Purchase Solution

Kinked demand curve - demand and forecasting

Not what you're looking for?

Ask Custom Question

See the attached file.

Attachments
Purchase this Solution
Solution Summary

A kinked demand curve is assessed in the solution.

Solution Preview

See the attached file.

55. The Winston Tobacco Company feels that it is faced with the following segmented demand function for it cigarettes:

P= 10- .10Q when 0≤ Q ≤ 20
12- .20Q when Q > 20

Where Q is the number of cartons sold and P is the price per carton.

a. Why is such a segmented demand function likely to exists? What type of industry structure is indicated by this relationship?

This is an example of kinked demand curve. Such type of demand curve exists when it is not possible for firms to increase or decrease price. If the firm increases its prices even by a small amount, other firms in the markets will not follow as they will gain sales by maintaining the same price level. So, increasing price would ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • Oligopoly: Underlying assumptions of the kinked-demand curve

    Underlying assumptions of the kinked-demand curve for oligpolists and the shortcomings of this model.

  • Oligopoly: Price cut and kinked demand curve

    370178 Oligopoly: Price cut and kinked demand curve What is the cost to a firm in an oligopoly that fails to take rivals' actions into account?

  • Kinked demand curve

    59397 Kinked demand curve overview A firm faces a kinked demand curve which is relatively flat above Po and relatively steep below Po. a. Describe the pricing behavior of the firm's rivals. In particular, how do they react to changes in price?

  • kinked-demand model

    73157 Question with an oligolply What assumptions about a rival's response to price changes underlie the kinked-demand curve for ologopolists? What are the shortcomings of the kinked-demand model? Please see the attached file.

  • Earning profit in a monopolistically competitive market

    All of the above In the Kinked Demand curve model, the demand curve is ________ for prices increases and _______ for price decreases: Select one: a. unit elastic; relatively elastic b. relatively elastic; relatively inelastic c. relatively

  • Monopoly and Demand Curve

    Discussion answers to questions about the kinked demand curve of a company, and whether Microsoft is considered a monopoly. The second is an opinion with some support.

  • Equation for MR curve

    b) Determine the price and quantity at the "kink" of the demand curve. The kinked demand curve in an oligopolistic market is defined by the equations: P = 140 - 0.5Q, and P = 200 - 2Q. a) Derive equations for the marginal revenue curves.

  • Kinked Demand Curve / Oligopolistic market

    17683 Kinked Demand Curve: Oligopolistic Market Subject: Kinked Demand Curve / Oligopolistic market Details: The kinked demand curve in an oligopolistic market is represented by the following: P = 100 - Q and P = 120 - 2*Q The oligopoly firms

  • Oligopoly Model

    Your answer is not correct because "Game theory" and "Kinked Demand Curve" are not models of oligopoly. The correct answers are Bertrand Model and Cournot models.

View More Related Solutions