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Market Equilibrium — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsMarket Equilibrium2 Marks
Question
Why is the demand curve facing a monopolistically competitive firm likely to be very elastic?
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Answer

The demand curve facing a monopolistically competitive firm is likely to be very elastic because the products produced by the monopolistically competitive firms are close substitutes to each other.
Consequently, Elasticity of Demand is high, i.e. presence of closely substitutable goods makes the firm's demand curve very elastic under monopolistic competition.

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