Assignment price determination - micro economics

Assignment : Price Determination

                                                                ASSIGNMENT

                                                      PRICE DETERMINATION

Very Short Answer Type Questions (VSA)

1.      Define market equilibrium.

2.      What is meant by equilibrium price?

3.      At what price- higher or lower than equilibrium price, there is excess demand?

4.      When will an increase in demand implies:

a)      An increase in price but no change in quantity.

b)      An increase in quantity but no change in price.

5.      When will an increase in supply implies:

a)   An increase in price but no change in quantity.

b)      An increase in quantity but no change in price.

Long Answer Type Questions (LA)

1.      Explain with the help of diagram and schedule the determination of price of a commodity under perfect competition.

2.      What will happen if the price prevailing in the market is:

a)      Above the equilibrium price.

b)      Below the equilibrium price.

3.      Explain the chain effect of increase in demand on price, demand and supply of a commodity. Use diagram.

4.      Explain with diagram the effect of a rightward shift of both Demand and Supply curves on equilibrium price and quantity.

5.      Show with the help of diagram, the effect on equilibrium price and quantity when:

a)      Supply is perfectly inelastic and demand decreases.

b)      The demand curve perfectly elastic and the supply curve shifts out. 

6.      How does increase in input price affect equilibrium price and quantity exchanged of a commodity?  Use diagram.

7.      How are equilibrium price and quantity affected when income of the consumer

a)Increase             b) decreases

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

9.      At a given price of a commodity, there is ‘‘excess supply”. Is this price an equilibrium price? If not how will the equilibrium price be reached?

10.  A product market is in equilibrium. Draw diagram showing:

a)A decrease in demand reduces both the equilibrium price and quantity of the commodity.

b)      A decrease in both demand and supply will reduce quantity but may increase, reduce or leave price unchanged.

11.  When does the following hold true:

(i)     No change in equilibrium price with changes in both demand and supply.

(ii)   No change in equilibrium quantity with changes in both demand and supply.

12.  What is the effect on equilibrium price and quantity when:

(i)     Increase in demand is equal to decrease in supply.

(ii)   Decrease in demand is equal to increase in supply. 

13.  Discuss the concept of price ceiling and price floor with the help of a diagram?