In economics, demand is a quantity of a good that consumers are willing and able to purchase at various prices during a condition period of time. The relationship between price as living as quantity demand is also called the demand curve. Demand for a specific segment is a function of an item's perceived necessity, price, perceived quality, convenience, available alternatives, purchasers' disposable income together with tastes, and many other options.
Practically every introductory microeconomics text describes the demand curve facing a perfectly competitive firm as being flat or horizontal. A horizontal demand curve is perfectly elastic. if there are n identical firms in the market then the elasticity of demand PED facing all one firm is
where PEDm is the market elasticity of demand, PES is the elasticity of supply of used to refer to every one of two or more people or things of the other firms, and n -1 is the number of other firms. This formula suggests two things. The demand curve is non perfectly elastic and whether there are a large number of firms in the industry the elasticity of demand for all individual firm will be extremely high and the demand curve facing the firm will be almost flat.
For example, assume that there are 80 firms in the industry and that the demand elasticity for industry is -1.0 and the price elasticity of manage is 3. Then
That is the firm PED is 317 times as elastic as the market PED. If a firm raised its price "by one tenth of one percent demand would drop by almost one third." if the firm raised its price by three tenths of one percent the quantity demanded would drop by nearly 100%. Three tenths of one percent marks the powerful range of pricing power the firm has because any attempt to raise prices by a higher percentage will effectively reduce quantity demanded to zero.