Skip to main content

Demand Function Facing the Firm

Go Search
Home
About
New Atlas
Atlas, A-Z
Atlas Maps
MPP/MPA Programs
Subjects
Core Topics
Illustrative Courses
Topic Encyclopedia
Concept Dictionary
Competencies
Career Tips
IGOs
Best Practices Project


 
PPGPortal > Home > Concept Dictionary > D, E > Demand Function Facing the Firm
 

Demand Function Facing the Firm 

Individual firms are constrained by the market price, and face a horizontal demand curve at the market determined price.

(Dwayne Benjamin, Toronto PPG 1002H)  

 

------------------------

Generally speaking, demand curves tend to slope downward. In a perfectly competitive situation, this is true for the market taken as a whole, but not for individual firms within the market. Individual firms are constrained by the market price, and face a horizontal demand curve at the market-determined price. This means that for a single firm in a competitive market, if it sets the price above this market-determined price, it will not be able to sell anything at all. The market demand curve and the demand curve facing a particular firm are not the same thing.  

 

 

References

 

Definition prepared by students at the University of Toronto School of Public Policy and Governance and edited by Ben Eisen.

     

Important Notices
© University of Toronto 2008
School of Public Policy and Governance