Demand below the equilibrium price is inelastic in a kinked demand curve model of an oligopoly.

Question

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In the kinked demand curve model of an oligopoly, the demand curve is assumed to have a kink at the current equilibrium price. This kink reflects the assumption that rival firms will not follow price increases, but will match price decreases. As a result, demand below the kink is relatively elastic, while demand above the kink is relatively inelastic. Therefore, demand below the equilibrium price is inelastic in this model.

Demand Below the Equilibrium Price Is Inelastic in a Kinked