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प्रश्न
Explain the chain effects, if the prevailing market price is below the equilibrium price.
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उत्तर
When the price is lower than the equilibrium market price of a good (OPe), the price ceiling leads to excess of demand. Now, the excess demand will increase the competition among consumers in the market. Thereby they consume the good at a higher price which leads to an increase in the price level, i.e. OPe.
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संबंधित प्रश्न
Determination of equilibrium price under perfect competition.
Giving reason, state whether the following statement is true or false.
When equilibrium price of a good is less than its market price, there will be competition among the sellers.
If the prevailing market price is above the equilibrium price, explain its chain of effects.
X and Y are complementary goods. The price of Y falls. Explain the chain of effects of this change in the market of X.
Explain the chain of an effect of excess demand of a good on it equilibrium price.
Explain the meaning of excess demand and excess supply with the help of a schedule. Explain their effect on equilibrium price.
Distinguish between Gross domestic product at a market price and Gross domestic product at factor cost.
Write explanatory answer.
Define perfect competition and explain price determination under perfect competition.
Suppose the price at which the 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?
Explain the following concept:
Price discrimination
Suppose the demand and supply equations of a commodity X in a perfectly competitive market are given by :
Qd = 1700 – 2P
Qs = 1300 + 3P
Calculate the value of equilibrium price and equilibrium quantity of the commodity X.
State whether the following statement is true or false. Give reasons for your answer :
When the equilibrium price is greater than the market price there will be excess supply in the market.
Answer the following question:
The market for a good is in equilibrium. How would an increase in an input price affect the equilibrium price and equilibrium quantity, keeping other factors constant? Explain using a diagram.
