Question

1. Explain briefly the meaning of price leadership model in oligopoly market?

2. State how the cartel deal can succeed in the oligopoly market?

3. Senaraikan empat faktor kewujudan monopoli.

Answer 1

Oligopoly is a market situation where the market is controlled or dominated by few sellers selling homogenous or differentiated product.

In oligopoly, when sellers are selling homogenous product, the out output of there product is nearly same. so any single firm can affect the price of whole market. So in oligopoly price leadership is takes place when there is only one dominant oligopolist in the market who sets the price and others follows it. And all the firms having same cost curve.

Price leadership takes place in following condition

Small no.of firms - There should be small no. pf firms in the market. otherwise price leadership will not work.

Entry is restricted - There should be restriction in entry so others firms can't enter in a market easily.

Homogeneous product - The product of all the firms are homogeneous. Their outcome should be nearly same.

Demand is inelastic - Changes in price can't effect much on the demand of the product.

- Similar cost curve - All the firms sharing similar cost curve.