Why is the demand curve that a perfectly competitive firm faces horizontal while the market demand curve is negatively sloped?

Question

I'm studying producer-theory and I'm stuck on this. Maybe I'm missing something important, but if the demand curve facing a firm in a perfectly competitive market is the same as the market demand curve shouldn't both curves have the same shape? And if it is the case that the demand curve facing a firm in a perfectly competitive market is not the market demand curve, why is this so?

P.S.: This is my first question on this forum so I am still getting familiar with how it works. I do not know if my question is clear enough or if it is necessary to develop more about my doubt.

Answer 1

Maybe I'm missing something important, but if the demand curve facing a firm in a perfectly competitive market is the same as the market demand curve shouldn't both curves have the same shape?

No, there is a difference between market demand curve, and firm specific demand curve.

Generally, there is no reason why market and firm demand curve should have the same shape. You can find exceptions such as monopoly where market and firm demand are same so they will have same shape. However, these are just exceptions.

And if it is the case that the demand curve facing a firm in a perfectly competitive market is not the market demand curve, why is this so?

The firm demand curve is not the market demand curve, and doesn’t have the same properties as overall demand curve. In case of perfect competition firm demand curve will be flat, despite overall market demand curve being downward sloping, because there is large number of firms offering the same product, and if firm deviates from the equilibrium price, it looses all customers. Hence, even when overall market demand is downward sloping, the firm specific demand will be perfectly elastic and flat.