# Scanner - Price Determination(2016-2018) Notes | Study Crash Course of Micro Economics -Class 12 - Commerce

## Commerce: Scanner - Price Determination(2016-2018) Notes | Study Crash Course of Micro Economics -Class 12 - Commerce

The document Scanner - Price Determination(2016-2018) 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

CBSE 2016

(Q1) What is minimum price ceiling ? Explain its implications. (3M)

(Q2) What is maximum price ceiling ? Explain its implications. (3M)

(Q3) If the prevailing market price is above the equilibrium price, explain its chain of effects.

(Q4) Explain the chain effects, if the prevailing market price is below the equilibrium price.

(Q5) Explain the chain of effects of ‘increase’ in demand of a good.

CBSC 2017

(Q1) State whether the following statements are true or false. Give reasons for your answer:

(a) When equilibrium price is greater than market price there will be excess supply

(b) X and Y are complementary goods. A fall in the price of Y will result in a rise in the price of X.
{ Ans: F , T }

(Q2) Explain the meaning of excess demand and excess supply with the help of a schedule. Explain their effect on equilibrium price. (6M)

Ans: Market demand and market supply schedule

Price                Quantity demanded            Quantity supplied

5                                  40                                           30

6                                  35                                           35

7                                  30                                           40    (2M)

At price of Rs.6 the quantity demanded and supplied are equal, so it is the equilibrium price.
When the market price is less than the equilibrium price, quantity demanded will be more than quantity supplied . This is the situation of “excess demand”.  At a price of Rs.5 there is excess demand. This leads to competition among buyers resulting in price rise. When price rises demand falls and supply rises. These changes continue till demand and supply are equal.
(2M)

Similarly at a price of Rs. 7, there is “excess supply”. This will result in competition among sellers. This will reduce price. When price falls demand will rise and supply will fall ultimately equilibrium is reached when price falls to Rs. 6 (2M)

(Q3) Explain the chain of effects of excess supply of a good on its equilibrium price.

(Q4) Explain the chain of effect of excess demand of a good on its equilibrium price.

(Q5) How is the price of a commodity determined in a perfectly competitive market? Explain with help of a diagram.

Ans: Price of a commodity is determined by market demand and market supply of a commodity, (i.e. industry is the price maker)

An individual producer/firm has no role in the determination of the price of the commodity (firm is a price taker).
No individual seller or buyer can influence the price of the commodity.

(Q6) Good Y is a substitute of good X. The price of Y falls. Explain the chain of effects of this change in the market of X.

Ans: demand of X decreases & hence price falls

(Q7) X and Y are complementary goods. The price of Y falls. Explain the chain of effects of this change in the market of X.

Ans:  demand increases of X & hence price rises.
(Q8) It is expected that replacement of all existing taxes on good X by the proposed single Goods and Services Tax (GST) will bring down overall tax on good X substantially. Explain its likely chain of effects on price and quantity of good X. Use diagram.

Ans: Supply increases & price falls

(Q9) What is meant by price floor ?

(Q10) The equilibrium market wage rate is Rs 14,000 per month. The government finding it low fixes minimum wage rate at rs 18,000 per month. Examine the implications of this decision. Use diagram.

or

Explain the implications of fixing minimum wage rate higher than equilibrium market wage rate. Use a numerical example.

CBSC 2018

(Q1) What is meant by price ceiling? Explain its implications.{ leaked paper}    (4M)

(Q2) Define price floor. Explain the implications of price floor.

(Q3) Market of a good is in equilibrium. Demand for the good ‘decreases’. Explain the chain of effects of this change.

Ans:  Market of a good is in equilibrium. If the demand for the good decreases this creates an excess supply of the good at the existing price, in the market .

The excess supply creates competition among sellers , resulting in fall in price, because sellers will not be able to sell all that they want to sell at the existing price. Fall in price leads to rise in demand and fall in supply. These changes continue till the market reaches new equilibrium.

The document Scanner - Price Determination(2016-2018) 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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## Crash Course of Micro Economics -Class 12

45 docs|14 tests

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