What is the monopolistic competition of demand curve?
A. U- shape
B. Horizontal
C. Downward sloping
D. Vertical
E. Upward sloping
C. Downward sloping
C. Downward sloping
The monopolistic competition demand curve is typically downward sloping. To understand why, let's first explain what monopolistic competition means.
Monopolistic competition is a type of market structure where there are many firms competing against each other, but each firm offers slightly differentiated products. This means that while firms produce similar goods or services, they are not perfect substitutes for each other.
Now, back to the demand curve. In monopolistic competition, firms have some degree of market power, which means that they can influence the price of their products to some extent. When a firm increases the price of its product, it can expect to sell fewer units because consumers have the option to switch to other similar but slightly differentiated products offered by competing firms.
As a result, the demand curve for a firm in monopolistic competition is downward sloping. This is because as the price of the product increases, the quantity demanded decreases. Conversely, as the price decreases, the quantity demanded increases. The downward slope of the demand curve reflects the inverse relationship between price and quantity demanded.
Therefore, the correct answer to your question is C. Downward sloping.