Class 8 Exam > Class 8 Questions > In oligopoly, the kink on the demand curve is...
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In oligopoly, the kink on the demand curve is more due to _________
- a)Discontinuity in MR
- b)Discontinuity in AR
- c)Fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by others
- d)Price war amongst the firms
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
In oligopoly, the kink on the demand curve is more due to _________a)D...
Explanation:
Oligopoly is a market structure where a few large firms dominate the market. The behavior of each firm in an oligopoly market affects the market as a whole. In an oligopoly market, the demand curve is not a straight line but rather has a kink in it. This kink is more due to the fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by others.
Fulfillment of Assumption:
The kink in the demand curve is a result of the assumption that exists amongst the firms in an oligopoly market. The assumption is that a price cut by one firm is likely to be followed by other firms, whereas a price increase by one firm is not likely to be followed by other firms. This means that if one firm lowers its price, it will gain market share and other firms will follow suit. However, if one firm raises its price, it will lose market share and other firms will not raise their prices.
Impact on Demand Curve:
The fulfillment of this assumption results in the kink in the demand curve. The demand curve is relatively elastic above the kink, meaning that a small change in price leads to a large change in quantity demanded. Below the kink, the demand curve is relatively inelastic, meaning that a change in price does not lead to a significant change in quantity demanded. This kink in the demand curve creates an unstable equilibrium point for the firms in the market.
Conclusion:
In conclusion, the kink on the demand curve in an oligopoly market is more due to the fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by others. This assumption creates an unstable equilibrium point and results in a kink in the demand curve.
Oligopoly is a market structure where a few large firms dominate the market. The behavior of each firm in an oligopoly market affects the market as a whole. In an oligopoly market, the demand curve is not a straight line but rather has a kink in it. This kink is more due to the fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by others.
Fulfillment of Assumption:
The kink in the demand curve is a result of the assumption that exists amongst the firms in an oligopoly market. The assumption is that a price cut by one firm is likely to be followed by other firms, whereas a price increase by one firm is not likely to be followed by other firms. This means that if one firm lowers its price, it will gain market share and other firms will follow suit. However, if one firm raises its price, it will lose market share and other firms will not raise their prices.
Impact on Demand Curve:
The fulfillment of this assumption results in the kink in the demand curve. The demand curve is relatively elastic above the kink, meaning that a small change in price leads to a large change in quantity demanded. Below the kink, the demand curve is relatively inelastic, meaning that a change in price does not lead to a significant change in quantity demanded. This kink in the demand curve creates an unstable equilibrium point for the firms in the market.
Conclusion:
In conclusion, the kink on the demand curve in an oligopoly market is more due to the fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by others. This assumption creates an unstable equilibrium point and results in a kink in the demand curve.
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Community Answer
In oligopoly, the kink on the demand curve is more due to _________a)D...
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
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In oligopoly, the kink on the demand curve is more due to _________a)Discontinuity in MRb)Discontinuity in ARc)Fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by othersd)Price war amongst the firmsCorrect answer is option 'C'. Can you explain this answer?
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In oligopoly, the kink on the demand curve is more due to _________a)Discontinuity in MRb)Discontinuity in ARc)Fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by othersd)Price war amongst the firmsCorrect answer is option 'C'. Can you explain this answer? for Class 8 2024 is part of Class 8 preparation. The Question and answers have been prepared according to the Class 8 exam syllabus. Information about In oligopoly, the kink on the demand curve is more due to _________a)Discontinuity in MRb)Discontinuity in ARc)Fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by othersd)Price war amongst the firmsCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Class 8 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In oligopoly, the kink on the demand curve is more due to _________a)Discontinuity in MRb)Discontinuity in ARc)Fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by othersd)Price war amongst the firmsCorrect answer is option 'C'. Can you explain this answer?.
In oligopoly, the kink on the demand curve is more due to _________a)Discontinuity in MRb)Discontinuity in ARc)Fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by othersd)Price war amongst the firmsCorrect answer is option 'C'. Can you explain this answer? for Class 8 2024 is part of Class 8 preparation. The Question and answers have been prepared according to the Class 8 exam syllabus. Information about In oligopoly, the kink on the demand curve is more due to _________a)Discontinuity in MRb)Discontinuity in ARc)Fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by othersd)Price war amongst the firmsCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Class 8 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In oligopoly, the kink on the demand curve is more due to _________a)Discontinuity in MRb)Discontinuity in ARc)Fulfillment of the assumption that a price cut is followed by others and a price increase by a firm is not followed by othersd)Price war amongst the firmsCorrect answer is option 'C'. Can you explain this answer?.
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