Oligopoly Equilibrium figure

Oligopoly Equilibrium figure - ED of the demand curve...

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Oligopoly Equilibrium figure: The lower segment ED 1 of the demand curve is steeper. Even with a significant fall in price from P to P 1 increase in the quantity demanded QQ 1 is very small. Reduction in price will then result in a smaller total revenue for the firm. On the other hand, any attempt to cause a small rise in price as PP2 on the flatter portion
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Unformatted text preview: ED of the demand curve causes a significant fall in the quantity demanded from Q to Q 2 . This again will cause total revenue of the oligopolist to be smaller at higher price. The oligopolist is rigidly fixed at E, the point of Kink with P as the price. This therefore is also called sticky price solution ....
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This note was uploaded on 11/26/2011 for the course ECON MICRO ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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