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Identify the correct statement from this list of statements about demand relationships
Identify the correct statement from this list of statements about demand relationships.
a. The demand curve is likely to be more inelastic if we make the time period longer between the price change and the point we measure the quantity response.
b. The demand curve for the individual firm is likely more elastic than the demand for the entire industry.
c. Firms selling "commodity"-type products (where their product is essentially identical to competitors) generally have quite steep demand curves.
d. None of the above is true.
Expert Solution
The correct option is c. Firms selling "commodity"-type products (where their product is essentially identical to competitors) generally have quite steep demand curves.
When a firm has a steep demand curve, it means that the demand for its product is inelastic. However, the firm in question here sells a product that is identical to competing products. This means that if this firm increases the price of its products, consumers will quickly go to competitors. This is representative of an elastic demand with a gentle demand curve.
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