If no other firms follow its changes in prices the firm will instead find itself on DE, a much more elastic demand curve. If the firm is the only one to raise prices it will experience a large drop in sales. Likewise, if it is the only one to lower prices it will find sales increase rapidly. So DE is the relevant demand curve if others don't follow the firms price changes.

   Before it can set profit maximizing price and quantity the firm must determine which is the appropriate demand curve. The kinked demand curve model is based on the idea that, if the firm raises prices other firms won't follow because they don't worry about loosing market share to a firm which is raising price. However, if the firm lowers its prices other firms will respond by lowering their prices also since they don't want to lose sales.

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