A kinked demand curve:
A)has three segments
B)is typical of rival oligopolists
C)has a flat section below the business's original price
D)has a steep section above the business's original price
E)is faced by monopolistic competitors

Question

Quizplus · Accepted Answer

A kinked demand curve is a common feature among rival oligopolists where each firm believes that if they raise their prices, the other firms will not follow suit, leading to a significant loss in market share. As a result, the demand curve is relatively flat below the initial price, indicating that consumers are particularly sensitive to price increases. In contrast, the demand curve is steep above the initial price since a small increase in price is not expected to alter the demand for the product.

A Kinked Demand Curve