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प्रश्न
Market of a good is in equilibrium. If the demand for the good 'decreases'. Explain the chain of effects of this change.
उत्तर
If the market is in equilibrium and the demand decreases, then the demand curve will shift towards left as shown in the figure below:
Now, if market demand decreases, then the market demand curve shifts parallely leftwards to D2D2. Now, at the initial price OP1, there exists excess supply equivalent to Oq1 – Oq'1 units of output. Due to the excess supply, the competition among the producers increases and they try to get rid of the excess stock by selling their output at comparatively lower price. The price will continue to fall until it reaches OP2, and the new equilibrium is established at point E2, where the new demand curve D2D2 intersects the initial market supply curve S1S1. Hence, a decrease in market demand with supply remaining constant, results in fall in the equilibrium price as well as the equilibrium quantity.
To summarise,
Decrease in demand ⇒ Excess supply at the existing price ⇒ Competition among the producers⇒ Fall in the price level ⇒ New equilibrium ⇒ Fall in both quantity demanded as well as price.
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संबंधित प्रश्न
Given the meaning of market demand.
Name the factors determining market demand
Distinguish between demand by an individual consumer and market demand of a good
Suppose there are two consumers in the market for a good and their demand functions are as follows:
d1(p) = 20 − p for any price less than or equal to 20 and d1(p) = 0 at any price greater than 20.
d2(p) = 30 − 2p for any price less than or equal to 15 and d1(p) = 0 at any price greater than 15.
Find out the market demand function.
Suppose there are 20 consumers for a good and they have identical demand functions:
D(p) = 10 − 3p for any price less than or equal to`10/3` and d1(p) = 0 at any price greater than `10/3`.
What is the market demand function?
Consider a market where there are just two consumers and suppose their demands for the good are given as follows:
Calculate the market demand for the goods.
|
p |
d1 |
d2 |
|
1 2 3 4 5 6 |
9 8 7 6 5 4 |
24 20 18 16 14 12 |
______ states that, other things being equal, quantity supplied increases with increase in price and decrease with decrease in price of a commodity.
Identify the correctly matched pair from column A to that of Column B:
| Column A | Column B | ||
| 1 | Large number of sellers and a single buyer | (a) | Monopoly Market |
| 2 | Single seller and a large number of buyers | (b) | Perfect Competition Market |
| 3 | Firms and industries are synonymous | (c) | Monopoly Market |
| 4 | No close substitutes | (d) | Perfect Competition Market |
Which of the following statements is true?
Product differentiation is a distinguishing feature of which form of the market?
A firm under perfect competition is a price taker but the industry is the price maker. Defend or refute this statement by giving a reason.
