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A perfectly competitive firm faces a downward-sloping demand curve.
What is demand curve?
It is a visual illustration of the connection between product pricing and demand-side quantity. The graph is built with amount demanded on the horizontal axis and price on the vertical axis.
Demand curve has two types-
- individual demand curve: The quantity that a specific household wants at different prices is represented by a demand curve for that particular household. The graphic representation of the individual demand schedule is another way to describe it. It can be created by analyzing consumer behavior in response to price changes.
- market demand curve: The total of each individual demand curve for a certain good on the market constitutes the market demand curve. It displays the quantity of the commodity that is demanded at various pricing points. The market demand curve has a negative, or downward, slope because quantity requested declines as price rises.
What is downward-sloping demand curve?
A demand curve demonstrating how demand declines as price rises.
The price elasticity of demand is always negative for a downward-sloping demand curve since the price and quantity requested move in the opposite directions.
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