, imperfect competition and perfect competition are those four market structures. Monopoly and perfect competition are the two extreme cases, in monopoly the market is governed by one seller, and under perfect competition there are so many sellers that none of them has any power to control the market. As these two market structures are so extreme in nature, examples of these markets are …
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…in real life we see many examples of imperfect competition. Imperfect competition follows the basic fundamentals of perfect competition. The difference being that there is product differentiation making the demand curve of the firm highly elastic instead of perfectly elastic. It is a much more socially efficient system as it has a variety of products to offer as compared to perfect competition.
Bibliography:
1)Katz and Rosen. (Third Edition) Microeconomics.
2)David F Heathfield. Modern Economics.
3)Internet.
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