CA Foundation Exam > CA Foundation Questions > The kinked demand curve model of oligopoly as...
Start Learning for Free
The kinked demand curve model of oligopoly assumes that
- a)response to a price increase is less than the response to a price decrease.
- b)response to a price increase is more than the response to a price decrease.
- c)elasticity of demand is constant regardless of whether price increases or decreases.
- d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.
Correct answer is option 'A'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
The kinked demand curve model of oligopoly assumes thata)response to a...
The oligopolist faces a kinked‐demand curve because of competition from other oligopolists in the market. If the oligopolist increases its price above the equilibrium price P, it is assumed that the other oligopolists in the market will not follow with price increases of their own.
View all questions of this test
Most Upvoted Answer
The kinked demand curve model of oligopoly assumes thata)response to a...
Explanation:
The kinked demand curve model of oligopoly is a theory that explains the pricing behavior of firms in an oligopoly market. It assumes that firms in an oligopoly market face a demand curve that is kinked, meaning that it has a discontinuity or a sharp bend at the current price level.
Response to a price increase is less than the response to a price decrease:
According to the kinked demand curve model, the demand curve facing a firm is more elastic above the current price level and less elastic below the current price level. This means that if a firm increases its price, it assumes that other firms will not follow suit and will keep their prices constant. As a result, the firm that increased its price will experience a significant decrease in demand because consumers will switch to the lower-priced alternatives offered by other firms. On the other hand, if a firm decreases its price, it assumes that other firms will follow suit and will also decrease their prices. Therefore, the firm that decreased its price will not gain a significant increase in demand because consumers will perceive the price decrease as temporary and will not switch from their current preferences.
Elasticity of demand is constant regardless of whether price increases or decreases:
The kinked demand curve model does not assume that the elasticity of demand is constant regardless of whether price increases or decreases. In fact, it assumes that the elasticity of demand is different above and below the current price level. Above the current price level, the demand curve is more elastic, meaning that a small change in price will result in a relatively large change in quantity demanded. Below the current price level, the demand curve is less elastic, meaning that a large change in price will result in a relatively small change in quantity demanded.
Elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases:
The kinked demand curve model does not assume that the elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases. Instead, it assumes that the elasticity of demand is relatively high above the current price level and relatively low below the current price level.
Therefore, the correct answer is option 'A' - response to a price increase is less than the response to a price decrease.
The kinked demand curve model of oligopoly is a theory that explains the pricing behavior of firms in an oligopoly market. It assumes that firms in an oligopoly market face a demand curve that is kinked, meaning that it has a discontinuity or a sharp bend at the current price level.
Response to a price increase is less than the response to a price decrease:
According to the kinked demand curve model, the demand curve facing a firm is more elastic above the current price level and less elastic below the current price level. This means that if a firm increases its price, it assumes that other firms will not follow suit and will keep their prices constant. As a result, the firm that increased its price will experience a significant decrease in demand because consumers will switch to the lower-priced alternatives offered by other firms. On the other hand, if a firm decreases its price, it assumes that other firms will follow suit and will also decrease their prices. Therefore, the firm that decreased its price will not gain a significant increase in demand because consumers will perceive the price decrease as temporary and will not switch from their current preferences.
Elasticity of demand is constant regardless of whether price increases or decreases:
The kinked demand curve model does not assume that the elasticity of demand is constant regardless of whether price increases or decreases. In fact, it assumes that the elasticity of demand is different above and below the current price level. Above the current price level, the demand curve is more elastic, meaning that a small change in price will result in a relatively large change in quantity demanded. Below the current price level, the demand curve is less elastic, meaning that a large change in price will result in a relatively small change in quantity demanded.
Elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases:
The kinked demand curve model does not assume that the elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases. Instead, it assumes that the elasticity of demand is relatively high above the current price level and relatively low below the current price level.
Therefore, the correct answer is option 'A' - response to a price increase is less than the response to a price decrease.
Free Test
FREE
| Start Free Test |
Community Answer
The kinked demand curve model of oligopoly assumes thata)response to a...
I think the answer is 'B'
I ICAI FOUNDATION MODULE THE ANSWER IS GIVEN -
"B"
I ICAI FOUNDATION MODULE THE ANSWER IS GIVEN -
"B"
Attention CA Foundation Students!
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer?
Question Description
The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer?.
The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer?.
Solutions for The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer?, a detailed solution for The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer? has been provided alongside types of The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice The kinked demand curve model of oligopoly assumes thata)response to a price increase is less than the response to a price decrease.b)response to a price increase is more than the response to a price decrease.c)elasticity of demand is constant regardless of whether price increases or decreases.d)elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases.Correct answer is option 'A'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup