Class 12 Micro Economics - Chapter Market Equilibrium NCERT Solutions | Compare the effect of shift in the deman
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.
The above figure depicts the cases when the number of firms is fixed (in the short run) and when the number of firms is not fixed (in the long run). P = min AC represents the long run price line D1D1 and D2D2 represent the demands in the short run and the long run. The point E1 represents the initial equilibrium where the demand curve and the supply curve intersect each other. Now let us suppose that the demand curve shifts under the assumption that the number of firms are fixed thus the new equilibrium will be at Es (in the short run) where the supply curve S1S1 and the new demand curve D2D2 intersect each other. The equilibrium quantity is Ps and
equilibrium quantity is qs. Now let us analyse the situation under the assumption of free entry and exit. The increase in demand will shift the demand curve rightwards to D2D2. The new equilibrium will be at E2. It is the long run equilibrium with equilibrium price (P) = min AC and equilibrium quantity qL. Therefore on comparing both the cases we find that when the firms are given the freedom of entry and exit the equilibrium price remains same and the price (Ps) wheares the long run equilibrium price (Ps) is less than the long run equilibrium price and the short run equilibrium quantity (qs) is less than the long run equilibrium quantity qL.
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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When do we say that there is an excess demand for a commodity in the market?
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When do we say that there is an excess supply for a commodity in the market?
- Q:-
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?
- Q:-
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.
- Q:-
Explain market equilibrium.
- Q:-
In what respect do the supply and demand curves in the labor market differ from those in the goods market?
- 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?
Popular Questions of Class 12 Micro Economics
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Explain the concept of a production function
- Q:-
What would be the shape of the demand curve so that the total revenue curve is?
(a) A positively sloped straight line passing through the origin?
(b) A horizontal line?
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Discuss the central problems of an economy.
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What do you mean by the budget set of a consumer?
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What is the total product of input?
- Q:-
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
-
- Q:-
What do you mean by the production possibilities of an economy?
- Q:-
How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
- Q:-
What is budget line?
Recently Viewed Questions of Class 12 Micro Economics
- Q:-
What is the ‘price line’?
- Q:-
A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4. - Q:-
Explain the concept of a production function
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Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?
- Q:-
Will the monopolist firm continue to produce in the short run if a loss is incurred at the best short run level of output?
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The following table gives the total product schedule of labour. Find the corresponding average product and marginal product schedules of labour.
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What do you mean by ‘monotonic preferences’?
- Q:-
The market demand curve for a commodity and the total cost for a monopoly firm producing the commodity are given in the schedules below.
Quantity
0
1
2
3
4
5
6
7
8
Price
52
44
37
31
26
22
19
16
13
Quantity
0
1
2
3
4
5
6
7
8
Price
10
60
90
100
102
105
109
115
125
Use the information given to calculate the following:
(a) The MIR and MC schedules
(b) The quantities for which MIR and MC are equal
(c) The equilibrium quantity of output and the equilibrium price of the commodity
(d) The total revenue, total cost and total profit in the equilibrium
- Q:-
What is the marginal product of an input?
- Q:-
Compute the total revenue, marginal revenue and average revenue schedules in the following table. Market price of each unit of the good is Rs 10.
Quantity Sold TR MR AR 0
1
2
3
4
5
6
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