Market Equilibrium quiz

Market equilibrium occurs where:

Excess demand at a price leads to:

With a fixed number of firms, an increase in demand leads to:

Under free entry and exit, long run equilibrium price equals:

A price ceiling set below equilibrium price creates:

Minimum support price is an example of:

If supply increases and demand remains the same, equilibrium price:

If demand and supply both increase in the same proportion, equilibrium price:

Rationing is a consequence of:

In the labour market, labour is supplied by:

Why does excess supply lead to a fall in price? (2 marks)

What is the effect of a decrease in the price of a substitute on the equilibrium of a good? (2 marks)

Why do black markets develop under price ceilings? (2 marks)

Explain the effect of an improvement in technology on market equilibrium. (2 marks)

Why is the long run supply curve horizontal under free entry and exit? (2 marks)

How is the wage rate determined in a perfectly competitive labour market? (2 marks)

Why is a minimum wage a price floor? (2 marks)

What happens to equilibrium if demand falls and supply rises? (2 marks)

Give two reasons why the government imposes a price ceiling. (2 marks)

Why does an increase in income raise the equilibrium price of a normal good? (2 marks)

Given Qd = 100 - 2p and Qs = 40 + 4p, calculate the equilibrium price and quantity. (3 marks)

Given Qd = 600 - 25p and Qs = 100 + 25p, find the equilibrium price and quantity. Calculate the excess supply at p = 12. (3 marks)

In a market with free entry and exit, the minimum AC of each firm is Rs 20 at an output of 40 units. Market demand is Qd = 1,000 - 10p. Find the equilibrium price, quantity and number of firms. (3 marks)

The demand for labour is Ld = 1,200 - 20w and the supply of labour is Ls = 200 + 30w, where w is the daily wage in rupees. Calculate the equilibrium wage and employment. (3 marks)

Market demand is Qd = 200 - 10p and supply changes from Qs = 50 + 15p to Qs = 100 + 15p. Calculate the old and new equilibrium price and quantity. (3 marks)

Read the passage and answer the questions. After heavy rains destroyed onion crops in Maharashtra, onion prices in Delhi rose from Rs 30 to Rs 80 per kg within weeks. The government then imported onions and sold them at fair price shops. (i) Which curve shifted and in which direction? (ii) Show the effect with a diagram. (iii) How did imports affect the market? (5 marks)

Read the passage and answer the questions. The government fixes the price of wheat sold through ration shops at Rs 2 per kg, far below the market price. Each family can buy only a limited quantity. (i) Identify the type of price control. (ii) Why is quantity limited? (iii) State two consequences of this policy. (5 marks)

Read the passage and answer the questions. The government announces an MSP for paddy above the market equilibrium price and buys the excess through the Food Corporation of India. (i) Identify the type of price control. (ii) Show the surplus with a diagram. (iii) Explain two problems caused by this policy. (5 marks)

Read the passage and answer the questions. The demand for electric scooters rose sharply after petrol prices increased. In the same year, many new firms entered the market and battery costs fell. (i) What happens to demand and supply? (ii) Predict the effect on equilibrium quantity. (iii) Why is the effect on price uncertain? (5 marks)

Read the passage and answer the questions. The market for face masks has free entry and exit. The minimum average cost of producing a mask is Rs 5. During an epidemic, demand increased five times. (i) What happens to price in the short run with fixed firms? (ii) What happens in the long run? (iii) How does the number of firms change? (5 marks)

Explain the determination of equilibrium price with a schedule and diagram. How is equilibrium restored when there is excess demand or excess supply? (6 marks)

Explain with diagrams the effects of simultaneous changes in demand and supply on equilibrium price and quantity. (6 marks)

Explain market equilibrium with free entry and exit and the effect of a shift in demand, with diagrams. (6 marks)

Explain price ceiling and price floor with diagrams, giving their consequences and Indian examples. (6 marks)

Explain the determination of the wage rate in a perfectly competitive labour market, deriving the demand curve from the marginal revenue product of labour. Draw a diagram. (6 marks)