Multiple choice

In the Sweezy model of Oligopoly, an increase in demand will make upper portion of the demand curve:

  1. More elastic

  2. Less elastic

  3. Unitary elastic

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In the Sweezy kinked demand curve model of oligopoly, the upper portion of the demand curve is less elastic (more inelastic) because firms expect competitors to match their price increases but not their price decreases. This asymmetry in expected responses creates the kink and makes the upper segment flatter (less elastic).

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