The demand curve of a firm is horizontal and parallel to the x axis.
What does this NOT imply?
Answer & explanation
Correct answer: option 3
Horizontal demand curve means that demand is perfectly elastic, firm is operating in perfect competition and that firm is given the prices i.e. it is a price taker. Horizontal demand curve means any quantity of commodity can be sold at the given prices, it DOES NOT mean more quantity at higher prices.