Nature of Demand Curve Under Different Markets
Nature of Demand Curve Under Different Markets: Firm demand (business demand) refers to the demand for a company’s product(s). While industrial demand refers to the demand for a certain industry’s goods. An industry is made up of all the businesses or corporations that produce identical items that are very near replacements for one another, regardless of their brand names. Understanding the relationship between firm and industry demand demands knowledge of various market configurations.
Demand Curve in a Perfectly Competitive Environment
Under Perfect Competition, industry demand differs significantly from that of individual firms. The industrial demand curve is slanted downward. The market’s price is determined by the interplay of demand and supply factors. The product’s equilibrium price is determined by the point where the demand and supply curves connect.
Under Perfect Competition, the number of companies has grown to the point that a single company has no effect on overall production or price. It makes a negligible contribution to overall production. When a new business joins the market or an old firm leaves, the overall production is relatively unaffected. Under Perfect Competition, a company cannot set its own price for its product.
It will be required to sell its goods at the going market price, which is determined by market demand and supply factors. Under Perfect Competition, a company is a price taker rather than a price creator. Firms are assigned a price, and each unit of their production is sold at that price, causing the demand curve of the company, or its average revenue curve, to become horizontal. Under Perfect Competition, the horizontality of the average revenue curve (demand curve) is the litmus test for a company.
Under perfect competition, what is the nature of the demand curve?
When perfect competition exists, there are a large number of buyers and sellers offering a homogenous commodity at a market-determined price. As a result, each business is a price taker, and the demand curve is completely elastic.
Nature of Demand Curve Under Different Markets
Under monopolistic competition, the demand curve is shaped like this:
Monopolistic competition occurs when a collection of monopolists compete to provide a distinct product. Each company’s product is somewhat different from the others. Because there exist alternatives, the demand curve for each firm’s product is downward sloping and somewhat elastic in nature. Because there are numerous vendors with distinct products under monopolistic competition, the industry demand curve has little relevance.
Under monopolistic competition, what is the nature of the demand curve?
The demand curve slopes downward under monopolistic competition due to the huge number of enterprises offering closely related but distinct items. It suggests that a company can only sell more production by lowering its product’s price.
Under Monopoly Competition, the Demand Curve
Except in the situation of monopoly, an individual firm’s demand curve is not the same as the industry or market demand curve. Monopoly refers to a market segment in which there is only one vendor and hence no distinction between a business and an industry. Because the business is an industry in and of itself, the demand curve of the individual firm and the industry demand curve will be the same under monopoly, and will be downward sloping, as we will see later. Furthermore, since there are no near replacements under monopoly, the demand curve is steeper, indicating highly inelastic demand.
Under monopoly competition, what is the nature of the demand curve?
A monopoly business is similar to an industry in that it is the only supplier of a product that has no near alternatives. As a result, a monopolist has complete control over the product’s pricing. The monopolistic corporation, on the other hand, has no influence over the product’s demand. The monopolist will have to lower the price in order to increase the amount of production available for sale. As a result, the demand curve for a monopolistic company slopes downward.
Under oligopolistic competition, the demand curve looks like this:
In an oligopoly market, there are just a few suppliers who produce differentiated or homogeneous goods. The behaviours of competitors have an impact on the demand for a company’s goods. In an oligopolistic market, a firm’s demand curve has a kink.
Under oligopolistic competition, what is the nature of the demand curve?
The demand curve for an oligopoly company is indeterminate, which means it can’t be drawn precisely since a producer’s specific behaviour pattern can’t be predicted with precision.