If market demand is sum of all demand curves for firms in the industry, why in perfect competition is the demand curve for the industry demand downward sloping if all firms have a perfectly elastic demand curve?
A price change has a different meaning across the two curves. The firm-specific demand curve is perfectly elastic because *if a single firm unilaterally raises its price* it loses all quantity demanded. The industry demand curve is downward sloping because *if every firm raises their price at the same time*, overall demand for the good does not totally collapse.
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A price change has a different meaning across the two curves. The firm-specific demand curve is perfectly elastic because *if a single firm unilaterally raises its price* it loses all quantity demanded. The industry demand curve is downward sloping because *if every firm raises their price at the same time*, overall demand for the good does not totally collapse.