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Which of the following describes the difference between the demand faced by a firm and the demand faced by an industry?

A. the demand facing individual firms tend to be more price-elastic than those for the entire industry.
B. the elasticity of demand for a firm and for an industry is the same.
C. the demand facing individual firms tend to be less price-elastic than those for the entire industry.
D. the income elasticity of demand faced by a firm is higher than the income elasticity of demand faced by and industry

User Puelo
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Final answer:

The demand facing individual firms is often more price-elastic than that for an entire industry; firms in perfect competition can sell any amount at the market price, while monopolies can only sell more by lowering prices.

Step-by-step explanation:

The difference between the demand faced by a firm and the demand faced by an industry lies in their respective price elasticities. A perfect competitor, in a perfectly competitive market, faces a perfectly elastic demand curve, where they can sell any amount of output at a given market price. In contrast, a monopoly faces the market demand and can only increase sales by lowering the price. A monopolistically competitive firm's demand curve is intermediate, not as elastic as a perfect competitor but not as inelastic as a monopoly.

In terms of options provided, the correct answer is A: the demand facing individual firms tends to be more price-elastic than those for the entire industry because firms have many competitors selling similar products. Thus, if a firm raises its prices, consumers can easily switch to a competitor, reflecting a high price elasticity of demand. On the other hand, the industry as a whole faces less elastic demand because there are fewer substitutes for the industry's product on the market.

User Sonnyb
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