Home
NCERT Soltions
Class 12
Micro Economics
Market Equilibrium
How are equilibrium price and quantity affected when income of the con...

How are equilibrium price and quantity a | Class 12 Micro Economics Chapter Market Equilibrium, Market Equilibrium NCERT Solutions

Welcome to the NCERT Solutions for Class 12 Micro Economics - Chapter Market Equilibrium. This page offers a step-by-step solution to the specific question from Exercise 1, Question 9: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.

Question 9:

How are equilibrium price and quantity affected when income of the consumers

a) Increase

b) Decrease

Answer:

(a) Increase in income of consumers If the number of firms is assumed to be fixed, then the increase in consumers’ income will lead the equilibrium price to rise. Let us understand how it happens: D1D1 and S1S1 respect the market demand and market supply respectively. The initial equilibrium occurs at E1, where the demand and the supply intersect each other. Due to the increase in consumers’ income, the demand curve will shift rightward parallelly while the supply curve will remain unchanged. Hence, there will be a situation of excees demand, equivalent to (qe-q1). Consequently, the price will continue to rise until it reaches E2 (new equilibrium), where D2D2 intersects the supply curve S1S1. The equilibrium price increases from Pe to P2 and the equilibrium output increases from qe to q2.

(b) Decrease in the income of consumers The decrease in consumer income is depicted by leftward parallel shift to demand curve from D1D1 to D2D2. Consequently at the price Pe there will be an execs supply (qe-q1) resulting the\ price of falls from Pe to P2 and the equilibrium quantity falls qe to q2.

Other Questions of Chapter Market Equilibrium

When do we say that there is an excess supply for a commodity in the market?

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.

Explain market equilibrium.

In what respect do the supply and demand curves in the labor market differ from those in the goods market?

Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.

A shift in demand curve has a larger effect on price and smaller effect on quantity when the number of firms is fixed compared to the situation when free entry and exits is permitted. Explain.

Can you think of any commodity on which the price ceiling is imposed in India? What may be the consequence of price-ceiling?

At what level of price do the firms in a perfectly competitive market supply when free entry and exit is allowed in the market? How is the equilibrium quantity determined in such a market?

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.

Suppose the demand and supply curve of commodity XX in a perfectly competitive market are given by:

qD =700 - p

qs = 500 + 3p for p ≥ 15

= 0 or 0 ≤ p <15

Assume that the market consists of identical firms. Identify the reason behind the market supply of commodity X being zero at any price less than Rs 15. What will be the equilibrium price for this commodity? At equilibrium, what quantity of X will be produced?

Popular questions of class 12 Micro Economics

The market price of a good changes from Rs 5 to Rs 20. As a result, the quantity supplied by a firm increases by 15 units. The price elasticity of the firm’s supply curve is 0.5. Find the initial and final output levels of the firm.

A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve?

How does the imposition of a unit tax affect the supply curve of a firm?

What is the supply curve of a firm in the long run?

Distinguish between a centrally planned economy and a market economy.

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.

Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?

What is the total product of input?

What is budget line?

Suppose there are 20 consumers for a good and they have identical demand functions:

d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.

Recently Viewed Questions of Class 12 Micro Economics

What are the total fixed cost, total variable cost and total cost of a firm? How are they related?

What is the ‘price line’?

What does the price elasticity of supply mean? How do we measure it?

What is a production possibility frontier?

Distinguish between microeconomics and macroeconomics.

What do you understand by normative economic analysis?

What do you understand by positive economic analysis?

What do you mean by the production possibilities of an economy?

What do the short-run marginal cost, average variable cost and short-run average cost curves look like?

How does the budget line change if the price of good 2 decreases by a rupee
but the price of good 1 and the consumer’s income remain unchanged?

Study Tips for Answering NCERT Questions:

NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:

Read the question carefully and focus on the core concept being asked.
Reference examples and data from the chapter when answering questions about Market Equilibrium.
Review previous year question papers to get an idea of how such questions may be framed in exams.
Practice answering questions within the time limit to improve your speed and accuracy.
Discuss your answers with your teachers or peers to get feedback and improve your understanding.

Latest Blog Posts

Stay updated with our latest educational content and study tips

Smart Questions to Ask in a Parent-Teacher Meeting | PTM Made Easy

Parent-Teacher Meetings (PTMs) are more than quick updates on marks — they’re a chance to build a real partnership between home and school. A good Parent-Teacher Meeting conversation helps parents see beyond grades. It opens up insights about a child’s strengths, struggles, emotions and even hidden talents. When parents participate actively, they don’t just track […]

The Secret to Smarter Learning — Building Strong Critical Thinking Skills

In today’s world of endless information , knowing how to think is more important than knowing what to think . From school projects to real – life decisions , critical thinking helps students question ideas , analyze facts and form logical conclusions . But what exactly does critical thinking mean ? Simply put , it’s […]

Study Smarter, Not Harder: Build Productive Habits That Stick

Every student dreams of better grades , stronger focus and more study time – but the real challenge isn’t starting, it’s staying consistent . Building productive study habits is not about studying all day , it’s about studying smart . In today’s fast – paced digital world, distractions are everywhere – from endless phone notifications […]

The Hidden Risks of Online Gaming for Children — Is your child safe while gaming online?

Online gaming has rapidly become one of the most popular pastimes among children. Whether it’s multiplayer mobile games , PC adventures or console challenges , kids are spending more time than ever in the virtual world . On the surface, gaming seems entertaining and even educational – improving hand- eye coordination , teamwork and problem […]

View All Blog Posts