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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.
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. This means that when firms set prices above the prevailing price level (P*), prices are relatively elastic because individuals are likely to ...
The kinked demand curve for a joint profit-maximizing oligopoly industry can model the behaviors of oligopolists' pricing decisions other than that of the price leader. Above the kink, demand is relatively elastic because all other firms' prices remain unchanged. Below the kink, demand is relatively inelastic because all other firms will ...
In order to distinguish themselves well, these firms can compete in price, but more often, oligopolistic firms engage in non-price competition because of their kinked demand 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.
Fifty acres or 400 tons of the grapes have been left to rot on the vineyard due to too much supply and not enough demand. "They're turning to raisins. They'll just end up falling off," Schaefer said.
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These types of fad diets often include extreme calorie deficits that can cause the body to enter “starvation mode,” she says, which often results in muscle loss, water retention, and a slower ...
In economics, nominal rigidity, also known as price-stickiness or wage-stickiness, is a situation in which a nominal price is resistant to change. Complete nominal rigidity occurs when a price is fixed in nominal terms for a relevant period of time. For example, the price of a particular good might be fixed at $10 per unit for a year.