Firms in an industry are unlikely to have pricing power if:
A)elasticity of demand for the product is high.
B)the product is not homogeneous.
C)the firms' elasticity of supply is high.
D)there are barriers to entry in the market.

Question

Quizplus · Accepted Answer

Pricing power refers to the ability of a firm to set prices for its products or services without affecting the quantity demanded by consumers. If the elasticity of demand for the product is high, this means that consumers are very sensitive to changes in price and will reduce their demand significantly in response to even small price increases. This makes it difficult for firms to raise prices, as it would result in a large decrease in demand and revenue. Therefore, high elasticity of demand makes it unlikely that firms in an industry will have pricing power.

Firms in an Industry Are Unlikely to Have Pricing Power