GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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‘Kinked’ demand curve is related with
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Oligopoly
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Monopoly
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Perfect competition
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Discriminating monopoly
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Explanation:
Detailed explanation-1: -Answer: In an oligopolistic market, the kinked demand curve hypothesis states that the firm faces a demand curve with a kink at the prevailing price level. The curve is more elastic above the kink and less elastic below it. This means that the response to a price increase is less than the response to a price decrease.
Detailed explanation-2: -This model of oligopoly suggests that prices are rigid and that firms will face different effects for both increasing price or decreasing price. The kink in the demand curve occurs because rival firms will behave differently to price cuts and price increases.
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