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A kink in an otherwise linear demand curve. Note how marginal costs can fluctuate between MC1 and MC3 without the equilibrium quantity or price changing. The Kinked-Demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.
The marginal revenue curve is affected by the same factors as the demand curve – changes in income, changes in the prices of complements and substitutes, changes in populations, etc. [15] These factors can cause the MR curve to shift and rotate. [16] Marginal revenue curve differs under perfect competition and imperfect competition (monopoly ...
The graph below depicts the kinked demand curve hypothesis which was proposed by Paul Sweezy who was an American economist. [29] It is important to note that this graph is a simplistic example of a kinked demand curve. Kinked Demand Curve. Oligopolistic firms are believed to operate within the confines of the kinked demand function.
"Kinked" demand curves appear similar to traditional demand curves but are distinguished by a hypothesised [clarification needed] convex bend with a discontinuity at the bend–"kink". Thus, the first derivative at that point is undefined and leads to a jump discontinuity in the marginal revenue curve.
In the kinked demand curve model, the firm will maximize its profits at Q,P where the marginal revenue (MR) is equal to the marginal cost (MC) of the firm. Hence, a change in MC would not necessarily change the market price, implying rather stable and sticky market prices.
regulatory program for implementing SMCRA and 30 C.F.R. §§ 780.21(b), 784.14(b) (2008), and their approved equivalents in the Pennsylvania state regulatory program for implementing SMCRA.
If the firm is a monopolist, the marginal revenue curve would have a negative slope as shown in the next graph, because it would be based on the downward-sloping market demand curve. The optimal output, shown in the graph as Q m {\displaystyle Q_{m}} , is the level of output at which marginal cost equals marginal revenue.
The competition has also been a benefit to the drugmakers and their investors; Lilly’s market value now surpasses $700 billion, quintupling over the last five years as GLP-1 drugs rake in ...