Assertion (A) Many oligopolistic industries exhibit an appreciable degree of Price rigidity or stability Reason (R) Oligopolists face a demand curve that is highly elastic for price increases and less elastic for price reductions
A)(A) is true but (R) is false.
B)Both (A) and (R) are false
C)Both (A) and (R) are true and (R) is the correct explanation of (A)
D)Both (A) and (R) are true but (R) is not the correct explanation of (A)

Question

Quizplus · Accepted Answer

Both statements are true and the reason correctly explains the assertion. In oligopolistic markets, firms are interdependent and cautious about changing prices. If one firm raises its price, others may not follow, leading to a loss of market share for the price-increaser due to the high elasticity for price increases. Conversely, if a firm lowers its price, others are likely to follow to maintain their market share, leading to less benefit from the price reduction due to the lower elasticity for price decreases. This interdependence and strategic behavior contribute to price rigidity.

Assertion (A) Many Oligopolistic Industries Exhibit an Appreciable Degree of Price