Economics

Market Equilibrium

Question:

At a given price of a commodity, there is an excess supply. Is it an equilibrium price? If not, how will an equilibrium price be reached? Use diagram.(Compartment 2014; All India 2006)

or

What is ‘excess supply of a good in a market? Explain its chain of effects on the market for that good. Use diagram.  (Foreign, 2014)

Answer:

By the definition, an equilibrium price refers to the price at which market demand is equal to market supply (i.e. there is no excess demand or excess supply).

When price prevailing in the market is higher than an equilibrium price, demand will be less than supply i.e. there is excess an supply in the market. Excess supply will force the market price to slide down causing an extension of demand and contraction of supply. The process of an extension and contraction would continue till the equilibrium between supply and demand is struck. Thus, an equilibrium price will be restored through the free play of market forces.

No, the price with excess supply is not an equilibrium price. This can be illustrated with the help of the given diagram.
important-questions-for-class-12-economics-market-equilibrium-t-61-44

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Market Equilibrium

Q 1.

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

Q 2.

How will an increase in the income of buyers of an ‘inferior goods', affect its equilibrium price and equilibrium quantity? Explain with the help of a diagram. [CBSE 2006]

Q 3.

Excess Supply

Q 4.

For a non-viable industry where does the supply curve lie relative to demand curve?

Q 5.

With the help of demand and supply schedule, explain the meaning of excess  demand and its effects on price of a commodity. (All India 2009)

Q 6.

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

Q 7.

Explain why an equilibrium price of a commodity is determined at that level of  output at which its demand equals its supply.

Q 8.

Determination of Equilibrium Price Under Perfect Competition

Q 9.

What happens to equilibrium price of a commodity if there is ‘decrease' in its demand and increase' in its supply?

Q 10.

What would be an effect on equilibrium price and quantity when demand and supply both shifts rightward?
Or
What would be an effect on equilibrium price and quantity when there is simultaneous increase in demand and supply? [AI 2008] Or
"If the demand and supply of a commodity both increase, the equilibrium price may not change, may increase, may decrease."Explain using diagrams.
Or [CBSE Sample Paper 2003]
Market for a good is in equilibrium. There is simultaneous "increase"both in demand and supply of the good. Explain its effect on market price. [CBSE 2012]

Q 11.

What would be an effect on equilibrium price and quantity when demand and supply both increase at the same rate? [CBSE 08, 08C] Or
Explain with the help of a diagram a situation when demand and supply curves shift to the right but equilibrium price remains the same.
[AI 2007] Or
Market for a good is in equilibrium. What is the effect on equilibrium price and quantity if both the market demand and the market supply of the goods increase in the same proportion? Use diagram. [CBSE 2008]

Q 12.

State whether the following statement is true or false. Give reason.

When equilibrium price of a good is less than its market price, there will be competition among the sellers.

Q 13.

Effects of Change in Demand On Equilibrium Increase in demand will shift the demand curve to the right keeping supply constant, it will lead to increase in equilibrium price and quantity and vice-versa . However,

Q 14.

How is an equilibrium price of a commodity affected by a leftward shift of the demand curve? Explain it with the help of a diagram. (All India 2007)

Q 15.

What is the Equilibrium Price and Equilibrium Quantity?

Q 16.

At a given price of a commodity, there is an excess supply. Is it an equilibrium price? If not, how will an equilibrium price be reached? Use diagram.(Compartment 2014; All India 2006)

or

What is ‘excess supply of a good in a market? Explain its chain of effects on the market for that good. Use diagram.  (Foreign, 2014)

Q 17.

How does an equilibrium price of a normal commodity change when income of its buyers falls? Explain the chain of effects. (All India 2010)

or

A product market is in an equilibrium. Suppose the demand for the product decreases. What changes will take place in the market? Use diagram. (Delhi 2006 C)

Q 18.

Give the meaning of equilibrium price.

Q 19.

Under what condition increase in demand would not make any effect on equilibrium quantity?

Q 20.

Define equilibrium price. (All India 2008,2006)

Q 21.

With the help of diagram, explain the effects of decrease in demand of a commodity on its equilibrium price and quantity. (Delhi 2009)

Q 22.

Explain market equilibrium.

Q 23.

Explain the changes that will take place when in a market the demand for a good is  greater than supply at the prevailing price.   (Delhi 2010 c)

Q 24.

Market for a good is in an equilibrium. There is simultaneous decrease both in demand and supply, but there is no change in market price. Explain with the help of a schedule, how is it possible.(All India 2012)

Q 25.

How will an increase in an income of the buyers of an inferior good, affect its equilibrium price and equilibrium quantity? Explain with the help of a diagram.(All India 2006)

Q 26.

Explain the effects of a ‘price floor'.  [CBSE Sample Paper 2014] Or
What are the effects of ‘price – floor' (minimum price ceiling) on the market of a good? Use diagram.

Q 27.

Give the meaning of equilibrium. (All India 2009 c)

Q 28.

Give the meaning of equilibrium quantity.

Q 29.

If at a given price of the commodity there is excess demand, how will the equilibrium price be reached? Explain with the help of a diagram.
Or
[CBSE 2004] If equilibrium price of a good is greater than its market price, explain all the changes that will take place in the market. Use diagram.
[AI 2013] Or
Explain the changes that will take place in the market for a commodity if the prevailing market price is less than the equilibrium price.  [CBSE Sample Paper 2011]

Q 30.

Assumptions of Equilibrium

Q 31.

Under what condition increase in demand would not make any effect on equilibrium price?

Q 32.

Give reasons for the following statements:

  1. A decrease in supply will not result in a change in equilibrium quantity if the demand for a commodity is perfectly inelastic.
  2. An decrease in supply will not result in a change in equilibrium price if the demand for a commodity is perfectly elastic.

Q 33.

Market for a good is in equilibrium. There is increase in demand for goods. Explain the chain of effects of this change. Use diagram.
Or [CBSE 2011] How does an increase in demand of a commodity affect its equilibrium price and equilibrium quantity? Explain with the help of a diagram.
Or ‘ [CBSE 2005]
How will equilibrium price and quantity be affected when there is rightward shift of demand curve?  [CBSE 2004, 07C; AI 05]

Q 34.

Market for a good is in equilibrium. There is decrease in demand for this good. Explain the chain of effects of this change. Use diagram.
Or
How will equilibrium price and quantity be affected when there is decrease in demand? Explain with diagram. [CBSE 04C, 06C, 09]
Or
How will equilibrium price and quantity be affected when there is leftward shift of demand curve?
Or [AI 2004]
Explain the chain effects on demand, supply and price caused by leftward shift of demand curve.
Or [CBSE 2005 C] Market for a good is in equilibrium. The demand for the good ‘decreases'. Explain the chain of effects of this change. [CBSE 2015 Set(2)]

Q 35.

What is Market Equilibrium ?

Q 36.

Explain the sequence of changes that will take place when there is  excess demand  of the commodity.(All India 2011)

or

At a given price, there is an excess demand for a good. Explain how the equilibrium price will be reached.         (Delhi 2007)

Q 37.

Effects of Change in Supply On Equilibrium When there is change in supply, keeping demand constant, it will shift supply curve to the right. When supply increases it leads to fall in equilibrium price and rise in quantity, on the other hand, when supply decreases, supply curve will shift to the left, causing rise in price and fall in quantity. However,

Q 38.

Market for a good is m equilibrium. There is  simultaneous increase both in demand and  supply of the good. Explain its effects on market price.(Delhi 2012; All India 2008)

Q 39.

Explain the term market equilibrium. Explain the series of changes that will take place if market price is higher than an equilibrium price. (Delhi 2011 c)

Q 40.

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

Q 41.

What happens to equilibrium price of a commodity if there is an ‘increase' in its demand and decrease' in its supply?

Q 42.

Effects of a Simultaneous Change in Demand and Supply on Equilibrium Price and Quantity

Q 43.

Explain the effects of increase in income of buyers of normal commodity on its  equilibrium price.  (Delhi 2010)

Q 44.

What is excess demand for a good in a market? Explain its chain of effects on the market for that good use diagram.(Foreign, 2014)

Q 45.

Market for good is an equilibrium.Explain the chain of reactions in the market if the price  is(i) Higher than an equilibrium price (ii) Lower than an equilibrium price (All India 2012)

Q 46.

What will happen if the price prevailing in the market is
(i) Above the equilibrium price?
(ii) Below the equilibrium price?
[6 Marks] Or
How price and quantity are determined in the market when number of firms are fixed? Or
How is equilibrium price of a commodity determined? (Use diagram).
[CBSE 2004C; AI 07, 09] Or
Explain why equilibrium price is determined at the level of output at which its demand is equal to its supply. [CBSE 2010C]
Or
How will equilibrium price be reached when there is excess demand/excess supply? Explain with diagram.  [CBSE 2004, 07; AI 2004] Or
With the help of a suitable diagram, explain the process of determination of equilibrium price of a commodity under perfectly competitive market.
[CBSE Sample Paper 2003] Or
Market for a good is in equilibrium. Explain the chain of reactions in the market if the price is
(i) higher than equilibrium price and
(ii) lower than equilibrium price. [AI 2012]

Q 47.

A severe drought results in a drastic fall in the output of wheat. Analyse how will it affect the market price of wheat?

Q 48.

How is the equilibrium price and equilibrium quantity of a normal commodity affected by an increase in the income of its buyers? Explain with the help of a diagram.
Or [CBSE 2006]
Explain the effect of increase in income of buyers of a ‘normal' commodity on its equilibrium price.  [CBSE 2010]

Q 49.

Simple Applications of Demand and Supply

Q 50.

Explain the effects of a price ceiling'.  [CBSE Sample Paper 2014] Or Explain the effects of maximum price ceiling' on the market of a good. Use diagram. [CBSE 2015]