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Homework answers / question archive / The kinked-demand curve describes a situation in which an oligopolist will be: A
The kinked-demand curve describes a situation in which an oligopolist will be:
A.interested in maintaining the going price unless there is a rather large change in costs.
B.anxious to either increase or lower price.
C.anxious to increase the price but not to lower price.
D.anxious to lower price but not to increase the price.
The kinked-demand curve describes a situation in which an oligopolist will be:
Kinked demand curve, in oligopoly, occurs because of different elasticity at different price levels. Kink is formed at prevailing price level. At prices, above the kink, the price elasticity is high. Whereas, below the kink, the elasticity is low. As any change in price will make the demand change much, the oligopolist will be interested in charging the current price. Only if huge cost cuts take place, the oligopolist could be interested in changing the price.
