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Question
In a perfect competition, the demand for product of the firm is _______.
In a perfect competition, the demand for product of the firm is _______.
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Solution
The correct option is B perfectly elastic
All producers are price takers and thus cannot influence the price. They simply accept the singular price determined in the market. Any variation in its output will have a negligible effect on the total supply and effectively the market price, that the effect can safely be assumed to be 0. Thus the elasticity of demand is approximated to be perfectly elastic in nature.
All producers are price takers and thus cannot influence the price. They simply accept the singular price determined in the market. Any variation in its output will have a negligible effect on the total supply and effectively the market price, that the effect can safely be assumed to be 0. Thus the elasticity of demand is approximated to be perfectly elastic in nature.
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