how minded demand curve explains price regidity
Answers
Answered by
1
Answer:
The kinked demand curve describes price rigidity
The kinked-demand theory is consistent with price-setters' account of price rigidity as arising from the customer's---not the firm's---side, and their account of their reluctance to make the first step in changing prices. ... (1998) stress their fear of ''antagonizing customer
Answered by
0
The figure shows that if a firm raises the price of a product, then it experiences a large fall in sales. Hence, no firm in an oligopolistic market will try to increase the price and a kink is formed at the prevailing price. This is how the kinked demand curve hypothesis explains the rigid or sticky prices.
Similar questions