Question

Explain why the demand curve facing a firm under monopolistic competition is negatively sloped

Answer 1

It is negatively sloped because in monopolistic competition seller cannot influence the market demand. So to sell more seller has to reduce the price .
Because of this MR and AR are downward sloping and MR is less than AR
Hence demand curve is downward sloping
Therefore demand curve under monopolistic competition is negatively sloped

Hope it will help you!!!

Answer 2

Answer:

A monopolistic firm has differentiated products; thus, it has to lower its price in order to increase its sales.

Further, the products of different monopolistic firms are close substitutes to each other.

Hence, the demand for all the products is elastic.

For this reason, the demand curve is negatively sloped.