A shift in demand curve has a larger effect on price and smaller effect on quantity when the number of firms is fixed compared to the situation when free entry and exit is permitted. Explain.
When the number of firms is fixed. Shift in demand curve (i.e., increase) has an effect on price (OP to OP1) and quantity (OQ to OQ1). When entry and exit of firms is permitted. The shift in demand curve (i.e., increase) has no effect on price but quantity rises from OQ to OQ1.
