How is the perceived demand curve for a monopolistically competitive firm different from the perceived demand curve for a monopoly or a perfectly competitive firm?

A monopolistically competitive firm faces a downward-sloping demand curve, which means that as the price of its product increases, the quantity demanded decreases. This is because a monopolistically competitive firm has some market power due to product differentiation but still faces competition from other similar firms. In this market structure, the firm can increase its sales by reducing its price, but it cannot charge a very high price without losing a significant share of its customer base. The price elasticity of demand is relatively high, which means that changes in price will have a relatively larger impact on the quantity demanded.

A monopoly firm also faces a downward-sloping demand curve, but it is typically steeper than that of a monopolistically competitive firm. This is because a monopoly is the sole provider of a product or service, which gives it a higher pricing power and some ability to set a higher price without immediately losing a large share of its customer base. However, the price elasticity of demand in a monopoly is still present, meaning that as the price increases, the quantity demanded will decrease, but the decrease in quantity demanded per unit increase in price will be smaller compared to monopolistic competition.

In a perfectly competitive market, each firm faces a horizontal demand curve, which represents a perfectly elastic demand. This is because there is no product differentiation, and each firm's product is identical to all others in the market. As a result, consumers view each firm's product as a perfect substitute for another, meaning that if one firm raises its price, even by a small amount, consumers will immediately switch to the other competitors. Thus, no firm in perfect competition has any pricing power, and they are price takers operating at the market-determined price.

The perceived demand curve for a monopolistically competitive firm is downward sloping, but less steep than that of a monopoly, indicating that it has some pricing power due to product differentiation but still faces competition. The demand curve for a monopoly is also downward-sloping, but it is typically steeper, reflecting the lower price elasticity of demand due to a lack of direct competitors. In contrast, a perfectly competitive firm faces a horizontal demand curve, reflecting the perfect elasticity of demand and the fact that such firms are price takers without any market power. Therefore, the key differences between the demand curves for these three market structures are in their shapes, slopes, and the underlying price elasticity of demand.