Q12 of 15 Page 5

What is excess demand for a good in a market? Explain its effects on the market for that good using diagram.

Excess demand refers to a situation in which a demand of a good in market exceeds its supply.


With increase in demand of a good, the competition will increase, the number of suppliers will increase in the market which in turn will increase equilibrium price and quantity.



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A shift in demand curve 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 exist is permitted. Explain.

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Explain the sequence of change that will take place when there is excess demand of the commodity.

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Market for a good is in an equilibrium. Suppose supply decrease. Giving reasons explain its effects on equilibrium price and quantity. Use diagram.

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Suppose the market determined rent for apartments is too high for common people to afford. If the government comes forward to help those, seeking apartments on rent by imposing control on rent, what impact will it have on the market for apartments?