Why is the market demand curve for perfect competition downward sloping?
It is not. The market demand curve for perfect competition is a horizontal line, i.e. the demand curve is perfectly elastic.
The reason is that there are many suppliers and no individual supplier can influence the market price – the individual suppliers are price takers. These suppliers can sell as many of their products as they want at the market price (hence the horizontal line). If they increase their price even by a penny, nobody will buy their products. Also, they have no incentive to decrease their price even by a penny, since they can sell of their products at the market price anyway.
BullishBear Finance
With all due respect, BB, you’re wrong here.
The _ market _ demand curve is downward-sloping, as is any normal demand curve. The demand curve _ for an individual firm _, however, is horizontal: perfectly elastic.
The question of how you can add up infinitely many horizontal firm demand curves and get a downward-sloping market demand curve is a calculus thing, the details of which aren’t important here.
S2000 Magician is right. Thanks for the correction.
My pleasure.