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18 December, 04:26

In monopolistic competition, which of the following would make an individual firm's demand curve less elastic?

the purchase of more efficient machinery

an increase in the price of the firm's product

increased brand loyalty toward the firm's product

an increase in the number of rival firms

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  1. 18 December, 04:31
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    The correct answer is option c.

    Explanation:

    In a monopolistic competition the firm faces a downward sloping demand curve. There are a number of firms in the market which are producing close substitutes. So, the firm faces an elastic demand curve. Which means that the quantity demanded will fall when there is an increase in price level.

    Though if people have certain degree of loyalty toward the firm's product, the consumer will prefer the product even when price increases.

    So, the loyalty towards brand will make the demand curve less elastic.
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