ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Economic intuition suggests that increased competition generates lower prices. However, recent theoretical work shows that a monopolist may charge a lower price than a firm facing a competitor selling a differentiated product.

Detailed explanation-2: -Basic economic theory demonstrates that when firms have to compete for customers, it leads to lower prices, higher quality goods and services, greater variety, and more innovation.

Detailed explanation-3: -Greater competition among sellers results in a lower product market price. If the same popular toy had numerous producers instead of only one, the price would be lower because the producer knows the consumer could get the toy somewhere else. The cycle of competition between sellers never ends.

Detailed explanation-4: -Because the individual demand curves are downward sloping, the market demand curve is also downward sloping: the law of demand carries across to the market demand curve. As the price decreases, each household chooses to buy more of the product. Thus the quantity demanded increases as the price decreases.

Detailed explanation-5: -If the price decreases, quantity demanded increases. This is the Law of Demand. On a graph, an inverse relationship is represented by a downward sloping line from left to right.