Reason Based Questions - Price Determination Notes | Study Crash Course of Micro Economics -Class 12 - Commerce

Commerce: Reason Based Questions - Price Determination Notes | Study Crash Course of Micro Economics -Class 12 - Commerce

The document Reason Based Questions - Price Determination Notes | Study Crash Course of Micro Economics -Class 12 - Commerce is a part of the Commerce Course Crash Course of Micro Economics -Class 12.
All you need of Commerce at this link: Commerce

Reason Based Question’s

(Q1) Excess supply of a commodity exists when its market price is greater than its equilibrium price.
Ans: (T)                                       

(Q2) Rationing will increase the aggregate utility derived by the community

(Q3) In a state of equilibrium, quantity demanded will be more than the quantity supplied.
Ans: (F)

(Q4) If the demand for a commodity increases, its supply curve remaining the same, the market price of the commodity will fall.
Ans: (F)      
(Q5) An increase in supply results in a fall both in equilibrium quantity and equilibrium price.
Ans: (F)

(Q6) If the increase in demand is proportionately equal to the decrease in supply,               equilibrium price will fall.
Ans: (F)

(Q7) If the decrease in demand meets with an increase in supply, equilibrium price will fall.
Ans: (T)     

(Q8) Equilibrium price will not change if the decrease in demand meets with a                    proportionate decrease in supply.

(Q9) Increase in demand always causes the rise in price
Ans: (T)     

(Q10) In a situation of war when people are fearing shortage of rice, equilibrium price of rice tends to rise.   
Ans: (T)                                          

(Q11) In a situation when import of inputs becomes expensive, equilibrium price of the       commodity tends to rise. 
Ans: (T)                                    

(Q12) In a state of increasing cost of production leading to a substantial cut in production, equilibrium price will fall.  
Ans: (F)                         

(Q13) Market price is always equal to or greater than the support price of a commodity.
Ans: (T)    

(Q14) For a non-viable industry, supply curve lies above the demand curve.
Ans: (T)    

(Q15) A market price higher than equilibrium price leads to competition among buyers.
Ans: (F)  

(Q16) Change in the demand of a good will not affect its equilibrium quantity if supply curve is vertical straight line.
Ans: (T)    

(Q17) When there is no excess demand or excess supply in the market, everybody is equally satisfied (or nobody suffers any shortage).
Ans: (F)  

(Q18) In a situation of perfectly elastic supply, price of the commodity tends to remain constant, no matter demand increases or decreases.
Ans: (T)    

(Q19) In a situation of war when people are fearing shortage of rice, equilibrium price of rice tends to rice.
Ans: (T)    

(Q20) In a situation when import of inputs becomes expensive, equilibrium price of the commodity tends to rise.
Ans: (T)    

(Q21) If consumers tend to buy more corresponding to the existing price of the commodity, supply curve should shift to the right.
Ans: (F)    

(Q22) A situation of excess demand or excess supply is automatically corrected under perfect competition.
Ans: (T) 

(Q23) To make the minimum price ceiling effective, it must be accompanied by rationing
Ans: (T) 

(Q24)  If the supply curve of a commodity is perfectly inelastic equilibrium price would remain unchanged at any demand level.
Ans: (T) 

Ans: False , the equilibrium price will more directly with the change in the demand of the commodity, i.e., it increase in demand and vice versa.

(Q25) The supply curve is a vertical straight line, change in demand will not affect the equilibrium price.
Ans: False.  A vertical straight line supply curve implies that the quantity supplied cannot be changed.  If the demand increases, equilibrium price will increase proportionately.

(Q26) If the supply curve is a horizontal straight line, change in demand will affect the equilibrium quantity.

Ans: True , A horizontal straight line supply curve implies that the quantity supplied can be adjusted to the change in demand.  With increase in demand, with no corresponding increase in price, equilibrium quantity will increase.

(Q27) Increase in demand necessarily cause rise in price

Ans: False , Increase in demand generally leads to rise in price.  But this is not always true.  If there is an equal increase in supply, the price will not increase. 

(Q28) If in a perfectly competitive market for a commodity excess demand is prevailing ,   equilibrium price must rise.

Ans: True , this creates demand side pressure generating competition among buyers leading to a rise in market price.

The document Reason Based Questions - Price Determination Notes | Study Crash Course of Micro Economics -Class 12 - Commerce is a part of the Commerce Course Crash Course of Micro Economics -Class 12.
All you need of Commerce at this link: Commerce

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