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Kinked demand curve model

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Kinked demand curve model

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Kinked demand curve model

  1. 1. Kinked Demand Curve Model
  2. 2. Assumptions of Kinked Demand Curve Model • All Firms in the Industry are quite developed with or without Product differentiation. • All firms are selling goods on fairly satisfactory price in the market. • If one oligopolistic organization reduces the prices, then other organizations would also cut their prices (so Demand would be inelastic) • If one oligopolistic organization increases the prices, then other organizations would not follow increase in prices and customers will shift to relatively low priced firms product. (so Demand would be elastic) • There is always a prevailing price
  3. 3. Diagram of Kinked Demand Curve Model

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