The demand curve of an individual perfectly competitive business is:
A)horizontal at a price set by the business
B)downward-sloping with price set solely by the forces of supply and demand
C)perfectly inelastic
D)horizontal at a price set by the forces of market supply and demand
E)upward-sloping with price set solely by the forces of supply and demand

Question

Quizplus · Accepted Answer

In a perfectly competitive market, individual businesses are price takers, meaning they cannot influence the market price of their goods or services. The demand curve for an individual business in such a market is horizontal at the market price, indicating that the business can sell any quantity of its product at the prevailing market price, but it cannot influence this price. This is because there are many sellers offering identical products, and consumers can easily switch from one seller to another without any cost, making the demand for an individual seller's product perfectly elastic at the market price.

The Demand Curve of an Individual Perfectly Competitive Business Is