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Question
- Mention the equilibrium point and equilibrium price in above diagram. (2m)
- Explain the concept of equilibrium price with the help of above diagram (2m)
Solution
- The equilibrium point in the given diagram is point E i.e. the point at which the demand & supply curves intersect. . The equilibrium price in the given diagram is ₹ 300.
- Equilibrium price is the price at which quantity demanded is equal to quantity supplied.
- In the given diagram, Y-axis represents the price whereas X-axis represents quantity demanded and supplied.
- The demand curve DD is a downward sloping curve indicating an inverse relationship between price & quantity demanded.
- The supply curve SS is an upward sloping curve indicating a direct relationship between price and quantity supplied
- The curves DD and SS intersect each other at point E which is the ‘equilibrium point’.
- Therefore, ₹ 300 is the equilibrium price and 3000 kgs is the equilibrium quantity.
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RELATED QUESTIONS
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In common language the term market means a specific place where buyers and sellers of a commodity meet and exchange their goods. But in Economics it is not necessarily a place but it is an arrangement through which buyers and sellers come in contact with each other directly or indirectly and exchange of goods takes place among them. Market can be classified on the basis of place, time and competition. Market on the basis of competition is perfect competition and imperfect competition. Perfect competition is an imaginary concept of market and in reality, we observe various types of imperfect competition like monopoly, duopoly, oligopoly and monopolistic competition. In practice monopolistic competition is used. In this market there are some features of perfect competition and monopoly acting together. The uniqueness of this market lies in the fact that a difference is made between cost of production and selling cost. Selling cost refers to the cost incurred by the firm to create more demand for its product and increase the volume of sale. It includes expenditure on advertisement, hoardings, window display etc. |
Questions:
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