Alright, let's finish discussing the characteristics of a monopoly by discussing what the demand curve is going to look like. So, remember in a monopoly, there's only one producer, right? There's only one producer of the good, so you could imagine that the market demand, all of the demand for that good, goes to the individual firm, right? The one firm that's supplying the good has all of the demand for that good. So what we're going to see is that the demand curve facing the monopoly firm, the firm's demand curve, is equal to the demand curve for the entire industry, right? There's this whole demand for whatever this product is, let's say electricity, right? And then there's only one supplier of electricity, so they have the whole demand curve to themselves, right? So remember when we were talking about perfect competition, they don't have the whole demand curve to themselves, right? They have such a small portion of demand that they have no influence.

So here on top, I've got basically just a regular market demand curve, right? Nothing special here. Just a downward demand, right? And so we'll just say this is the market demand, and then notice down here, the monopoly firm on the left has the same demand, right? They have the whole demand of the market, the downward sloping firm's demand is equal to the market demand, right? Compare that to perfect competition on the right, right? In perfect competition, there was some sort of market demand and market supply here, right? And then there was going to be some equilibrium price, and at that equilibrium price is where the perfectly competitive firm was going to supply, right?

So let's note two things here real quick down at the bottom. We've got first I want to talk about the shape of the demand curve, right? The monopoly firm is facing a downward sloping demand curve, right? But when we're talking about perfect competition, the demand curve was perfectly elastic, right? I'll put horizontal here, right? A perfectly elastic demand curve was completely flat. So what are going to be the implications of having this downward-sloping demand curve instead of the flat demand curve? Well for one, for sure, if we increase output, right? Let's say we wanted to sell more units in this case, so let's go back to the graph. Here let's say we were selling this amount at this price. Well, let's say we wanted to sell this amount way out here, right? Well now, we're going to have to lower our price, right? This was price one here and price two is lower. So if you want to increase your output in a monopoly, you're going to have to decrease your price. Remember, in perfect competition, you could sell any quantity you wanted, right? Because your influence over the whole market wasn't going to affect the price because you were such a small portion of the market, so you could increase your quantity, and it would be the same price that you would sell the next unit. Okay? So that's going to have some implications when we start talking about revenue, in another video, but what we see here is that when we increase output, we have to charge a lower price in a monopoly, right? So this is going to change our marginal revenue, right? Before our marginal revenue was just equal to the price. If we wanted to sell one more unit, the price didn't change. Now if we want to sell one more unit, the price has to go down to increase that output, okay? So we'll see those implications once we start talking about revenue, but I just want to make that note, right? We still have that price equals average revenue, right? We prove that out, and that's going to be true for every firm, in any market and any market structure, but in perfect competition, we had that special case where the price equaled average revenue and also equaled marginal revenue, right? So in perfect competition, we could increase output and keep the same price, right? But we're not seeing that case anymore here in monopolies. Alright? So let's go ahead and do some practice problems to get us started and then we'll dive into the next topic. Alright, let's do that now.