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प्रश्न
A market for a product is in equilibrium. Demand for the product "decreases." Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram
A market of a commodity is in equilibrium. Demand for the commodity 'decreases'. Explain the chain of effects of this change till the market again reaches equilibrium. Use Diagram.
उत्तर
Consider DD1 to be the initial demand curve and SS to be the supply curve of the market. Market equilibrium is achieved at Point E, where the demand and supply curves intersect each other. Therefore, the equilibrium price is OP1, and the equilibrium quantity demanded is OQ1.
If there is fall in the demand, the demand curve will shift towards the left to DD1 and the supply curve SS will remain the same. This implies that at the initial price OP1, there is an excess supply of OQ1 to OQ11 units of output. Thereby the competition among producers will increase and they tend to reduce the price of the output to the OP2 level. Now, the new market equilibrium will be at Point E1, where the new demand curve DD1 intersects the supply curve SS.
This clearly states that if the demand curve shifts towards the left, the price of the good tends to decrease with the decrease in the demand for a good. Thus, the direction of change in equilibrium price and the quantity are the same whenever there is a shift in the demand curve.
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संबंधित प्रश्न
A market for a good is in equilibrium. There is simultaneous "increase" both in demand and supply of the good. Explain its effect on the market price
A market for a good is in equilibrium. The demand for the good 'increases'. Explain the chain of effects of this change.
A market for a good is in equilibrium. The supply of good "decreases". Explain the chain of effects of this change
What is meant by 'excess supply' of a good in a market?
Explain its chain of effects on the market of that good. Use diagram
Draw average revenue and marginal revenue curves in a single diagram of a firm which can sell more units of a good only by lowering the price of that good. Explain.
Market for a good is in equilibrium. There is an ‘increase’ in demand for this good. Explain the chain of effects of this change. Use diagram.
Explain market equilibrium.
How are equilibrium price and quantity affected when income of the consumers increase.
How will a change in price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.
How do the equilibrium price and the quantity of a commodity change when price of input used in its production changes?
Compare the effect of shift in the demand curve on the equilibrium when the number of firms in the market is fixed with the situation when entry-exit is permitted.
Considering the same demand curve as in exercise 22, now let us allow for free entry and exit of the firms producing commodity X. Also assume the market consists of identical firms producing commodity X. Let the supply curve of a single firm be explained as
qSf = 8 + 3p for p ≥ 20
= 0 for 0 ≤ p < 20
(a) What is the significance of p = 20?
(b) At what price will the market for X be in equilibrium? State the reason for your answer.
(c) Calculate the equilibrium quantity and number of firms.
