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Market Equilibrium — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsMarket Equilibrium4 Marks
Question
Why a firm's demand curve indeterminates under oligopoly?
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Answer

A firm's demand curve is indeterminates under oligopoly because there is high degree of interdependence between the firms. Price and output policy of one firm has a significant impact on the price and output policy of the rival firms in the market. When one firm lowers its price, the rival firms may also lower the price. Contrarily, when one firm raises the price, the rival firms may not do it. Accordingly, it becomes very difficult to estimate change in firm's sale caused by a change in price. So, a precise relationship between price and sales cannot be established or the firm's demand curve cannot be drawn.

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