Could each coffee shop face a demand curve that is not perfectly elastic? Select

Question

Could each coffee shop face a demand curve that is not perfectly elastic? Select one: O a. Yes; if the individual firm demand curve is horizontal, then demand is not perfectly elastic. This will often be true for small sellers O b. Yes; if they have some degree of market power (e.g., they can charge slightly higher prices since consumers will not stop at every coffee shop in town to find the cheapest latte), then they will not face perfectly elastic demand. O c. No; the conditions mentioned (many small sellers, price-takers, homogeneous products) guarantee that each of these industries will be perfectly competitive Demand will always be perfectly elastic. d. No; since customers aren't willing to spend their morning visiting each coffee shop in a large city to find the best deal, then each firm's demand curve will be perfectly elastic since consumers do not have full information

Explanation / Answer

Solution: Yes; if they have some degree of market power (e.g., they can change slightly higher prices since consumers will not stop at every coffee shop in town to find the cheapest latte), then they will not face perfectly elastic demand

Explanation: A coffee shop may face a demand curve that is not perfectly elastic, if they have some type of control over price and market power

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