Class 12 Micro Economics - Chapter Non-competitive Markets NCERT Solutions | What is meant by prices being rigid? How
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.
More Questions From Class 12 Micro Economics - Chapter Non-competitive Markets
- Q:-
List the three different ways in which oligopoly firms may have.
- Q:-
Will the monopolist firm continue to produce in the short run if a loss is incurred at the best short run level of output?
- Q:-
If duo poly behavior is one that is described by Cornet, the market demand curve is given by the equation q = 200 - 4p and both the firms have zero costs, find the quantity supplied by each firm in equilibrium and the equilibrium market price.
- Q:-
Comment on the shape of MR curve in case when TR curve is a
(a) Positively sloped straight line
(b) Horizontal straight line
- Q:-
A monopoly firm has a total fixed cost of Rs 100 and has the following demand schedule:
Quantity
1
2
3
4
5
6
7
8
9
10
Marginal
Revenue
100
90
80
70
60
50
40
30
20
10
Find the short run equilibrium quantity, price and total profit. What would be the equilibrium in the long run? In case the total cost is Rs.1000, describe the equilibrium in the short run and in the long run.
- Q:-
From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity
1
2
3
4
5
6
7
8
9
Marginal
Revenue
10
6
2
2
2
0
0
0
-
- Q:-
What would be the shape of the demand curve so that the total revenue curve is?
(a) A positively sloped straight line passing through the origin?
(b) A horizontal line?
- Q:-
If the monopolist firm of Exercise 3 was a public sector firm. The government set a rule for its manager to accept the government fixed price as given (i.e. to be a price taker and therefore behave as a firm in a perfectly competitive market). And the government has decided to set the price so that demand and supply in the market are equal. What would be the equilibrium price, quantity and profit in this case?
- Q:-
Explain why the demand curve facing a firm under monopolistic competition is negatively sloped.
- Q:-
What is the value of the MR when the demand curve is elastic?
Popular Questions of Class 12 Micro Economics
- Q:-
Explain the concept of a production function
- Q:-
Explain market equilibrium.
- Q:-
Discuss the central problems of an economy.
- Q:-
What are the characteristics of a perfectly competitive market?
- Q:-
What do you mean by the budget set of a consumer?
- Q:-
What is the total product of input?
- Q:-
When do we say that there is an excess demand for a commodity in the market?
- Q:-
What do you mean by the production possibilities of an economy?
- Q:-
How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
- Q:-
What is budget line?
Recently Viewed Questions of Class 12 Micro Economics
- Q:-
What are the characteristics of a perfectly competitive market?
- Q:-
How does an increase in the price of an input affect the supply curve of a firm?
- Q:-
Compute the total revenue, marginal revenue and average revenue schedules in the following table. Market price of each unit of the good is Rs 10.
Quantity Sold TR MR AR 0
1
2
3
4
5
6 - Q:-
A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4. - Q:-
How will a change in the price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.
- Q:-
Consider a market with two firms. In the following table, columns labelled as SS1 and SS2 give the supply schedules of firm 1 and firm 2 respectively. Compute the market supply schedule.
Price (Rs.) SS1 (kg) SS2 (kg) 0
1
2
3
4
5
6
7
80
0
0
1
2
3
4
5
60
0
0
0
0.5
1
1.5
2
2.5 - Q:-
What is the relation between market price and marginal revenue of a price-taking firm?
- Q:-
What do you mean by substitutes? Give examples of two goods which are substitutes of each other.
- Q:-
Compare the effect of shift in the demand curve on the equilibrium when the number of firms in the market is fixed with the situation when entry-exit is permitted.
- Q:-
What is the total product of input?
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