Graphical Depiction

Figure 9-1 shows graphically the difference between the demand curves faced by perfectly and imperfectly competitive firms. Figure 9-1 (a) reminds us that a perfect competitor faces a horizontal demand curve, indicating that it can sell all it wants at the going market price. An imperfect competitor, in contrast, faces a downward-sloping demand carve, Figure 9-1 (b) shows that if an imperfectly competitive firm increases its sales, it will tendinitis depress the market price of its output as it moves demand curve. We can also see the difference between perfect and imperfect competition in terms of price elasticity.

For (competition demand )· elastic fur an imperfect competitor; demand has a finite Plasticity. A careful measurement 11 show that the price elasticity is around 2 at point Bin Figure 9-1(b).

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