Micro And Macro Theory And Application

Micro and Macro Theory and Application.

The demand curve is kinked at X. At prices higher than P1 demand is very elastic. Oligopolists fear that if their prices are raised competitors will not follow suit resulting in a large part of their market share being lost. At prices lower than P1 demand is more inelastic as oligopolists know that if they cut their prices rivals shall follow them and they will gain very little in additional sales. The result is likely that all the firms shall end up selling at lower prices whilst their market share remains the same before the pricing war. Define what is meant by the term monopoly.

Describe the price and output behaviour of monopoly market structure