Cartels Tend to Collapse and Lose Their Power for Three

question 61

Essay

Cartels tend to collapse and lose their power for three reasons. List these reasons and briefly explain why each of them causes cartels to collapse.

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Definitions:

Utility-maximizing Consumer

An economic concept where consumers aim to get the greatest utility or satisfaction from their purchases given their budget constraints.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, unlike normal goods, where demand increases with rising income.

Demand Curves

Graphs that show the relationship between the price of a product and the quantity of the product demanded.

Income Effect

The change in an individual's or economy's consumption patterns due to a change in real income.