Question

Man motors, inc., is an oligopolist and faces the following kinked demand curve:

Answer 1

An oligopolist firm faces a kinked demand curve, where pressure to match price cuts but not price increases leads to significant changes in price and quantity.

Step-by-step explanation:

An oligopolist firm faces a kinked demand curve, which is an example of the pressure exerted by competing firms in an oligopoly to match price cuts but not price increases.

The kink in the demand curve occurs because if the oligopolist tries to expand output and reduce price, other firms will also cut prices, resulting in a significant drop in the price per unit. On the other hand, if the oligopolist raises its price, other firms will not do so, leading to a sharp decline in sales.

Answer 2

Man Motors, Inc., an oligopolist, operates with a kinked demand curve. This curve reflects price rigidity in the market, with a relatively elastic demand above the current price and relatively inelastic demand below it. The assumption is that competitors match price cuts but resist price increases, creating a distinctive kink in the demand curve.

Step-by-step explanation:

Man Motors, Inc., functioning as an oligopolist, confronts a kinked demand curve, a concept central to understanding pricing behavior in oligopolies. The kinked demand curve posits that competitors in an oligopoly are more likely to match price cuts than price increases. This results in a distinctive bend in the demand curve at the existing price level.

Above this point, demand is relatively elastic as firms anticipate losing market share if they raise prices, leading to a decline in sales. Below the kink, demand becomes relatively inelastic, as competitors are expected to match any price cuts to avoid losing customers.The kinked demand curve contributes to price rigidity in oligopolistic markets. When one firm lowers its price, others tend to follow suit to maintain competitiveness.

However, if a firm raises its price, competitors are hesitant to do the same, fearing a potential loss of market share. This strategic interaction among oligopolistic firms creates a gap in the marginal revenue curve at the existing price, exemplifying the complex dynamics and interdependence inherent in oligopoly pricing strategies.

Complete Question:

What are the equations or slopes of the two parts of the demand curve?