What is meant by prices being rigid? How can oligopoly behavior lead to such an outcome?
Price rigidity implies that the price is unresponsive to the changes in demand. This is because of the fact that even if any firm raises the price of its product with the motive of earning higher profits, the other firm will not do so, and the first firm will lose its customers. On the other hand, if one firm lowers its price in order to earn higher profits by maximising its sales, then in response, the other firm may also reduce the price. Consequently, the increase in total market sales is shared by both the firms. The firm that initiated selling at a lower price may get a lower share of the increase than expected. Therefore, the firms do not change their prices due to the fear of rival reaction. Hence, there is no incentive for any firm to change its price. That is why the prices are regarded as rigid prices or sticky prices.
NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:
This question is important because it tests key concepts from the NCERT syllabus and is frequently asked in CBSE exams.
This question is based on core NCERT concepts explained in the chapter and should be revised thoroughly before exams.
Price rigidity implies that the price is unresponsive to the changes in demand. This is because of the fact that even if any firm raises the price of its product with the motive of earning higher profits, the other firm ...
Step-by-step explanation:
• Price rigidity implies that the price is unresponsive to the changes in demand
• This is because of the fact that even if any firm raises the price of its product with the motive of earning higher profits, the other firm will not do so, and the first firm will lose its customers
• On the other hand, if one firm lowers its price in order to earn higher profits by maximising its sales, then in response, the other firm may also reduce the price
• Consequently, the increase in total market sales is shared by both the firms
• The firm that initiated selling at a lower price may get a lower share of the increase than expected
Students often lose marks by skipping steps, writing incomplete explanations, or misunderstanding keywords used in the question.
Stay updated with our latest educational content and study tips
Interest is one of the most significant ideas in maths and financial calculations. It is very common in banking, loan applications, investments, saving account and competitive exams. Simple Interest and Compound Interest make it easier to find out how much more is earned and/or paid on a principal during the period of time. These Interest … Read more
Read More
In 2026, students, professionals, and job seekers must have a high level of spoken English. Spoken English is a beginner level course to enhance learners’ communication skills in English, their pronunciation, vocabulary, grammar structure and confidence in speaking English fluently. Today, the emphasis of spoken English courses is placed on actual conversations, everyday speech practice … Read more
Read More
Artificial Intelligence (AI) and Machine Learning (ML) are two of the most sought-after technologies in today’s digital era. Although these terms are often used together, they are not the same. Machine Learning is, in fact, a component of Artificial Intelligence that enables systems to learn and enhance on their own, without direct programming. AI is … Read more
Read More
Time, Speed, and Distance are some of the most important concepts in mathematics and aptitude. These are the concepts which are used to calculate the speed of an object, time taken for an object to move and the distance traveled during the motion. Questions from this topic are frequently seen in School Tests, Competitive Tests, … Read more
Read More
Student Discussion
Be the first to comment.
ADD NEW COMMENT