ICSE Class 10 Answered

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. On the other hand, large firms under monopolistic competition deals with differentiated products on the basis of brand. Thus, demand curve slopes downwards and enjoys the monopoly power. It can sell more goods only by reducing the price of the product and by selling close substitutes. Hence, the demand curve facing a firm perfectly elastic under perfect competition but less than perfectly elastic under monopolistic competition.