If there is an increase in market demand in a perfectly competitive market, then in the short run

Question 1 options:

a) there will be no change in the demand curves faced by individual firms in the market.

b) the demand curves for firms will shift downward.

c) the demand curves for firms will become more elastic. d) profits will rise.

Question

Business

Natalya Atkinson

24 May, 05:02

If there is an increase in market demand in a perfectly competitive market, then in the short run

Question 1 options:

a) there will be no change in the demand curves faced by individual firms in the market.

b) the demand curves for firms will shift downward.

c) the demand curves for firms will become more elastic. d) profits will rise.

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Answers (1)

Know the Answer?

Jackson Valentine · Answer 1

The correct answer is option d.

Explanation:

An increase in the market demand will cause the market demand curve to move to the right. This rightward shift in the demand curve will lead to an increase in the market price.

This increase in market price will cause the individual demand curves to move upwards. As the price increases, the profits earned by the firms will increase as well.

Profit to a firm is the difference between its total revenue and total cost, as the price increases, revenue will increase and cost will remain the same. This will cause profits to increase.