Economics 1 Marks Question

Market price of wheat will increase (due to decrease in supply).

Equilibrium price is the price at which market demand equals market supply.

Equilibrium is a situation where at a given price, quantity demanded is equal to quantity supplied. There is no tendency for market to change from this situation

It is known as duopoly. It is a special case of oligopoly.

It is homogeneous.

There are various barriers to the entry of the new firms.

Support price is higher than the equilibrium price.

It is a market in which there is only one seller/ producer of a product.

Equilibrium price is the price at which quantity demanded of a commodity is equal to its quantity supplied.

When supply decreases, equilibrium price will increase, other things remaining constant.

It will remain constant.

Supply means the quantity of a good which a firm (or industry) is willing to supply at a given price during a period of time.

For a non-viable industry, supply curve lies above the demand curve.

Control price is lower than the equilibrium price.

Under perfect competition, a firm's Marginal Revenue is always equal to price.

Monopoly demand curve is a downward sloping curve, showing that more can be sold only at a lower price.

The quantity bought and sold att he equilibrium price is called equilibrium quantity.

Costs incurred by a firm with a view to promote sales through publicity are seiling costs.

Market equilibrium refers to the situation when market demand is equal to the market supply.

It indicates increase in demand at the same price.

Equilibrium quantity is the quantity at which quantity demanded and quantities supplied of a commodity are equal.

When the market price is lower than the equilibrium price there will be excess demand.

Excess supply means market supply of a commodity is more than the market demand for a commodity at a given price.

It decreases the price of the commodity.

In monopoly, MR curve slopes downward and it lies below the AR curve.

Price is determined by the forces of market demand and market supply under perfect competition.

Equilibrium price will rise.

Equilibrium price will fall.

When supply is perfectly inelastic with increase in demand, price increases but there is no change in quantity supplied.

When Market price is below the equilibrium price, then at that given price, demand is greater than supply that leads to excess demand.

Other things remaining constant, when demand and supply both increase in equal proportion, there will be no change in equilibrium price. However, the equilibrium quantity will increase.

The price at which equilibrium is reached is called equilibrium price.

Selling the same good at different prices to different buyers is known as price discrimination.

It refers to a market form where all the firms in the market are producing homogeneous product. There is no difference of any kind.

In a situation of increase in demand, other things remaining constant, equilibrium price must be rising.

Imperfect oligopoly is that market situation in which all firms produce differentiated but close substitutes, e.g. automobile industry.

When demand increases less than the supply, equilibrium price will fall, other things remaining constant.

These are the costs incurred by the firm with a view to promote sales through publicity.

Equilibrium point is the point of intersection of the demand curve and supply of commodity.

With increase in input price, the supply curve shifts to the left. Accordingly, equilibrium quantity reduces in the product market.

When demand decreases, equilibrium price must decrease, other things remaining unchanged.

Monopoly (Single seller as producer).

Main features of monopoly market are as follows:

1. Single seller and large number of buyers of a product.
2. Entry of new firms not possible.
3. No close substitutes of the product.
4. Full control over price.
5. Price discrimination.
6. Supernormal profits even in the long-run.
7. Less output and higher price as compared to perfect competition.

When supply increases, equilibrium price will fall, other things being equal.

If at a prevailing price, quantity demanded is more than quantity supplied, then supplier will be motivated to increase the price of the commodity due to which demand decreases, till it reaches at the equilibrium price where quantity demanded is equal to quantity supplied.

Perfect competition is a form of the market where there are a large number of buyers and sellers of the commodity. Homogeneous product is sold at a uniform price.

Two examples of price floor in India are:

1. Agricultural Price Support Programmes, i.e., fixing minimum support price for agricultural goods and
2. Minimum Wage Regulation, i.e., fixing minimum wages for labourers.

Price ceiling means maximum price of a commodity that the sellers can charge from the buyers. Often the government fixes this price much below the equilibrium market price of the commodity, so that, it ecomes within the reach of the poorer sections of the society.

When the government imposes price floor, it results in more supply and less demand thus causing a surplus of the commodity.

If the firms are earning supernormal profits, the number of firms in the industry will tend to increase, leading to normal profits in the long-run.

Market is defined as a complex set of activities by which potential buyers and sellers are brought in close contact with each other for the purchase and sale of a commodity.

Price ceiling is resorted to by the government to protect the interests of the consumers (mainly poor population).

Market Equilibrium is a situation where the quantity demanded becomes equal to quantity supplied, corresponding to a particular price.
It means Market demand = Market supply

Buffer stocks are the stocks of mainly foodgrains and to build them, Government procures (or purchase) food grains at the floor price to protect the interest of the farmers by storing them in godowns.

At a price of ₹ 15, there is excess supply of 100 units which exerts downward pressure on price, i.e., price will fall.

Examples of monopolistic competition are:

1. Market for toothpaste in India.
2. Market for soaps in India.

This is a law that prevents big firms to form trusts with a view of preventing them from acquiring monopoly powers in the market.

A black market is a situation whereby goods are sold at a price higher than the legal price ceiling (i.e., the price fixed by the government).

In case of monopoly, the firm is called a price maker. As a single seller deals in the market therefore he holds the power over the price that he charges for a commodity.

There are large number of buyers and sellers under monopolistic competition.

In perfect competition, there is homogeneous product and in monopolistic competition, there is a product differentiation.

No, this is not correct. The price of luxury items like diamond does not fall even if there is a decrease in demand. These items indicate social status of rich class due to which the price remains high, irrespective of change in demand.

Price ceiling refers to the maximum price fixed by the government below the market determined price (i.e., equilibrium price) so that necessities may be made available to the common masses at an affordable price.

A cartel is a group of firms which jointly set 'output and price' policy of its product in such a way so as to reap benefits of monopoly.

When demand is perfectly elastic and supply increases, there will be no change in equilibrium price.

In India, the government has imposed price ceiling on necessary items like wheat, rice, kerosene oil etc. to help the poor to buy them at an affordable price.

It is a situation where different producers in the market try to differentiate their product with a view to attract the buyers and be able to exercise partial control over price.

Above statement is correct, that firms under monopolistic competition cannot decide the price. However, due to product differentiation, they have partial control over price, hence they can charge a price a little over or below its competitors, depending upon the distinct features of its products.

Other things being equal, the increase in demand for a commodity should cause increase in price. But if other things are not equal, then this relationship may not hold true. e.g. if there is an equal increase in supply, the price may not increase. In fact, if the increase in supply is more than increase in demand, the price may fall.

An increase in price of a substitute (y) of goods (x) will directly affect the equilibrium price and quantity of goods (x). Rise in price of (y) will relatively cheaper and demand for (x) will rise. It will lead to excess demand. It will lead to increase in both equilibrium price and equilibrium quantity.

During recession, the demand in the market is low. Due to this, prices fall even if supply of the commodity is good.

Rent control refers to the rent fixed by the government below the market rent.

Patent rights are granted with a view to:

1. Encourage research and development.
2. Give protection to the producers of new products.

1. Supply of labour is provided by households whereas demand for commodities is from the households.
2. The supply of commodities is by the firms, whereas demand for labour is by the firms.

Patent rights are the official recognition of the originators of a new product or technology. No one else can use their technology without obtaining a license from them.

In case of perfect competition, the firm is called a price taker. It has to adopt the price determined by the market forces of demand and supply.

Price floor refers to the minimum price fixed by the government above the market determined price so that the producers may not suffer losses.