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Deficient demand

  • a)
    Market price is same as the equilibrium price

  • b)
    Market price is higher than the equilibrium price

  • c)
    Market price is lower than the equilibrium price 

  • d)
    None of these

Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Deficient demanda)Market price is same as the equilibrium priceb)Marke...
Yes of us the answer is a but now the question is why only the is the answer the answer is only a because if total utility is increasing so the marginal utility is also increasing and if total utility is constant so the marginal utility is also constant and in the case of the total utility is decreasing so the marginal utility is also decreasing so that's my answer thank you
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Community Answer
Deficient demanda)Market price is same as the equilibrium priceb)Marke...
Deficient demand refers to the situation when aggregate demand is short of aggregate supply corresponding to full employment level in the economy. Aggregate supply being perfectly elastic, it converges with aggregate demand at a lower level of output lower than the full employment level of output in the economy
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Read the following passage and answer the questions that follows:In economics, rationing is an artificial restriction of demand and is done to keep price below the equilibrium (market-clearing) price determined by the process of supply and demand in an unfettered market. Thus, rationing can be complementary to price controls which can be explained through indifference curve approach.There are two kinds of rationing done by the government to reduce consumption—price rationing and non-price rationing. By rationing, we mean exercise tax and by non-price rationing, we mean all types of control on the quantity consumed. Non-price rationing could be done by giving away coupons that would enable low income families to obtain some goods at affordable prices, which could not be possible if the prices were to increase alone. With coupon schemes, it would develop a black market for coupons, which would paradoxically increase the utility for those who are in need of that commodity by collection of more of these coupons from those who are not in need. This ensures greater marginal utility for those people who are in need of the commodity and will provide exchange of money to those who sell these coupons. For this, it is necessary for the government to encourage trading of the coupons.The major importance of introducing rationing is to keep the price of important commodities under control, as for a necessary commodity, there will be an excessive demand in the market which will drive their price up in the market and high prices leads to reduction of consumption and utility for those who could not afford it. This ensures that the resources are planned in favour of the poor people of the country and restricts the rich people to ensure excessive purchase of limited resources of the country. This ensures development and equality of welfare and utilitybetween the rich and the poor people. Rationing of the good is done by the government and not the private sector. There is the same limit put on every person on the budget spending to which people could buy the commodities and within the limit, one could buy any amount of the commodity.Q. The marginal utility of a person diminishes.

Deficient demanda)Market price is same as the equilibrium priceb)Market price is higher than the equilibrium pricec)Market price is lower than the equilibrium priced)None of theseCorrect answer is option 'B'. Can you explain this answer?
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