In the kinked demand curve model,the demand curve is ________ for price increases and ________ for price decreases.
A)unit elastic; relatively elastic
B)relatively inelastic; relatively elastic
C)relatively elastic; relatively inelastic
D)perfectly elastic; perfectly inelastic

Question

Quizplus · Accepted Answer

In the kinked demand curve model, the demand curve is relatively elastic for price increases and relatively inelastic for price decreases. This is because firms are reluctant to raise prices above the kink point due to the fear of losing market share, but they are more willing to lower prices below the kink point in order to gain market share.

In the Kinked Demand Curve Model,the Demand Curve Is ________