Question

10) What type of demand (elastic or inelastic) do you think you would find in a perfectly competitive market (for each firm, not each product)? Why do you think this is true?

Answer 1

Since the presence of competition indicates an elastic demand for a product, then in a perfectly competitive market there will be an elastic demand for each firm. This is because the degree of response of the quantity of goods sold to price changes for competitive firms is characterized by a value close to unity.