Figure 9-1 The Demand Curve for a Competitive Industry and for One
Firm in the Industry
The competitive industry’s demand curve is negatively sloped; the
competitive firm’s demand curve is horizontal. Notice the difference in
the quantities shown on the horizontal scale in each part of the figure.
The competitive industry has an output of 200 million units when the
price is $3. The individual firm takes that market price as given and
considers producing up to, say, 6000 units. The firm’s demand curve in
part (ii) is horizontal because any change in output that this single firm
could manage would leave price virtually unchanged at $3. The firm’s
realistic output variation has an imperceptible effect on industry output
and thus market price.
Applying Economic Concepts 9-1
Why Small Firms Are Price Takers
Consider an individual wheat farmer and the world market for
wheat. Since products have negatively sloped market demand