Market Equilibrium and Price Controls for CUET Economics

AnswerB · quantity demanded equals quantity supplied

1. At the equilibrium price, every buyer who wants the good at that price gets it and every seller sells what he offers.

AnswerB · ₹6

1. At ₹6, 40 are demanded and 40 supplied: the two match.

AnswerD · ₹6 and 40 units

1. Set Qd = Qs: 100 − 10P = 10P − 20, so 20P = 120 and P = ₹6.

2. Q = 100 − 60 = 40 units (check: 60 − 20 = 40).

AnswerA · ₹20

1. 200 − 4P = 6P, so 10P = 200 and P = ₹20.

2. Equilibrium quantity = 6 × 20 = 120.

AnswerB · 26

1. 50 − 2P = 3P − 10, so 5P = 60 and P = ₹12.

2. Q = 50 − 24 = 26 (check: 36 − 10 = 26).

AnswerA · At any other price, excess demand or excess supply pushes the price back towards it

1. Above it, unsold stock makes sellers cut prices; below it, unmet demand makes buyers bid prices up.

2. So the market keeps returning to the equilibrium until demand or supply itself changes.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true, and R is why A holds: equal quantities leave nothing short and nothing over.

AnswerA · Only I

1. I is true: entry pushes price down to minimum AC, exit pulls it up to it.

2. II is false: at price = minimum AC firms earn only normal profit.

AnswerA · ₹20

1. 120 − 3P = 2P + 20, so 5P = 100 and P = ₹20.

2. Quantity = 120 − 60 = 60.

AnswerA · 80 units would be unsold, so the price would fall

1. At ₹10, quantity demanded is 0 and quantity supplied is 80.

2. The whole 80 is excess supply, which pushes the price down.

AnswerD · A is false, but R is true.

1. A is false: both demand and supply decide the price, like the two blades of a pair of scissors.

2. R is true.

AnswerC · 360 units

1. With free entry and exit, the long-run price settles at minimum AC: ₹12.

2. Quantity = 600 − 20 × 12 = 360 units.

AnswerB · 18

1. Number of firms = market quantity ÷ output per firm = 360 ÷ 20 = 18.

AnswerC · quantity demanded is greater than quantity supplied at the current price

1. Excess demand is a shortage: buyers want more than sellers offer at that price.

2. It happens at prices below the equilibrium price.

AnswerC · 40 units

1. At ₹4, quantity demanded is 60 and quantity supplied is 20.

2. Excess demand = 60 − 20 = 40 units.

AnswerB · Excess supply of 40 units, so the price tends to fall

1. At ₹8, 20 are demanded and 60 supplied: 40 units are left unsold.

2. Sellers compete to clear the stock, so the price falls towards ₹6.

AnswerC · rise

1. Buyers who cannot get the good offer more; as the price rises, demand contracts and supply extends until the gap closes.

AnswerD · A is false, but R is true.

1. A is false: below equilibrium there is excess demand.

2. R is true, and it describes excess demand.

AnswerD · 80 units

1. At ₹2, 80 are demanded and 0 supplied: excess demand = 80.

AnswerC · sellers cannot sell all they offer, and competition among them lowers the price

1. Above equilibrium, quantity supplied exceeds quantity demanded.

2. Unsold stock makes sellers cut prices until the gap disappears.

AnswerA · Only I

1. I is true: these movements along the curves close the gap.

2. II is false: a price change moves buyers along the demand curve; it does not shift it.

AnswerC · a fall in both equilibrium price and quantity

1. Demand shifts left along an unchanged supply curve, so the new crossing point is lower and to the left.

AnswerA · a rise in equilibrium price and a fall in quantity

1. Supply shifts left along an unchanged demand curve: the new point is higher and to the left.

AnswerA · Price rises from ₹6 to ₹7 and quantity from 40 to 50

1. New equilibrium: 120 − 10P = 10P − 20, so P = ₹7 and Q = 50.

2. An increase in demand, with supply unchanged, raises both price and quantity.

AnswerD · Price falls from ₹6 to ₹5 and quantity rises from 40 to 50

1. New equilibrium: 100 − 10P = 10P, so P = ₹5 and Q = 50.

2. An increase in supply, with demand unchanged, lowers price and raises quantity.

AnswerC · ₹8

1. 140 − 10P = 10P − 20, so 20P = 160 and P = ₹8.

2. Quantity = 140 − 80 = 60, up from 40.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true.

2. More supply at every price (R), with demand unchanged, means a lower equilibrium price (A).

AnswerB · a lower price and a larger quantity

1. Lower costs increase supply: the supply curve shifts right.

2. With demand unchanged, price falls and quantity rises.

AnswerB · ₹7 and 30 units

1. 100 − 10P = 10P − 40, so 20P = 140 and P = ₹7.

2. Q = 100 − 70 = 30: price up, quantity down after a decrease in supply.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true, and R explains A: higher demand for coffee with supply unchanged raises its price.

AnswerB · Equilibrium quantity rises; price stays the same

1. Both shifts push quantity up.

2. The demand shift pushes price up and the supply shift pushes it down by the same amount, so price is unchanged.

AnswerD · a rise in both equilibrium price and quantity

1. Both shifts raise quantity.

2. The larger demand shift pushes price up more than the supply shift pushes it down, so price rises.

AnswerA · The equilibrium price rises

1. Both changes push the price up, so the price certainly rises.

2. Quantity is pushed up by demand and down by supply; which wins depends on the sizes.

AnswerC · Both I and II

1. Vertical supply: quantity cannot change, so all the effect is on price. I is true.

2. Horizontal supply: price cannot change, so all the effect is on quantity. II is true.

AnswerD · A-II, B-IV, C-I, D-III

1. Demand shifts move price and quantity in the same direction.

2. Supply shifts move them in opposite directions.

AnswerA · The equilibrium price falls

1. Both changes push the price down.

2. Quantity is pulled down by demand and up by supply, so its direction depends on which shift is larger.

AnswerB · a maximum price set by the government, below the equilibrium price

1. A ceiling caps the price to keep an essential good affordable; to matter, it must be below equilibrium.

AnswerB · a minimum price set by the government, above the equilibrium price

1. A floor stops the price falling below a set level, to protect producers such as farmers.

AnswerC · A shortage of 40 units: 60 demanded, 20 supplied

1. At ₹4: Qd = 100 − 40 = 60; Qs = 40 − 20 = 20.

2. Excess demand = 60 − 20 = 40 units, which the price is not allowed to clear.

AnswerC · queues, rationing and black markets

1. The shortage means not everyone who wants the good at the ceiling price can get it.

2. The government rations it (as through ration shops), and some is sold illegally above the ceiling.

AnswerD · A surplus of 40 units: 60 supplied, 20 demanded

1. At ₹8: Qd = 100 − 80 = 20; Qs = 80 − 20 = 60.

2. Excess supply = 60 − 20 = 40 units, which the government usually has to buy and store.

AnswerA · a price floor

1. MSP is the price at which the government stands ready to buy, so farmers need not sell below it.

2. A guaranteed lower limit on price is a price floor.

AnswerD · more workers seeking jobs than employers want to hire

1. A minimum wage is a price floor in the labour market.

2. Above equilibrium, more labour is offered than demanded: a surplus of labour.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true, and R explains A: a cap above where the price would be anyway never bites.

AnswerC · Both I and II

1. Ration shops distribute a good whose price is held below equilibrium: a ceiling. I is true.

2. Grain bought at MSP to hold the price up becomes buffer stock: a floor. II is true.

AnswerD · 20 units, the quantity supplied

1. Buyers cannot buy more than sellers offer: the smaller of the two quantities is traded.

2. At ₹4 sellers offer only 20, so only 20 change hands; 40 units of demand go unmet.

AnswerA · 20 units

1. At ₹8, buyers want only 20 units.

2. Sellers offer 60; the other 40 are surplus that buyers do not take.

AnswerA · Both A and R are true, and R is the correct explanation of A.

1. Both are true, and R explains A: those who get the good pay less than the market would charge.

AnswerA · 50 units

1. Equilibrium: 200 − 5P = 5P, so P = ₹20; the ceiling of ₹15 is below it and binds.

2. At ₹15: Qd = 200 − 75 = 125; Qs = 75. Shortage = 125 − 75 = 50 units.

AnswerB · 50 units

1. At ₹25: Qs = 125 and Qd = 200 − 125 = 75.

2. Surplus = 125 − 75 = 50 units, which the government buys.

AnswerD · A is false, but R is true.

1. A is false: a floor above equilibrium causes a surplus.

2. R is true and describes that surplus.

AnswerD · Neither I nor II

1. A floor below equilibrium does not bind: the market price is already above it. I is false.

2. A ceiling above equilibrium does not bind either. II is false.