Q7 of 25 Page 1

Suppose the demand and supply curves of a commodity X, in a perfectly a competitive market, is given as :

Qd = 2200 – 3p, and


Qs = 1800 + 2p


Estimate the values of equilibrium price and equilibrium quantity of the commodity X.


OR


The market for a commodity is in equilibrium. The supply of thecommodity decreases, without any corresponding change in the demand


for the commodity.


Discuss, using a diagram, the impact of the given change in theequilibrium price and equilibrium quantity of the commodity.


At the perfect competition, demand and supply are equal.

Qd = Qs


2200 - 3p = 1800 +2p


2200-1800= 2p +3p


400=5p


P = 400/5


P = 80


Qd= 2200-3p


Qd = 2200 - 3* 80


Qd = 2200 - 240


Qd = 1960


The equilibrium price and equilibrium quantity of the commodity X is Rs 80 and 1960 units.


OR



● The x-axis represents quantity and the y-axis represents price.


● The market is in equilibrium at point E.


● A decrease in the supply will shift the supply curve towards the left.


● The original supply curve is SS. It will shift left towards S'S'.


● This will create excess demand which will lead to an increase in competition among the buyers.


● The new supply curve intersects the original demand curve at a higher equilibrium point of E'.


● The equilibrium price will increase from OPe to OPe'.


● The equilibrium quantity will fall from OQe to OQe'.


More from this chapter

All 25 →
5

‘‘Problem of resource allocation would not arise if resources do not have alternative uses.’’ Defend or refute the statement with valid arguments.

OR


Discuss briefly the meaning of positive economics and normative economics, with suitable examples.


 6

Explain the law of diminishing marginal utility, using a suitable diagram or a schedule.

 7 A

Note: The following question is for the Visually Impaired Candidates only, in lieu of Q. No. 7 (Alternative) :

The market for a commodity is in equilibrium. The supply of the commodity decreases, without any corresponding change in the demand


for the commodity.


Discuss the impact of the given change in the equilibrium price and the equilibrium quantity of the commodity.


 8

At a price of < 5 per unit, a consumer buys 40 units of a commodity. The coefficient of price elasticity of demand is given as (–)2. How many units of the commodity will she buy if the price is reduced by 20 %?