The kinked demand curve is:
A) inelastic above the kink and elastic below it.
B) inelastic above the kink and inelastic below it.
C) elastic above the kink and inelastic below it.
D) elastic above the kink and elastic below it.

Question

Quizplus · Accepted Answer

The kinked demand curve theory suggests that demand is more elastic above the kink because a price increase will lead to a significant loss of customers, while it is inelastic below the kink because a price decrease will not gain many customers due to competitors matching price cuts.

The Kinked Demand Curve Is