Answer to Question #49178 in Microeconomics for mujtaba

Question

In Michigan, there are many apple orchards and apple farmers. There are also a lot of Burger King Restaurants. But why would it be better to model an apple farmer's demand with a perfectly horizontal curve, but you would use a downward sloping curve for Burger King?

Answer 1

It would be better to model an apple farmer's demand with a perfectly horizontal curve, because the market of apples can be considered as perfectly competitive (the products are similar, farmers are price takers, no barriers to entry) but you would use a downward sloping curve for Burger King, because the market of fastfoods can be considered as monopolistically competitive (or even oligopolistic) with the differentiated products, barriers to entry and possibility to set own prices.