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Class 11 Economics Long Answer Questions - Forms of Market and Price Determination

LONG ANSWER QUESTIONS (6 MARKS)

 

Q. Equilibrium price may or may not change with shifts in both demand and supply curve. Comment.

Ans:- There can be 3 situations of a simultaneous right wards shift of supply curves and demand curves.

When demand increases more than supply price and quantity both will increase

 

 
 

Class 11 Economics Long Answer Questions - Forms of Market and Price Determination

When increase in demand is more than increase in supply price increases from OP to OP1. Quantity increases from OM to OM1. Increase in price is less than increase in quantity. ii) When demand increases less than supply, price will fall but quantity will rise.

Class 11 Economics Long Answer Questions - Forms of Market and Price Determination

When supply increases more than demand price falls from OP to OP1 and quantity demand increases from OM to OM1. Decrease in price is less than increase in quantity. i) When demand and supply increases equally then equilibrium price remain same.


                

When supply increases more than demand price falls from OP to OP1 and quantity demand increases from OM to OM1. Decrease in price is less than increase in quantity. i) When demand and supply increases equally then equilibrium price remain same.

Class 11 Economics Long Answer Questions - Forms of Market and Price Determination

 

When increase in demand is equal to increase in supply price remains unchanged at OP. Quantity exchanged increases from OQ to OQ1.

 

Q. Distinguish between collusive and non-collusive oligopoly. Explain the following features of oligopoly.

a) Few firms.

b) Non-price competition.

 

Ans:- Collusive oligopoly is one in which the firm cooperate with each other in deciding price and output.

Non collusive oligopoly is one in which firms compete with each other.

Few firms: There are few sellers of the commodity and each seller sells a substantial portion of the output of the industry. The number of firm is so small that each seller knows that he can influence the price by his own action and that he can provoke rival firms to react.

Non price competition: The firms are afraid of competition through lowering the price because it may start price war. Therefore they complete through the non price factors like advertising, after sales service etc.

 

Q. With the help of demand and supply schedule explain the meaning of excess demand and its effects on price of a commodity.

Ans:- 

Class 11 Economics Long Answer Questions - Forms of Market and Price Determination

 

The above schedule shows market demand and market supply of the commodity at different prices. At the price of 7 and 6 the market demand is greater than market supply. This is the situation of excess demand. There will be competition among the buyers resulting in a rise in price. Rise in price will result in fall in market demand and rise in market supply. This reduces the excess demand. These changes continue till the price rises to Rs. 8 at which excess demand is zero. The excess demand results in a rise in price of the commodity.

 

Q. Market for a good is in equilibrium. There is increase in demand for the goods. Explain the chain effect of this change.

 

Ans. 

Class 11 Economics Long Answer Questions - Forms of Market and Price Determination

 

  • Increase in demand shift the demand curve from D to D1 to right leading to excess demand E E1 at the given price OP.
  • There will be competition among buyers leading to rise in price.
  • As price rise supply starts rising (along S) demand starts falling.
  • These changes continues till D=S at a new equilibrium at E1
  • The quantity rises to OM to OM1 and price rises OP to OP1

 

Q. Distinguish between monopoly and monopolistic competition.

Ans:- i) Under monopoly there is single seller / producer of the commodity. Whereas under monopolistic competition there are large numbers of sellers, so the firm under monopoly has greater influence over price than under monopolistic competition.

ii) There is freedom of entry of new firms under monopolistic competition where as there is no such freedom under monopoly. As a result a monopolist can earn abnormal profit in the long run.

iii) Under monopolistic competition the product is heterogeneous while under monopoly there is no close substitute of the product.

iv) Demand curve in a monopoly market is less elastic than the demand curve under monopolistic competition because under monopoly there is no close substitute of the product.

The document Class 11 Economics Long Answer Questions - Forms of Market and Price Determination is a part of the Commerce Course Economics Class 11.
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FAQs on Class 11 Economics Long Answer Questions - Forms of Market and Price Determination

1. What are the different forms of market?
Ans. The different forms of market are perfect competition, monopoly, monopolistic competition, and oligopoly. In a perfect competition market, there are many buyers and sellers, homogeneous products, and free entry and exit. Monopoly market is characterized by a single seller with no close substitutes for the product. Monopolistic competition market has many sellers and differentiated products. Oligopoly market is dominated by a few large sellers.
2. How is price determined in a perfect competition market?
Ans. In a perfect competition market, price is determined by the forces of demand and supply. The equilibrium price is set at the point where the quantity demanded equals the quantity supplied. If the market price is above the equilibrium price, there is a surplus and sellers will lower their prices. If the market price is below the equilibrium price, there is a shortage and sellers will increase their prices. This process continues until the equilibrium price is reached.
3. What factors influence price determination in a monopoly market?
Ans. Price determination in a monopoly market is influenced by factors such as the monopolist's ability to set prices, the elasticity of demand for the product, and the level of competition from substitute products. A monopolist has the power to set prices as there are no close substitutes for the product. If the demand for the product is inelastic, the monopolist can charge higher prices. However, if there are close substitutes or the demand is elastic, the monopolist may have to lower prices to maintain market share.
4. How does product differentiation affect price determination in monopolistic competition?
Ans. Product differentiation plays a significant role in price determination in monopolistic competition. In this market structure, each firm produces a differentiated product that is not identical to the products of other firms. The level of product differentiation affects the elasticity of demand for each firm's product. If a firm's product is highly differentiated and has low substitutes, it can charge higher prices. On the other hand, if the product is less differentiated and has many substitutes, the firm may have to lower prices to attract consumers.
5. What factors influence price determination in an oligopoly market?
Ans. Price determination in an oligopoly market is influenced by factors such as the behavior of competing firms, the level of market concentration, and the extent of collusion among firms. The behavior of competing firms, whether they engage in price competition or non-price competition, can affect the pricing decisions in the market. The level of market concentration, i.e., the number and size of firms in the market, also plays a role in price determination. Additionally, if firms collude and engage in price-fixing agreements, prices can be artificially determined.
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