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प्रश्न
If the prevailing market price is above the equilibrium price, explain its chain of effects.
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उत्तर
When the price is above the equilibrium market price of a good (OP), the price ceiling leads to excess of supply. In the diagram, the equilibrium price and quantity are OP and OQ. As the equilibrium price is low for farmers, the government fixes the price floor, i.e. the price level increased from OP to OP1 which leads to a decline in the quantity demand, and therefore, there is excess supply in the market. Here, the competition will increase among the sellers, and hence, the price will come down to the equilibrium point where market demand is equal to market supply.
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संबंधित प्रश्न
Explain the chain effects, if the prevailing market price is below the equilibrium price.
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.
Explain the chain of effects of excess supply of a good on its equilibrium price
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.
Equilibrium price of an essential medicine is too high. Explain what possible steps can be taken to bring down the equilibrium price but only through the market forces. Also explain the series of changes that will occur in the market.
Write explanatory answer.
Define perfect competition and explain price determination under perfect competition.
Define or Explain the General equilibrium.
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?
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 the equilibrium quantity determined in such a market?
Explain the following concept:
Price discrimination
Define or explain the following concept:
Equilibrium price
Fill in the blank with appropriate alternative given below
The price at which demand and supply equate to each other is called _______ price.
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.
The diagram given below shows the change in price of cotton shirts. Which one of the following causes the equilibrium price to move from P1 to P2?
