Class 12 Micro Economics - Chapter Market Equilibrium NCERT Solutions | How do the equilibrium price and the qua
How do the equilibrium price and the quantity of a commodity change when the price of input used in its production changes?
The change in the price of input price of input alters the cost of production of a commodity. Let us analyze the two different cases.
1. Increase in input price If the input price of a firm increases, the cost of production will also increase which will discourage the firm’s incentive to produce and supply the commodity. This will lead to a left upward shift of the marginal cost curve which further will lead to a leftward parallel shift of an individual firms supply curve and finally a leftward shift of the market supply curve. The demand curve remaining the same, the new equilibrium will occur at E2 with higher equilibrium price (P2) and lower quantity of output (q2).
2. Decrease in input price If an input price of a firm decreases, then the cost of production will also decrease. This will shift the marginal cost curve rightward, which implies that the firms supply curve will also shift rightward. Consequently, the market supply curve will shift rightward parallelly from S1S1 to S2S2. Demand curve remaining the same, the new equilibrium will occur at E2 with lower equilibrium price (P2) and higher quantity level of output (q2).
More Questions From Class 12 Micro Economics - Chapter Market Equilibrium
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How will a change in the price of coffee affect the equilibrium price of tea? Explain the effect on equilibrium quantity also through a diagram.
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Suppose the price at which the equilibrium is attained in exercise 5 is above the minimum average cost of the firms constituting the market. Now if we allow for free entry and exit of firms, how will the market price adjust to it?
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Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.
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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?
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Explain how price is determined in a perfectly competitive market with a fixed number of firms.
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- Q:-
Suppose the demand and supply curves of salt are given by:
(a) Find the equilibrium price and quantity.
(b) Now, suppose that the price of an input that used to produce salt has increased so, that the new supply curve is qs = 400 + 3p
How does the equilibrium price and quantity change? Does the change conform to your expectation?
(a) Suppose the government has imposed at ax of Rs 3 per unit of sale on salt. How does it affect the equilibrium rice quantity?
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From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity
1
2
3
4
5
6
7
8
9
Marginal
Revenue
10
6
2
2
2
0
0
0
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