Kerala Plus Two Microeconomics Chapter Wise Questions and Answers Chapter 5 Market Equilibrium
Question 1.
Explain the consequence if price prevailing the market is fixed:
(i) above the equilibrium price (price floor)
(ii) below the equilibrium price (price ceiling)
കമ്പോളത്തിൽ നിലനിൽക്കുന്ന വില താഴെ പറയുന്ന രീതിയിലാണെങ്കിൽ അതിന്റെ അനന്തര ഫലങ്ങൾ എന്തെല്ലാം ?
(i) സന്തുലിത വിലയേക്കാൾ മുകളിൽ (തറ വില)
(ii) സന്തുലിത വിലയേക്കാൾ താഴെ (പരിധി വില) (March 2016)
Answer:
(i) Above equilibrium price (price floor) shows the excess supply.
(ii) Below the equilibrium price shows the excess demand. In price ceiling each consumer has to stand in long queues to buy goods from ration shops.
Question 2.
Diagrammatical explain the effects of changes in autonomous spending on equilibrium demand in the product market.
ആട്ടോണമസ് ചെലവ് ഫലപ്രദമായ ചോദന എങ്ങനെ സ്വാധീനിക്കുന്നു എന്ന്
ചിത്രത്തിന്റെ (March 2016)
Answer:
a) There are two situations of shift of demand and supply curves in the same direction.
1. Demand and supply curves shift forward. In this case equilibrium quality will increases. Equilibrium price may increase, decrease remain unchanged.
2. Demand and supply curves shift backward. In this case situation equilibrium quality will decrease. Equilibrium may increase, decrease remain unchanged.
b) There are two situations of shift of demand and supply curves in the opposite direction.
1. In this situation equilibrium price will increase, Equal quantity may increase, decrease or remain unchanged.
2. Demand decreases and supply increases .In this situation equilibrium price will decrease. Equilibrium quantity may increase decrease or remain unchanged.
Question 3.
The following diagram shows the equilibrium price of wheat determined by the supply curve ‘SS’ and market demand curve ‘DD’. With the help of the diagram answer the questions given below.
കമ്പോള ചോദനവും കമ്പോള പാനവും നിശ്ചയിച്ച ഗോതമ്പിന്റെ സന്തുലിത വിലയുടെ ചിത്രം ചുവടെ ർക്കുന്നു. ചിത്രത്തിന്റെ സഹായത്തോടെ കൊടു ത്തിരിക്കുന്ന ചോദ്യങ്ങൾക്ക് ഉത്തരമെഴുതുക.
a. If the Government imposes price ceiling on wheat, what happens to the demand for wheat?
ഗവൺമെന്റ് ഗോമ്പിന് പരമാവധി വില നിശ്ച യിച്ചാൽ ഗോതമ്പിന്റെ ചോദനത്തിന് എന്ത് വ്യത്യാ സം സംഭവിക്കുന്നു?
b. Define price ceiling
പരമാവധി വില എന്താണെന്ന് നിർവചിക്കുക
c. Write down two adverse impacts of price ceiling on the consumers.
പരമാവധി വില നിശ്ചയിച്ചാൽ ഉപഭോക്താക്കൾ ക്കുണ്ടാകുന്ന രണ്ട് ദോഷഫലങ്ങൾ എന്തെല്ലാം? (March 2015)
Answer:
a. Price ceiling increases the demand for wheat. As supply becomes less, there will be short age of wheat as shown in the diagram.
b. Price ceiling is a situation when the price charged is more than or less than the equilibrium price determined by market forces
of demand and supply.
c. Price ceiling also reduce the quality of products as suppliers have less financial resources to reinvest in their business. Price ceiling will also encourage black markets to thrive in an economy. Shortage in the free market makes the consumer to look for commodities in the black market
even though they are highly price.
Question 4.
Read the following statements:
a) Both demand and supply curves shift in the same direction.
b) Demand and supply curves shift in the opposite direction. What will be the effect on equilibrium quantity and price in these situations? (March 2014)
Answer:
a) There are two situations of shift of demand and supply curves in the same direction.
1. Demand and supply curves shift forward. In this case equilibrium quality will increases. Equilibrium price may increase, decrease remain unchanged.
2. Demand and supply curves shift backward. In this case situation equilibrium quality will decrease. Equilibrium may increase, decrease remain unchanged.
b) There are two situations of shift of demand and supply curves in the opposite direction.
1. In this situation equilibrium price will increase, Equal quantity may increase, decrease or remain unchanged.
2. Demand decreases and supply increases .In this situation equilibrium price will decrease. Equilibrium quantity may increase decrease or remain unchanged.
Question 5.
In economics, it is generally assumed that consumer is rational. The consumer have well defined preference over a set of available bundle. He always tries to maximise his satisfaction or attain the optimum level. Diagrammatically illustrate the consumer’s optimum. (Hint: Consumer’s equilibrium). (March 2013)
Answer:
The term consumer’s equilibrium refers to the amount of goods and services which the consumer may buy in the market given his income and given prices of goods in the market. The aim of the consumers is to get maximum satisfaction from his money income. Given the price line (budget line) and the indifference map, a consumer is said to be in equilibrium at a point where the price line is touching the highest attainable indifference curve, a consumer is said to be in equilibrium at a point where the price line is touching the highest attainable indifference curve from below. Thus the consumer equilibrium under the indifference curve theory must meet the following two conditions.
First order condition:
A given price line should be tangent to an indifference curve or marginal rate of substitution of good X for good Y (MRS) must be equal to the price ratio of the two goods. MRSxy = Px/Py
Second order condition
The second condition is that indifference curve must be convex to the origin at the point of tangency
Assumptions
The following assumptions are made to determine the consumer’s equilibrium position.
- Rationality. The consumer wants to obtain maximum satisfaction given his income and prices.
- Utility is ordinal. The consumer can rank his preferences according to the satisfaction of each combination of goods.
- Consistency of choice. It is assumed that the consumer is consistent in the choice of goods.
- Perfect competition. There is perfect competition in the market from where the consumer is purchasing the goods.The optimum bundle of the consumer is located at the point where the budget line is tangent to one of the indifference curves.
It is drawn below:
Condition I: Budget line should be tangent to the indifference curve
Condition II: Slope of IC(MRSxy) should be equal to slope of budget line (Price Ratio).
Question 6.
The following diagram shows equilibrium market price determined by the equality between demand and supply. Show the effect in demand and supply equilibrium price and output under the following situations (use diagrams) [March 2013]
i) Increase in demand or when the demand curve shift right words.
ii) Increase in supply or when supply curve shift right wards.
Answer:
a) When demand curve shift to right increase demand), there will be increase in equilibrium price increase in equilibrium quantity. This change is shown in the diagram.
b) When supply curve shift to right (increase in supply the equilibrium price decreases and the equilibrium quantity increases. This is given in the following diagram.
Question 7.
This is a demand curve for a branded umbrella.
a) If the demand for umbrella increases during rainy season, what term we use in economics to
denote this change? Draw the curve.
b) If the demand of the umbrella decreases when the price increases, what term we use in economics to denote this change? Draw the curve, (March 2012)
ഒരു പ്രമുഖ കുട കമ്പനിയുടെ ചോദന പ്രക മാണ് തന്നിരിക്കുന്നത്.
a) കുടയുടെ ചോദനം നല്ല മഴക്കാലത്ത് കൂടു കയാണെങ്കിൽ ഈ മാറ്റത്തെ സാമ്പത്തിക ശാസ്ത്രത്തിൽ എന്ത് പേര് വിളിക്കുന്നു? മാറ്റം ചിത്രത്തിൽ കാണിക്കുക.
b) വില കൂടിയപ്പോൾ കൂടയുടെ ചോദനം കുറ യുകയാണെങ്കിൽ ഈ മാറ്റത്തെ എന്ത് പേര് വിളിക്കുന്നു? മാറ്റം ചിത്രത്തിൽ കാണിക്കു
Answer:
a) Rightward shift or increase in demand Price
b) Upward movement along the same demand there is contraction of demand.
Question 8.
Imposition of the price ceiling below the equilibrium price leads to
a) Excess demand
b) Excess supply
c) Deficit demand
d) Deficit supply
സംതുലിത വിലയ്ക്ക് താഴെ പൈസ് സീലിംഗ് (price ceiling) ഏർപ്പെടുത്തുന്നത്.
a) അധിക ചാദനത്തിന് കാരണമാകും
b) അധിക പ്രദാനത്തിന് കാരണമാകും
c) ന്യൂന ചോദനത്തിന് കാരണമാകും
d) ന്യൂന പ്രദാനത്തിന് കാരണമാകും
Answer:
Excess demand
അധിക ചോദനത്തിന് കാരണമാകും
Question 9.
The demand and supply equations of a commodity in a perfectly competitive market are given as
qd= 700 – P
qa = 500 + 3P
a) Equilibrium price
b) Equilibrium quantity
c) Based on the given supply and demand equations draw equilibrium situation on a – diagram.
സമ്പൂർണ്ണ കുത്തക മത്സര കമ്പോളത്തിലെ ഒരു സാധനത്തിന്റെ ചോദന പ്രദാന സമവാക്യങ്ങ ളാണ് തന്നിരിക്കുന്നത്.
qd= 700 – P
qa = 500 + 3P
a) സംന്തുലിതാവസ്ഥ കാണുക.
b) സംന്തുലിത അളവ് കാണുക.
c) തന്നിരിക്കുന്ന ചോദന പ്രദാന സമവാക്യങ്ങ ളിൽ നിന്നും സംതുലിതാവസ്ഥ ഒരു രേഖാ ചിത്രത്തിന്റെ സഹായത്തോടെ ചിത്രീകരിക്കു
Answer:
Equilibrium price
a) qD= qs
i.e, 700 – P = 500 + 3P
4P = 700 – 500 = 200
P = 200/4 = 50
b) Equilibrium quantity
q = 700 – P
i.e., 700 – 50 = 650
Question 10.
Suppose demand and supply curve of good x shift simultaneously. The simultaneous shift can happen in four possible cases. The impact on equilibrium price and quantity in all the four cases are different. On the basis of this, complete the following table:
| Shift in demand | Shift in supply | Equilibrium quantity | Equilibrium price |
| Leftward | -(1)- | Decrease | Remain unchanged |
| -(2)- | Rightward | Increase | Unchanged |
| Leftward | Rightward | Unchanged | –(3)– |
| Right ward | Leftward | Unchanged | –(4)– |
X എന്ന സാധനത്തിന്റെ പ്രദാനവകവും (ചോദന വകവും ഒരേസമയം മാറുന്നു എന്ന് സങ്കൽപി ക്കുക. ഈ മാറ്റങ്ങൾ നാല് അവസ്ഥകളിലൂടെ സംഭവിക്കുന്നു. ഈ നാല് അവസ്ഥകളിലൂം സ് ന്തുലിത വിലയിലും അളവിലും മാറ്റം സംഭവിക്കു ന്നു. ഇതിന്റെ അടിസ്ഥാനത്തിൽ താഴെ കൊടുത്ത പട്ടിക പൂർത്തിയാക്കുക. (March 2010)
Answer:
- Leftward
- Rightward
- Decrease
- Increase
Question 11.
Provide appropriate term.
അനുയോജ്യമായ പദം നൽകുക.
a) Upper limit on the price of a good imposed by government.
b) The ratio of foreign currency to domestic prices.
a) ഒരു സാധനത്തിന്റെ വിലയിൽ ഗവൺമെന്റ് – നിർണ്ണയിക്കുന്ന ഉയർന്ന പരിധി
b) വിദേശ കറൻസിയും ആഭ്യന്തര വിലയും – തമ്മിലുള്ള തോത്.
Answer:
a) Price ceiling or maximum price
b) Exchange rate or Foreign exchange rate
Question 12.
Explain market equilibrium.
കാമ്പാള സന്തുലിതാവസ്ഥ എന്തെന്ന് വിശദീ കരിക്കുക
Answer:
Market equilibrium can be analysed in two different situations:
കമ്പോള സന്തുലിതാവസ്ഥ രണ്ട് വ്യത്യസ്ത സാഹ ചര്യങ്ങളിൽ വിശകലനം ചെയ്യുന്നു.
- Market equilibrium with fixed number of firms
നിശ്ചിത എണ്ണം സ്ഥാപനങ്ങളുള്ളപ്പോൾ കാമ്പാള സന്തുലിതാവസ്ഥ - Market equilibrium with free entry and exist.
സ്ഥാപനങ്ങൾക്ക് സ്വതന്ത്രമായി കാമ്പാളത്തിൽ പ്രാവ ശിക്കാനും വിട്ടുപോകാനും കഴിയുമ്പോളുള്ള സന്തു ലിതാവസ്ഥ.
Question 13.
When do we say there is excess demand for a commodity in the market?
എപ്പോഴാണ് നമ്മൾ ഒരു ഉല്പന്നത്തിന് കൂടു തൽ ചോദനമുണ്ടെന്ന് പറയുന്നത്.
Answer:
When market demand exceeds market supply of commodity at a given price then there is an excess demand for a commodity.
Question 14.
When do we say there is excess supply for a commodity in the market?
എപ്പോഴാണ് നമ്മൾ ഒരു ഉല്പ്പന്നത്തിന് കൂടു തൽ പ്രദനമുണ്ടെന്ന് പറയുന്നത്
Answer:
When the market supply of a commodity is greater than market demand at a given price then there is an excess supply for a commodity in the market.
Question 15.
What will happen if the price prevailing in the market is
(i) above the equilibrium price?
(ii) below the equilibrium price?
Answer:
a.Price ceiling
(വിലപരിധി)
The government imposed upper limit on the price of a good or service is called price ceiling
ഒരു സാധനത്തിനോ സേവനത്തിനാ ഗവൺമെന്റ് ഒരു ഉയർന്ന വില നിശ്ചയിക്കുന്നതിനെയാണ് വില പരിധി എന്നുപറയുന്നത്.
b.Price floor
(തവില)
The govenment imposed lower limit on the price that may be charged for a particular good or service is called price floor.
ഒരു പ്രത്യക സാധന സവനത്തിന് ഗവൺമെന്റ് നിശ്ചയിക്കുന്ന ഏറ്റവും കുറഞ്ഞ ഒരു വിലയാണ തറവില എന്നിയപ്പെടുന്നത്.
Question 16.
Suppose the price at which equilibrium is attained in exercise 5 is above the minimum average cost of the firms constituting the market. Now, if allow for free entry and exit of firms, how win the market price adjust to it?
Answer:
The equilibrium price is Rs 9 in the above the minimum of average cost it implies that firm is earning super normal profit. This situation attracts new firms, the industry supply of output also increases new firms will continue to enter the industry which leads to fall until it becomes dual to minimum average cost. At this stage firms
starts earning normal profit.
Question 17.
How is the equilibrium number of firms determined in a market where entry and exit is permitted?
Answer:
With the free entry and exit, the equilibrium number of firms determined in a market by equilibrium quantity supply per firm. Equilibrium no.of firms – Equilibrium quantity/supply of each firm.
Question 18.
Can you think of any commodity on which price ceiling is imposed in India? What may be the consequences of price ceiling?
Answer:
Price ceiling means the maximum price in this condition the market price below the equilibrium price consequences of price ceiling are
a. Excess demand
b. Emergence of black market
c. Rationing due to shortage of supply of the commodity.
Question 19.
Suppose the market determined rent for apartments is too high for common people to afford. If the government comes for ward to help those seeking arguments on rent by imposing control on rent, what impact will it have on the market for apartments.
Answer:
If the Government imposes price ceiling by Rent Control Act that can be charged as the rent of apartment it results decline in equilibrium price due to
a. Excess demand of apartments
b. black marketing by builders
Question 20.
A shift in demand has a larger effect on price and smaller effect on quantity when the number of firms is fixed compared to the situation when free entry and exit is permitted. Explain
Answer:
Under long run, when free entry and exit is permitted, there is total changes in quantity bu no change in equilibrium price. It happens when the demand curve intersect the supply curve at equilibrium point. Then price is equal to minimum average cost. As result the demand curve shift upward, it effect, there is no change in price but quantity rise when the number of firms is fixed, the supply curve is upward and demand curve is downward sloping. It results the demand effect more in price than quantity.
Question 21.
At what level of price do the firms in a perfectly competitive market supply when free entry and exit is
allowed in the market.
Answer:
Equilibrium price will always be equal to minimum average cost in the long run as due to the free entry and exit of the firms, all the firms earn zero economic profit.
