Economics 2 Marks Question

1. The only doctor in the area may charge lower fee from the poor patients as compared to the rich ones.
2. For the same facilities, Indian railways are charging lower fare from the senior citizens than others.

Since such a price is below the equilibrium price, it leads to shortage because demand is greater than supply at this price. The shortage in turn may lead to black marketing.

1. Large Number of Buyers and Sellers Under perfect competition, market is dominated by a large number of buyers and sellers.
2. Homogeneous Product Under this form, all sellers sell identical products. It implies that there is no product differentiation.
3. Free Entry and Exit of Firms In perfect competition, there is no restriction on the entry and exit of the firms. Any firm can enter or leave the market at any time.

1. Improvement in technology.
2. Fall in input prices.
3. Fall in price of related products, etc.

1. When increase in demand is equal to increase in supply.
2. When decrease in demand is equal to decrease in supply.
3. When demand increases and supply is perfectly elastic.
4. When demand decreases and supply is perfectly elastic.
5. When supply increases and demand is perfectly elastic.
6. When supply decreases and demand is perfectly elastic.

1. Firms may collude together and decide not to compete with each other and maximise total profits, as in collusive oligopoly.
2. Under non-collusive oligopoly, firms decide not to collude and hence decide to compete with each other through non-price competition.
3. Firms may produce differentiated products, having their own distinguishing characteristics, as in imperfect oligopoly.

1. If the demand for a commodity is perfectly inelastic, i.e., if the demand curve is a vertical straight line, a decrease in supply curve will result only in a change in the equilibrium price, but no change in the equilibrium quantity.
2. If the demand for a commodity is perfectly elastic, i.e., if the demand curve is a horizontal straight line, a decrease in supply curve will result only in change equilibrium quantity, but no change in equilibrium price.

1. Increase in quantity demanded.
2. Increase in supply.
3. Decrease in supply.
4. Decrease in quantity demanded.

1. Huge set-up costs.
2. Patent rights.
3. License requirements.
4. Control over raw material, etc.

Under perfect competition, there will be no restriction on the entry and exit of both buyers and sellers. If the existing sellers start making abnormal profits, new sellers should be able to enter the market freely. This will bring down the abnormal profits to the normal level. Similarly, when losses will occur existing sellers may leave the market. However, such free entry or free exit is possible only in the long run, but not in the short-run

1. Government ensures price Floor/ minimum Support price with the tool called buffer stock.
2. If government feels market price is lower than what it ought to be, it would purchase the commodity at higher price from the farmers, producers so as to maintain stock.
3. Government maintain this buffer stock with itself and they real eased in case of shortage of the commodity in future.

1. Black marketing may be termed as a direct consequence of price ceiling.
2. Black market is a market under which the commodity is bought and Sold at a price higher than the maximum fixed by the Government.
3. It arises due to presence of consumers who may be willing to pay higher price for the commodity than to go without it.

1. One Seller and Large Number of Buyers Under monopoly, there is a single producer of a commodity. He may be alone or there may be a group of partners or joint stock company or a state. However, there are a large number of buyers of the product.
2. Restrictions on the Entry of New Firms Under monopoly, there are some restrictions on the entry of new firms into the monopoly industry. Generally, there are patent rights or exclusive control over a technique or raw material.

1. Patent Rights These are given to the new product or technology and it gives rise to monopoly as no one can use their technology without permission.
2. Cartel Firm's negotiations with other firms with regards to pricing and output policy also give rise to monopoly.
3. Government Licensing Such licensing to a particular company also gives rise to monopoly.

1. When demand increases more than supply, equilibrium price increases.
2. When demand and supply increase equally, equilibrium price remains constant.
3. When supply increases more than demand, equilibrium price falls.

1. Equilibrium price = ₹ 5, Equilibrium quantity = 8kg.
2. Excess demand = 10 - 5 = 5kg.
3. Excess supply = 11 - 6 = 5kg.