For purely competitive industry, a fundamental requirement of the demand curve f...
QuestionFor purely competitive industry, a fundamental requirement of the demand curve faced by individual firms is that it should be?
Related Lesson: How Perfectly Competitive Firms Make Output Decisions | Perfect Competition
The correct answer is B.
In Economics, a purely competitive industry means that there are many firms producing identical products or services and no one firm has control over the market. The question asks about a fundamental requirement of the demand curve faced by individual firms in a purely competitive industry.
The demand curve is a graph that shows how much of a product or service consumers are willing to buy at different prices. For a purely competitive industry, the demand curve faced by individual firms should be perfectly price elastic. This means that the firm can sell any quantity of the product or service at the market price, but cannot raise the price without losing all its customers to competitors. In other words, the firm is a price taker, not a price maker.
Option A is incorrect because a downward sloping demand curve indicates that the firm can sell more of the product or service at a higher price, which is not the case in a purely competitive industry. Option C is also incorrect because price inelastic demand means that consumers are less responsive to changes in price, which is not true for a purely competitive industry where consumers can easily switch to a cheaper alternative. Option D is incorrect because perfectly price inelastic demand means that consumers will buy the same quantity of a product or service regardless of the price, which is also not true for a purely competitive industry.
Therefore, the correct answer is Option B: perfectly price elastic.
If you see something wrong with the question or answer, please leave a comment and we'll take a look.
Don't fully understand why the selected answer is correct or need additional clarification? Try asking AI Tutor.
More Past Questions:
- English Language
- Christian Religious Knowledge
- Literature In English
- Agricultural Science
- General Paper
- Islamic Religious Knowledge
- Further Mathematics
- Computer Studies
- Civic Education
- Catering Craft Practice
- Data Processing
- Current Affairs
- Animal Husbandry
- Office Practice
- Fine Arts
- Home Economics