Question

Why is there no single, stable demand curve for each firm in a duopoly?

Options

• Demand never changes in any market

• Price is always fixed by the government

• Demand depends on the rival firm’s behaviour

• Consumers do not respond to prices

Answer 1

Demand depends on the rival firm’s behaviour

Explanation:

The demand for each firm’s product changes when the rival changes its price, output, or advertising, so one fixed demand curve is not possible.