Question

Please answer the question below fully in complete sentences. (Providing examples to support your answers will...

Please answer the question below fully in complete sentences. (Providing examples to support your answers will help earn you some points.)

In 2019, an article in the wall street journal noted that the Nestle company was financing “fierce competition” in the markets for its Nescafe coffee and KitKat chocolate bars. Does this “fierce competition” mean that the demand curves for Nescafe coffee and KitKat chocolate bars are horizontal?

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Answer - The fierce competition in terms of market can be seen when the large number of firms compete for the same product or the product which has the perfect substitutes. This is seen in the competitive market and hence the demand curve will be horizontal here as the demand will be perfectly elastic here and the price will be market driven.

An example one such competition is market for groceries. The grocery vendors roadside sell the same product , hence they have perfect substitutes , they face the horizontal demand curve and fierce competition because of large number of sellers.

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