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
Have you ever noticed that doing activities such as playing outdoors, chilling with your friends, or using the mobile phone feels so effortless and fun? Whenever you might have played sports, you kept on playing even when it felt hard initially just so you could get that feeling after the game, a feeling of accomplishment, … Read more
Read More
Imagine this; You’re sitting in the test hall, pen in hand, and the question paper has been put in front of you. Rather than freezing, you feel calm, collected, and set. Why? As you have formerly been there in your mind. You’ve seen yourself sitting composibly, reviewing the question paper fluently, performing well in the … Read more
Read More
Parent-Teacher Meetings (PTMs) are more than quick updates on marks — they’re a chance to build a real partnership between home and school. A good Parent-Teacher Meeting conversation helps parents see beyond grades. It opens up insights about a child’s strengths, struggles, emotions and even hidden talents. When parents participate actively, they don’t just track … Read more
Read More
In today’s world of endless information , knowing how to think is more important than knowing what to think . From school projects to real – life decisions , critical thinking helps students question ideas , analyze facts and form logical conclusions . But what exactly does critical thinking mean ? Simply put , it’s … Read more
Read More
Student Discussion
Be the first to comment.
ADD NEW COMMENT