What shape is the market demand curve for a good in a perfectly competitive industry?

In a perfectly competitive market, the demand curve faced by an individual firm is perfectly elastic. This means that the firm can sell any quantity of goods it wishes at the market price, but if it tries to raise the price even slightly above this market price, it will sell nothing.

The reasoning behind this shape of the demand curve lies in the characteristics of perfect competition, which include a large number of buyers and sellers, identical products, and free entry and exit from the market. Since the products are homogeneous and there are many firms, consumers will switch to other suppliers if any firm increases its prices, resulting in a horizontal demand curve at the market price when viewed from the perspective of the individual firm.

In contrast, the overall market demand for the good would typically appear as a downward-sloping curve, illustrating that as the price decreases, the total quantity demanded in the market increases. However, it is crucial to note that this market demand curve pertains to the aggregate of all consumers, which is different from the demand faced by an individual firm in a perfectly competitive setup.

Therefore, the correct answer is that the market demand curve for a good in a perfectly competitive industry is perfectly elastic from the perspective of individual firms, represented by a horizontal line.