A Downward Sloping Demand Function

question 64

Multiple Choice

A downward sloping demand function:

• A)is characteristic of both a perfectly competitive firm and a monopolistic firm.
• B)necessarily implies that the firm's marginal revenue will be less than price.
• C)is true only of firms in a perfectly competitive industry.
• D)indicates the presence of economies of scale.

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Definitions:

Downward-sloping Demand

Refers to the economic principle that, all else being equal, as the price of a good or service decreases, the quantity demanded increases.

Inelastic Demand

A condition in market dynamics where the demand for a product does not significantly change with a change in the product's price.

Competitive Price-searcher

An economic term for a seller that sets its product prices based on what competitors are charging, within a competitive market environment.

Product Differentiation

The process of distinguishing a product or service from others in the market to make it more attractive to a particular target market.