Often prices appear to be relatively stable in oligopolistic markets. This is explained through the use of kinked curve structure.The Kinked demand curve suggests firms have little incentive to increase or decrease prices. This is because of the following reasons:
If a firm increases the price, they become uncompetitive and see a big fall in demand; therefore demand is price elastic for a higher price. This means increasing price would lead to a fall in revenue.
However, if firm decreases price, they would gain market share. It is assumed in this situation other firms don’t want to lose market share and so, therefore, they cut prices too. Therefore, for a price cut, demand is price inelastic. Because every firm is cutting prices so they receive no increase in market share.
The model of the kinked demand curve suggests prices will be stable.
Firms don’t want to increase prices because they will see a sharp fall in demand.
Firms don’t want to cut prices because they will start a price war, where they don’t gain market share, but do get lower prices and lower revenue.
Therefore, in theory, the kinked demand curve suggests an explanation for why prices are stable.
omondijacob answered the question on September 29, 2018 at 08:31
- Explain why most countries rely on extractive level of production(Solved)
Explain why most countries rely on extractive level of production.
Date posted: September 24, 2018. Answers (1)
- What is the importance of middlemen in global procurement?(Solved)
What is the importance of middlemen in global procurement?
Date posted: September 22, 2018. Answers (1)
- What is the difference between price discrimination and product differentiation?(Solved)
What is the difference between price discrimination and product differentiation?
Date posted: September 17, 2018. Answers (1)
- Discuss ethics and professionalism in HRM(Solved)
Discuss ethics and professionalism in HRM
Date posted: September 7, 2018. Answers (1)
- Discuss the role business entrepreneurs could play in the future development of your country(Solved)
Discuss the role business entrepreneurs could play in the future development of your country.
Date posted: September 1, 2018. Answers (1)
- Scenario A, You are currently employed by highway assemblers, who assemble motorbike parts in Kenya. The management is making a decision of whether to continue...(Solved)
Scenario A, You are currently employed by highway assemblers, who assemble motorbike parts in Kenya. The management is making a decision of whether to continue importing the parts or complete bike from China.
Required:
(a) Explain to them the factors to be considered in making such a decision.
(b) Discuss the limitations of partnership sourcing.
(c) Explain the benefits and limitations of international sourcing.
(d) Why is a market analysis necessary in sourcing?
(e) Discuss the disadvantages to an organization the application of EDI (Electronic
Data Interchange) in the process of sourcing for its material or spare parts.
Date posted: August 30, 2018. Answers (1)
- Explain the methodology for disaster risk management(Solved)
Explain the methodology for disaster risk management.
Date posted: August 29, 2018. Answers (1)
- Outline the circumstances under which the following characteristics of human wants may be observed: (a)complimentary wants (b)wants become habitual(Solved)
Outline the circumstances under which the following characteristics of human wants may be observed: (a)complimentary wants (b)wants become habitual
Date posted: August 26, 2018. Answers (1)
- You are provided with the following information for a certain company,
Annual demand=4000 units,cost per unit Ksh 200, cost of replacing an order 5000 annually. Inventory...(Solved)
You are provided with the following information for a certain company,
Annual demand=4000 units,cost per unit Ksh 200, cost of replacing an order 5000 annually. Inventory carrying cost is expressed as a percentage of cost of average stock as 20%
Required
i)Determine EOQ
ii)Frequency of ordering
iii)When to order
iv)Total cost associated with the policy
Date posted: August 25, 2018. Answers (1)
- List down four securities that are traded at NSE(Solved)
List down four securities that are traded at NSE.
Date posted: August 24, 2018. Answers (1)
- Differentiate between human wants and human needs(Solved)
Differentiate between human wants and human needs
Date posted: August 22, 2018. Answers (1)
- What kind of factors that might affect attitudes towards charging sustainable interest rates by micro finance institution in the Kenyan market environment?(Solved)
What kind of factors that might affect attitudes towards charging sustainable interest rates by micro finance institution in the Kenyan market environment?
Date posted: August 21, 2018. Answers (1)
- Give five assumptions in monopolistic product market (Solved)
Give five assumptions in monopolistic product market
Date posted: August 16, 2018. Answers (1)
- List four contents of money order
(Solved)
List four contents of money order
Date posted: August 14, 2018. Answers (1)
- Outline four circumstances that would make it appropriate to use pipeline to transport oil(Solved)
Outline four circumstances that would make it appropriate to use pipeline to transport oil.
Date posted: August 12, 2018. Answers (1)
- Country X has been experiencing an upward trend in the price of petrol as a result of a rise in inflation. State four steps that can...(Solved)
Country X has been experiencing an upward trend in the price of petrol as a result of a rise in inflation. State four steps that can be taken to minimize expenditure on this product.
Date posted: August 11, 2018. Answers (1)
- Highlight circumstances under which a producer will find it necessary to transport goods by train(Solved)
Highlight circumstances under which a producer will find it necessary to transport goods by train.
Date posted: August 10, 2018. Answers (1)
- State any four ethical considerations in product promotion(Solved)
State any four ethical considerations in product promotion.
Date posted: August 10, 2018. Answers (1)
- State four method of after sales services(Solved)
State four method of after sales services.
Date posted: August 10, 2018. Answers (1)
- Benefits of managing ethics in an organization (Solved)
Benefits of managing ethics in an organization
Date posted: August 9, 2018. Answers (1)