The Kinked Demand Curve: Econ Concepts in 60 Seconds

The video tutorial by Mr. Cook from ACDC Econ explains the concept of oligopolies, focusing on the kinked demand curve in non-colluding oligopolies. It describes how firms react to price changes, highlighting that if one firm increases its price, others will ignore it, leading to elastic demand. Conversely, if a firm lowers its price, competitors will match it, resulting in inelastic demand. The tutorial uses a graph to illustrate these concepts, emphasizing the strategic behavior of firms in an oligopoly.

What is a key characteristic of firms in a non-colluding oligopoly?

• They work together to set prices.

• They always increase prices together.

• They have a monopoly over the market.

• They ignore each other's price changes.

In a non-colluding oligopoly, what happens to demand when a firm raises its price?

• Demand becomes elastic.

• Demand becomes inelastic.

• Demand increases significantly.

• Demand remains unchanged.

If a firm lowers its price in a non-colluding oligopoly, what is the likely response from competitors?

• They will exit the market.

• They will increase their prices.

• They will ignore the price change.

• They will match the price decrease.

What is the result of a price decrease in terms of demand elasticity in a non-colluding oligopoly?

• Demand becomes more elastic.

• Demand becomes more inelastic.

• Demand increases significantly.

• Demand remains perfectly elastic.

What does the kinked demand curve illustrate in an oligopoly?

• The relationship between supply and demand.

• The benefits of collusion among firms.

• The effect of price changes on demand elasticity.

• The impact of government regulations.