The Demand Curve for a Perfectly Competitive Firm Is

question 147

Multiple Choice

The demand curve for a perfectly competitive firm is

• A) elastic at relatively high prices and inelastic at relatively low prices.
• B) perfectly elastic.
• C) perfectly inelastic.
• D) unitary elastic.

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Definitions:

Homothetic Preferences

A situation in consumer theory where a consumer's preference structure can be represented by a utility function that is proportionally scalable.

Engel Curve

A graphical representation that shows the relationship between income and the demand for a good or service, keeping all other factors constant.

Utility Function

A mathematical representation of how a consumer ranks different baskets of goods according to their level of satisfaction.

High Income

Refers to individuals or households that earn a significantly higher amount of money compared to the average income levels within a specific geographic region or within a particular demographic.