Which elasticity of demand curve confronts monopolistically competitive firms?
Answers
The demand curve that confronts monopolistically competitive firms will be more “elastic” because monopolistic firms will not have control over the price. The price will be based on their product and how it is differentiated from the other competing firms. If the product is not differentiated from the other competing firms then the demand will be less and the price also will not increase.
A monopolistic competitors demand curve is more elastic compared to a pure competitors demand curve when he has a number of rivals and his products have close substitutes.
A monopolistic competitors demand curve is less elastic compared to a pure competitors demand curve when there are less number of rivals and its products are differentiated.
The number of rivals and the amount of product differentiation are the main factors which influence the elasticity of demand for a monopolistic competitor. If the number of rivals is more the elasticity for the product will increase. Elasticity will decrease if the amount of differentiation is large.