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Market Supply and Demand Question?
If a market contained two companies and one of the companies decided to lower the price of their product, how would that affect the supply/demand curve of the market? Would the market supply/demand curve shift because of substitutes or would the market price move along the demand curve? I'm confused about how the market curves would be affected.
- OiyLv 72 months ago
The demand curve is kinked. The lower price company won‘t be able to get extra revenues because the other company will do the same. The demand will be kinked at this price. On the other hand, if a company raises the price, it will lose the clients because the other will stay at the lower price.