Every question from this NCERT chapter, with a detailed explanation.
With reference to the demand for a normal good, consider the following statements: 1. An increase in consumers' income leads to a rightward shift in the market demand curve. 2. An increase in the number of consumers leads to a rightward shift in the market demand curve. 3. A rightward shift in demand, with supply constant, leads to a decrease in equilibrium price. Which of the statements given above is/are correct?
Consider the following statements regarding Market Equilibrium in a perfectly competitive market: 1. An equilibrium is defined as a situation where the plans of all consumers and firms in the market match. 2. In equilibrium, the aggregate quantity that all firms wish to sell equals the quantity that all consumers wish to buy. 3. If the market supply is greater than market demand at a specific price, the market is said to be in a state of excess demand. Which of the statements given above is/are correct?
Consider the following statements regarding the determination of equilibrium with a fixed number of firms: 1. If the prevailing price is lower than the equilibrium price, there will be excess supply in the market. 2. In a situation of excess demand, the market price tends to increase. 3. As price rises, quantity demanded falls and quantity supplied increases, moving the market towards equilibrium. Which of the statements given above is/are correct?
With reference to the Labour Market, consider the following statements: 1. Households are the suppliers of labour, while the demand for labour comes from firms. 2. The demand curve for labour by a profit-maximising firm is upward sloping. 3. The wage rate is determined at the intersection of the demand and supply curves of labour. Which of the statements given above is/are correct?
Consider the following statements regarding the Marginal Revenue Product of Labour (MRPL): 1. It is the extra cost incurred for employing the last unit of labour. 2. It is calculated as the product of Marginal Revenue and Marginal Product of labour. 3. For a perfectly competitive firm, the Marginal Revenue Product of Labour is equal to the Value of Marginal Product of Labour. Which of the statements given above is/are correct?
With reference to the supply of labour by an individual, consider the following statements: 1. An increase in wage rate always leads to an increase in the supply of labour hours by an individual. 2. At high wage rates, the income effect may dominate the substitution effect, leading to a decrease in labour supply. 3. The individual labour supply curve can be backward bending. Which of the statements given above is/are correct?
In the context of market equilibrium, what happens when the market demand curve shifts rightward while the supply curve remains unchanged ?
Consider the following statements regarding the impact of simultaneous shifts in demand and supply on equilibrium: 1. If both demand and supply curves shift rightwards, the equilibrium quantity invariably increases. 2. If both demand and supply curves shift rightwards, the equilibrium price invariably increases. 3. If demand shifts leftward and supply shifts rightward, the equilibrium price decreases. Which of the statements given above is/are correct?
With reference to Market Equilibrium with Free Entry and Exit, consider the following statements: 1. The assumption implies that in equilibrium, no firm earns supernormal profit. 2. The equilibrium price will always be equal to the minimum average cost of the firms. 3. If firms are earning supernormal profits, new firms will enter, shifting the supply curve leftward. Which of the statements given above is/are correct?
Consider the following statements regarding the effect of a demand shift in a market with free entry and exit: 1. A rightward shift in demand leads to an increase in the equilibrium price in the long run. 2. A rightward shift in demand leads to an increase in the number of firms in the market. 3. The equilibrium price remains constant at the level of minimum average cost. Which of the statements given above is/are correct?
With reference to "Price Ceiling", consider the following statements: 1. It is a government-imposed upper limit on the price of a good or service. 2. It is generally fixed above the market-determined equilibrium price. 3. It often leads to excess demand and shortages in the market. Which of the statements given above is/are correct?
With reference to "Price Floor", consider the following statements: 1. It is a government-imposed lower limit on the price of a good or service. 2. Minimum Wage Legislation is an example of a price floor. 3. Imposition of a price floor usually results in excess demand in the market. Which of the statements given above is/are correct?
What is the primary consequence of a price ceiling accompanied by rationing?
Consider the following statements regarding the impact of input prices on market supply: 1. An increase in the price of an input increases the marginal cost of production. 2. An increase in input prices causes the supply curve to shift leftward. 3. A leftward shift in supply, with demand constant, leads to a decrease in equilibrium quantity and an increase in price. Which of the statements given above is/are correct?
In the context of a perfectly competitive market, if the number of firms increases: Statements: 1. The market supply curve shifts to the right. 2. The market demand curve shifts to the right. 3. The equilibrium price decreases and equilibrium quantity increases. Which of the statements given above is/are correct?
Consider the following statements regarding the "Invisible Hand": 1. It assumes that market participants are driven by altruistic motives. 2. It ensures that the objectives of consumers and firms are compatible in equilibrium. 3. It operates through price signals to correct market imbalances. Which of the statements given above is/are correct?
Which one of the following is a direct consequence of the government's "Agricultural Price Support Programmes" where a price floor is set above the equilibrium?
In a perfectly competitive market, if the demand curve shifts leftward and the supply curve shifts rightward simultaneously, what is the certain impact on equilibrium price?
Consider the following statements comparing market equilibrium with a fixed number of firms versus free entry and exit: 1. With a fixed number of firms, a shift in demand affects both equilibrium price and quantity. 2. With free entry and exit, a shift in demand affects only the equilibrium quantity and number of firms, not the price. 3. The impact of a demand shift on quantity is larger in a market with free entry and exit than in a market with a fixed number of firms. Which of the statements given above is/are correct?
With reference to "Ration Coupons", consider the following statements: 1. They are issued to consumers to limit the purchase of essential goods. 2. They are typically used when the government imposes a price floor. 3. They allow consumers to buy goods from fair price shops. Which of the statements given above is/are correct?
Consider the following statements regarding the demand for labour: 1. It is a derived demand based on the demand for the final commodity. 2. A profit-maximising firm employs labour up to the point where the extra cost of the last unit equals the additional benefit. 3. The law of diminishing marginal product is assumed to hold. Which of the statements given above is/are correct?
If the market supply curve shifts rightward and the market demand curve shifts leftward, what is the effect on equilibrium quantity?
Which of the following factors would cause a rightward shift in the market demand curve for a normal good? 1. Increase in the price of a substitute good. 2. Decrease in the income of consumers. 3. Increase in the number of consumers.
In the context of the labour market, if the price of the commodity produced increases, what happens to the demand for labour?
What is the immediate market effect if a Price Floor is set above the equilibrium price?
Consider the following statements regarding the simultaneous rightward shift of both demand and supply curves: 1. The equilibrium quantity will definitely increase. 2. The equilibrium price will definitely increase. 3. The equilibrium price may remain unchanged if the magnitude of shifts is equal. Which of the statements given above is/are correct?
With reference to the "Income Effect" on labour supply, consider the following statements: 1. It arises because an increase in wage rate increases the purchasing power of the individual. 2. It encourages the individual to spend more on leisure activities. 3. It always works in the same direction as the substitution effect. Which of the statements given above is/are correct?
Which of the following is NOT a characteristic of a perfectly competitive market in equilibrium?
Consider the following statements regarding the effect of a leftward shift in the demand curve with a fixed number of firms: 1. There is excess supply at the initial equilibrium price. 2. Firms will lower their prices to sell their desired quantity. 3. The new equilibrium will have a lower price and lower quantity. Which of the statements given above is/are correct?
In a perfectly competitive market, if the market price is above the equilibrium price, there will be:
With reference to the market supply of labour, consider the following statements: 1. It is obtained by aggregating individual labour supply curves. 2. It is always backward bending like the individual supply curve. 3. It is generally upward sloping as higher wages attract more people to the workforce. Which of the statements given above is/are correct?
Consider the following statements regarding the impact of a technological progress on market equilibrium: 1. Technological progress shifts the marginal cost curve downward. 2. The market supply curve shifts to the right. 3. The equilibrium price decreases and quantity increases. Which of the statements given above is/are correct?
Which of the following statements is correct regarding the equilibrium in a perfectly competitive market with free entry and exit?
Consider the following statements regarding Price Ceiling on wheat: 1. It creates a shortage of wheat in the open market. 2. It necessitates a system of rationing to distribute the limited supply. 3. It eliminates the possibility of black marketing. Which of the statements given above is/are correct?
If the demand for a commodity is perfectly elastic, a rightward shift in the supply curve will lead to:
What happens to the equilibrium price if the supply curve shifts rightward and the demand curve shifts leftward by a larger magnitude?
Consider the following statements regarding the simultaneous shift of demand and supply curves: 1. If demand shifts left and supply shifts left, equilibrium price definitely increases. 2. If demand shifts left and supply shifts left, equilibrium quantity definitely decreases. 3. The direction of price change is independent of the relative magnitude of the shifts. Which of the statements given above is/are correct?
With reference to the "Invisible Hand", Adam Smith maintained that: 1. It operates through the price mechanism to coordinate markets. 2. It is driven primarily by the altruistic motives of producers. 3. It leads the market towards equilibrium. Which of the statements given above is/are correct?
Consider the following statements regarding the effect of an increase in the number of firms on market equilibrium: 1. The supply curve shifts to the left. 2. The price of the commodity falls. 3. The total quantity produced in the market increases. Which of the statements given above is/are correct?
In a market with free entry and exit, if the demand curve shifts to the left: Statements: 1. Firms will enter the market to capture the lower price. 2. The market price will temporarily fall below the minimum average cost. 3. The supply will increase until the price returns to the minimum average cost. Which of the statements given above is/are correct?
Which of the following is a key difference between the labour market and the goods market? Statements: 1. In the labour market, households are suppliers and firms are demanders. 2. In the goods market, households are suppliers and firms are demanders. 3. The wage rate is determined by the interaction of demand and supply, similar to goods prices.
What is the effect on equilibrium price if the demand for a good increases and the supply decreases simultaneously?
Consider the following statements regarding the "Price Line" in a perfectly competitive market: 1. It is a vertical straight line parallel to the Y-axis. 2. It shows the relationship between market price and a firm's output level. 3. For a price-taking firm, the price line coincides with the demand curve facing the firm. Which of the statements given above is/are correct?
With reference to "Super-normal profit", consider the following statements: 1. It refers to the profit earned which is exactly equal to the normal profit. 2. In the short run, it is possible for firms to earn super-normal profits. 3. It discourages new firms from entering the market. Which of the statements given above is/are correct?
In the context of market equilibrium, if the market supply curve is vertical, a rightward shift in the demand curve will result in: