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?

The correct option is 1 and 2 only. Explanation In microeconomics, specifically within a perfectly competitive market, market equilibrium is determined by the interaction of market demand and market supply. It represents a state of balance where market forces result in a stable price and quantity, with no inherent tendency for change unless external factors shift the demand or supply curves. Statement-wise Analysis - Statement 1 is Correct: Equilibrium is fundamentally defined as a situation where the economic plans of all agents in the market coincide. At the equilibrium price, the intentions of buyers (consumers) regarding how much to purchase match the intentions of sellers (firms) regarding how much to produce and sell. - Statement 2 is Correct: This statement describes the market-clearing condition. In equilibrium, the aggregate quantity supplied by all firms exactly equals the aggregate quantity demanded by all consumers. Consequently, there is no unsold stock (surplus) and no unfulfilled demand (shortage). - Statement 3 is Incorrect: When market supply exceeds market demand at a specific price ($Q_s > Q_d$), the market experiences a surplus. This condition is technically termed Excess Supply. Conversely, Excess Demand occurs when market demand exceeds market supply ($Q_d > Q_s$), typically resulting in a shortage. Key Takeaway Market Equilibrium occurs at the price where Quantity Demanded equals Quantity Supplied ($Q_d = Q_s$). If Supply > Demand, it is Excess Supply; if Demand > Supply, it is Excess Demand.

Consider the following statements regarding Market… - NCERT Class 12 Economics MCQ

NCERT Class 12 Economics — Chapter 2: Market Equilibrium

mcqeasy

Consider the following statements regarding Market Equilibrium in a perfectly competitive market:

An equilibrium is defined as a situation where the plans of all consumers and firms in the market match.
In equilibrium, the aggregate quantity that all firms wish to sell equals the quantity that all consumers wish to buy.
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?

NCERT textbook question

From NCERT Introductory Microeconomics · Page 71

Options

A1 and 3 only
B2 only
C1 and 2 only
D1, 2 and 3

Did you get this right?

Solution

The correct option is 1 and 2 only.

Explanation

In microeconomics, specifically within a perfectly competitive market, market equilibrium is determined by the interaction of market demand and market supply. It represents a state of balance where market forces result in a stable price and quantity, with no inherent tendency for change unless external factors shift the demand or supply curves.

Statement-wise Analysis

Statement 1 is Correct: Equilibrium is fundamentally defined as a situation where the economic plans of all agents in the market coincide. At the equilibrium price, the intentions of buyers (consumers) regarding how much to purchase match the intentions of sellers (firms) regarding how much to produce and sell.
Statement 2 is Correct: This statement describes the market-clearing condition. In equilibrium, the aggregate quantity supplied by all firms exactly equals the aggregate quantity demanded by all consumers. Consequently, there is no unsold stock (surplus) and no unfulfilled demand (shortage).
Statement 3 is Incorrect: When market supply exceeds market demand at a specific price ($Q_s > Q_d$), the market experiences a surplus. This condition is technically termed Excess Supply. Conversely, Excess Demand occurs when market demand exceeds market supply ($Q_d > Q_s$), typically resulting in a shortage.

Key Takeaway

Market Equilibrium occurs at the price where Quantity Demanded equals Quantity Supplied ($Q_d = Q_s$). If Supply > Demand, it is Excess Supply; if Demand > Supply, it is Excess Demand.

Your note

More from Chapter 2: Market Equilibrium

In the context of market equilibrium, what happens when the market demand curve shifts rightward while the supply curve remains unchanged ?

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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?

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What is the primary consequence of a price ceiling accompanied by rationing?

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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?

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In a perfectly competitive market, if the market price is above the equilibrium price, there will be:

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