As a result of a kinked demand curve, the price:
A) fluctuates.
B) falls below the kink.
C) settles at the kink.
D) rises above the kink.

Question

Quizplus · Accepted Answer

The kink in the demand curve represents a point where the demand becomes relatively more elastic. In this situation, if a producer were to raise the price, demand would fall dramatically, while if the producer were to lower the price, demand would only increase slightly. Therefore, to maximize profits, the producer would keep the price at the kink, where the demand is relatively inelastic, resulting in a stable price. Thus, the price settles at the kink.

As a Result of a Kinked Demand Curve, the Price