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How elastic is the demand curve for a firm in a perfectly competitive market?

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  1. It's ♦perfectly elastic♦ - it is given by definition of perfect competition - so demand in this case is just horizontal line.


  2. B=PQ-C(Q)

    B=Profit

    P=Price

    Q=Production

    C=Costs

    Q=[B+C(Q)]/P

    We call

    B+C(Q)=T

    µ=dQ/dP (P/Q)

    µ=-T/P² (P/Q)

    µ=-T/PQ=-[B+C(Q)]/[B+C(Q)]=-1
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