Market Equilibrium

Class 12 · Economics · 22 Questions

1beginner💡 Understand3 marksShort Answer

Explain market equilibrium.

2beginner🧠 Remember2 marksShort Answer

When do we say there is excess demand for a commodity in the market?

3beginner🧠 Remember2 marksShort Answer

When do we say there is excess supply for a commodity in the market?

4intermediate💡 Understand3 marksShort Answer

What will happen if the price prevailing in the market is (i) above the equilibrium price? (ii) below the equilibrium price?

5intermediate💡 Understand5 marksLong Answer

Explain how price is determined in a perfectly competitive market with fixed number of firms.

6intermediate🔧 Apply5 marksLong Answer

Suppose the price at which equilibrium is attained in exercise 5 is above the minimum average cost of the firms constituting the market. Now if we allow for free entry and exit of firms, how will the market price adjust to it?

7intermediate💡 Understand3 marksShort Answer

At what level of price do the firms in a perfectly competitive market supply when free entry and exit is allowed in the market? How is equilibrium quantity determined in such a market?

8intermediate💡 Understand3 marksShort Answer

How is the equilibrium number of firms determined in a market where entry and exit is permitted?

9intermediate🔍 Analyze3 marksShort Answer

How are equilibrium price and quantity affected when income of the consumers (a) increase? (b) decrease?

12intermediate💡 Understand3 marksShort Answer

How do the equilibrium price and quantity of a commodity change when price of input used in its production changes?

13intermediate🔧 Apply3 marksShort Answer

If the price of a substitute(Y) of good X increases, what impact does it have on the equilibrium price and quantity of good X?

14advanced🔍 Analyze5 marksLong Answer

Compare the effect of shift in demand curve on the equilibrium when the number of firms in the market is fixed with the situation when entry-exit is permitted.

16advanced🔍 Analyze5 marksLong Answer

How are the equilibrium price and quantity affected when (a) both demand and supply curves shift in the same direction? (b) demand and supply curves shift in opposite directions?

17intermediate💡 Understand3 marksShort Answer

In what respect do the supply and demand curves in the labour market differ from those in the goods market?

18intermediate💡 Understand3 marksShort Answer

How is the optimal amount of labour determined in a perfectly competitive market?

19intermediate💡 Understand3 marksShort Answer

How is the wage rate determined in a perfectly competitive labour market?

20intermediate🔧 Apply3 marksShort Answer

Can you think of any commodity on which price ceiling is imposed in India? What may be the consequence of price-ceiling?

21advanced🔍 Analyze5 marksLong Answer

A shift in demand curve has a larger effect on price and smaller effect on quantity when the number of firms is fixed compared to the situation when free entry and exit is permitted. Explain.

22intermediate🔧 Apply5 marksNumerical

Suppose the demand and supply curve of commodity X in a perfectly competitive market are given by: $q^{D}$ = 700 - p; $q^{S}$ = 500 + 3p for p $\geq$ 15; = 0 for 0 $\leq$ p < 15. Assume that the market consists of identical firms. Identify the reason behind the market supply of commodity X being zero at any price less than Rs 15. What will be the equilibrium price for this commodity? At equilibrium, what quantity of X will be produced?

23advanced🔧 Apply5 marksNumerical

Considering the same demand curve as in exercise 22, now let us allow for free entry and exit of the firms producing commodity X. Also assume the market consists of identical firms producing commodity X. Let the supply curve of a single firm be explained as $q^{S}$ _f = 8 + 3p for p $\geq$ 20; = 0 for 0 $\leq$ p < 20.

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