What will happen if the price prevailing in the market is
(i) Above the equilibrium price?
(ii) Below the equilibrium price?

6

(a)

How are equilibrium price and quantity affected when income of the consumers.
(i) Increase? (ii) Decrease?

6

(a)

Using supply and demand curves, show how an increase in the price of shoes affects the price of a pair of socks and the number of pairs of socks bought and sold.

6

(a)

Suppose the demand and supply curves of salt are given by:
\({ q }^{ D }\)=1,000 - P
\({ q }^{ S }\)=700 + 2P
(i) Find the equilibrium price and quantity.
(ii) Now suppose that the price of an input used to produce salt has increased so that the new supply curve is \({ q }^{ S }\) = 400 + 2p. How does the equilibrium price and quantity change? Does the change conform to your expectation?
(iii) Suppose the government has imposed a tax of Rs.3 per unit on sale of salt. How does it affect the equilibrium price and quantity?

6

(a)

How price and quantity are determined in the market when number of firms are fixed?

6

(a)

How is equilibrium price of a commodity determined? (Use diagram).

6

(a)

How will equilibrium price be reached when there is excess demand/excess supply? Explain with diagram.

6

(a)

With the help of a suitable diagram, explain the process of determination of equilibrium price of a commodity under perfectly competitive market.

6

(a)

Market for a good is in equilibrium. Explain the chain of reactions in the market if the price is
(i) higher than equilibrium price and
(ii) lower than equilibrium price.

6

(a)

How will a rise in price of complementary affect the equilibrium price of given commodity? Explain the chain of effects.

6

(a)