The demand curve for a monopolist slopes downward because the market demand curve, which is downward sloping, applies to the monopolist's market activity. Demand for the monopolist's product increases as its price decreases. According to Boundless, an educational resource website, the downward sloping demand curve contributes to market inefficiency, which leads to excess production capacity and a loss of consumer surplus.Continue Reading
As the only producer in the market, the monopolist exhibits price searching as opposed to price taking behavior. The monopolist searches the demand curve for the profit-maximizing price where the cost of producing an additional unit of output, marginal cost, is equal to the additional revenue received from selling, marginal revenue, an additional unit of product.
Because the demand curve slopes downward, marginal revenue decreases with each unit of production beyond the profit-maximizing quantity. Thus, the monopolist loses money with each additional unit produced, as marginal cost exceeds marginal revenue. This causes the restricted output and higher costs that characterize products produced by monopolists.
Because they have no competition, monopolists have no incentive to improve their products. Much of their focus is instead placed on maintaining monopolistic conditions through lobbying and other tactics that dissuade competitors from entering the market.Learn more about Economics
The supply curve slopes upward because the volume suppliers in an industry are willing to produce increases as the price the market pays increases. Under typical circumstances, the revenue and profit derived by a supplier increases as the market price rises.Full Answer >
The downward slope of a demand curve is due to consumers being less willing to purchase expensive products. As the price increases, potential consumers are likely to buy competing products. They may also refrain from purchasing a similar product.Full Answer >
An indifference curve has a negative slope and is convex to the origin. Two indifference curves cannot cross each other. A higher indifference curve indicates a higher satisfaction level. Indifference curves are drawn in a graph to show the combination of two products that give a consumer a given level of satisfaction. Economists use them to analyze the effect of changes in prices and income.Full Answer >
A demand curve is a graphical representation of the demand of a product based on its price. Demand curves are downward sloping, demonstrating the law of demand that states that the quantity of a product or service demanded moves in the opposite direction of its price.Full Answer >