Assume an oligopolist confronts two possible demand curves for its own output as

Question

Assume an oligopolist confronts two possible demand curves for its own output as illustrated here. The first (A) prevails if other oligopolists don't match price changes. The second (B) prevails if rivals do match price changes By how much does quality demanded increases if the price is reduced from dollar11 to dollar9 and Rivals match the price cut? Rivals don't match the price cut? By how much does quality demanded change when the price is raised from dollar11 to dollar13 and Rivals don't match the price hike?

Explanation / Answer

a) (i) 0.5

(ii) 2.5

b) (i) 1

(ii) 4

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