InterviewSolution
Saved Bookmarks
InterviewSolution
This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 51. |
The diagram below shows one of the government intervention programmes in the market. 1. Identify the programme and calculate the excess supply. 2. Explain how the government is monitoring the higher price fixed. |
|
Answer» 1. Minimum price floor/price, 40 unit excess supply. 2. The government announces the minimum price above the market price. As a result of this intervention there occurs excess supply in the market. The government has to remove the excess from the market to maintain the price. So the government store the excess supply in the warehouses and redistribute it at the time of shortage. |
|
| 52. |
The market demand function and market supply functions are given as, Find the equilibrium price and equilibrium quantity. qD = 200 – P for 0 = P = 200 qS = 120 + P for P > 10 |
|
Answer» We nd equilibrium price by equating market demand function and market supply functions as shown below qD = qS 200-P = 120 + P 2P = 80 P = 80/2 = 40 Therefore equilibrium price is ₹40. Equilibrium quantity is obtained by substituting the equilibrium price into either the demand or supply function equations. Applying the value of price ₹40 in demand equation we have. qD = 200 – P qD =200 – 40 = 160 Therefore equilibrium price is ₹40 and equilibrium quantity is 160. |
|
| 53. |
When there is increase in demand, the demand curve.(a) shifts right ward (b) shifts leftward (c) shifts downward (d) remains constant |
|
Answer» (a) shifts right ward |
|
| 54. |
Complete the statement given below. Free entry and of firms imply that the market price will always be equal to ……… |
|
Answer» Minimum average cost (P = Min. AC) |
|
| 55. |
Market equilibrium of a commodity shows, (a) excess demand (b) quantity demanded greater than quantity supplied (c) quantity demanded equals quantity supplied (d) excess supply |
|
Answer» (c) quantity demanded equals quantity supplied |
|
| 56. |
Demand and supply equations of commodity X is given byqd = 100- Pqs = 70 + 2P find the equilibrium price and quantity. |
|
Answer» qd = 100 - p qs = 70 + 2p qd = qs 100 - p = 70 + 2p 100 - 70 = 2p + p 30 = 3p p = \(\frac{30}{3}\) = p = 10 Hence equilibrium price is = 10 Equilibrium quantity is = qd = 100 -P = 100 - 10 = 100 - 10 = 90 |
|
| 57. |
Complete the following table to show the impact of simultaneous shifts of demand and supply on equilibrium price and quantity.Shift in DemandShift in supplyQuantityPriceLeftwardLeftwardRightwardRightwardLeftwardRightwardRightwardLeftward |
||||||||||||||||||||
Answer»
|
|||||||||||||||||||||
| 58. |
State whether the following statements are true or false:(a) With supply curve remaining unchanged, when demand curve shifts rightward, the equilibrium quantity decreases and equilibrium price decreases. (b) In a perfectly competitive market, equilibrium occurs where market demand equals market supply. |
|
Answer» (a) False (b) True |
|
| 59. |
Draw distinction between floor pricing and price ceiling. |
|
Answer» Floor price means minimum price. Floor price is fixed to protect producers like farmers from price crashes. It ensures a remunerative price to producers. In India, floor prices are fixed for a variety of agricultural commodities like paddy, wheat, coconut, rubber etc. On the other hand, price ceiling mean maximum price. It is the maximum price fixed by the government. The aim of price ceiling is to protect consumers. Government fixes price ceiling for essential products and medicines to protect the interests of the consumers. |
|
| 60. |
Suppose the demand and supply curves of salt are given by. qD = 1000 – P qS = 700 + 2P 1. Find the equilibrium price and quantity 2. Suppose that the price of input used to produce salt has increased so that the supply curve is qS = 400 + 2P How does the equilibrium price and quantity change? Does the change conform to your expectation?3. Suppose the government has imposed a tax of 3 per unit of salt. How does it affect the equilibrium price and quantity? |
|
Answer» 1. equilibrium price and quantity qD = 1000 – P qS = 700 + 2P For equilibrium qD = qS 1000 – P = 700 + 2P 1000 – 700 = 3 P 3P = 300 P = 300/3 = 100 Put the value of P in supply equation qS = 700 + 2P qS = 700 + 2×100 qS =700 + 200 = 900 Therefore the equilibrium price = ? 100 and the equilibrium quantity is = 900 units 2. For equilibrium qD = qS 1000 – P = 400 + 2P 1000 – 400 = 3P 600 = 3 P P = 600 / 3 = 200 Put the value of P in demand equation QD = 1000 – P QD = 1000 – 200 = 800 Therefore the equilibrium price = ₹200 and the equilibrium quantity is = 800 units This change confirms to our expectations, i.e., rise in input prices raises prices and lowers supply. 3. qD = 1000 – P qS = 700 + 2P When ₹3 as tax is imposed on sale of salt the new demand and supply function will change qD = 1000 – (P + 3) qS = 700 + (2P +3) In part A equilibrium price was ₹100 which goes up to ₹103 with imposition of tax qD = 1000 – (100 + 3) = 1000 – 103 =897 qS = 700 + (2P + 3) = 700 + 2(100 + 3) = 700 + 2×103 = 700 + 206 = 906 qD < qS Therefore, new price and quantity has to be adjusted. |
|
| 61. |
Mention the factors that cause shift in the supply curve. |
|
Answer» The factors that cause shift in the supply curves are: 1. The change in the number of firms 2. The change in the price of factor inputs 3. Change in production technology 4. Change in the prices of related goods 5. Change in production tax. |
|
| 62. |
1. Identify the situations depicted in the following figures in panel A and B. 2. Why do such policies are followed and explain the impact of such policies? |
|
Answer» 1. PANEL A – Price ceiling PANEL B –Price floor. 2. Price ceiling is fixed below equilibrium price. Imposition of price ceiling at ‘Pg’ gives rise to excess demand in the market price floor is fixed above equilibrium price. Imposition of floor price at ‘pg’ gives rise to excess supply. |
|
| 63. |
Calculate equilibrium price and quantity based on the following information. qd = 400 – P (1) qs = 240 + 3 (p – 4) (2) |
|
Answer» At equilibrium, qd = qs Putting the values, 400 – p = 240 + 3(p – 4) 400 – p = 240 + 3p – 12 400 - 240 + 12 = 3p + p 172 = 4P P =\(\frac{172}{4}\) p = 43 Putting p = 43 in the first equation, we get, qd =400 – 43 = 357 Therefore, equilibrium price = 43 and equilibrium quantity is = 357 units |
|
| 64. |
What is the effect on the equilibrium price when there is an increase in the price of the substitute good? |
|
Answer» Increase in the price of the substitute good, increases the amount of demand of the substitute good, so that the equilibrium price of that good increases. |
|