Question

Why the demand curve facing perfectly competitive firm is assumed to be perfectly elastoc?

Answer 1

Heya...


Demand curve is perfectly inelastic in perfect competition market because..

It is the market there are large no of buyers and sellers of the same product and there is no any price control of particular seller over products prices..

So , a firm can sell any of amount at the prevailing prices , so it is perfectly inelastic.

Thank You...

Answer 2

Under perfect competition, a demand curve of the firm is perfectly elastic because the firm can sell any amount of goods at the prevailing price. So even a small increase in price will lead to zero demand. This indicates that the firm has no control over price.