The demand curve that a monopoly faces is the market demand. It can sell more output only by decreasing the price

it charges. The demand curve that a monopolistically competitive firm faces falls in between.

The demand curve as a monopolistic competitor faces is not flat, but rather downward-sloping, which means

that the monopolistic competitor can raise its price without losing all of its customers or lower the price and

gain more customers. Since there are substitutes, the demand curve facing a monopolistically competitive

firm is more elastic than that of a monopoly where there are no close substitutes. If a monopolist raises its

price, some consumers will choose not to purchase its product—but they will then need to buy a completely

different product. However, when a monopolistic competitor raises its price, some consumers will choose not

to purchase the product at all, but others will choose to buy a similar product from another firm. If a
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