How does the demand curve faced by a purely monopolistic seller differ from that confronting a purely competitive firm? Why does it differ? Of what significance is the difference? Why is the pure monopolist’s demand curve typically not purely inelastic?
The demand curves for the two firms, monopolistic and purely competitive firms are illustrated and analysed. Diagrams drawn in MS Word are also included. The major reasons for differences in the demand curves and their shapes are analysed. The significance of these differences in terms of prices and supply are also discussed. The main phenomenon to be noted in the case of monopolistic demand curve is that, it is not typically purely inelastic and hence the causes for these are also included in the solution.
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