1. An increase in income always leads to a rise in demand for goods. Defend or refute, giving reasons for the same.
Answer:
This statement is not always true. An increase in income usually increases the demand for many goods because people have more purchasing power. For example, when income rises, people may buy more fruits, better clothes, electronics, or higher-quality products.
However, demand does not rise for all goods. For some goods, people may buy less when their income increases because they shift to better alternatives. For example, a person may stop buying low-quality products and start buying branded or higher-quality goods.
So, income affects demand, but the effect depends on the type of good, taste, preference, and lifestyle of the consumer.
2. If petrol prices double, what happens to—
2(a). Demand for diesel cars
Answer:
The demand for diesel cars may increase because diesel cars can act as substitutes for petrol cars. If petrol becomes very expensive and diesel remains comparatively cheaper, some consumers may prefer diesel cars to reduce fuel cost.
2(b). Demand for electric cars
Answer:
The demand for electric cars will likely increase because people may look for alternatives to petrol vehicles. Electric cars become more attractive when petrol prices rise because they reduce dependence on petrol.
2(c). Demand for car accessories
Answer:
The demand for car accessories may fall or change. If high petrol prices reduce the use or purchase of petrol cars, people may spend less on petrol-car accessories. However, demand for accessories related to diesel or electric vehicles may increase.
2(d). Demand for public transport
Answer:
The demand for public transport will likely increase because travelling by personal petrol vehicles becomes costly. People may shift to buses, metro, trains, or shared transport to save money.
3. A farmer traditionally irrigates fields manually. He installs drip irrigation that reduces water use by 40% and increases yield by 30%. How does this affect—
3(a). His cost of production
Answer:
In the beginning, the farmer’s cost may increase because he has to spend money on installing drip irrigation. But in the long run, his cost of production may decrease because drip irrigation saves water, reduces wastage, improves efficiency, and increases yield.
3(b). His willingness to supply at different prices
Answer:
The farmer’s willingness to supply will increase at different prices. Since drip irrigation improves yield and reduces water use, the farmer can produce more efficiently. This encourages him to supply more crops in the market.
3(c). The overall market supply if many farmers adopt this technology
Answer:
If many farmers adopt drip irrigation, the overall market supply will increase. Better technology reduces production cost and increases output. As a result, more crops will be supplied in the market, and prices may fall if demand remains the same.
4. During online festival sales, the prices of many products are very low. Use the concept of demand and supply to explain why sellers sell at such a low price. What happens to the equilibrium when the price is lowered? Does this benefit only consumers or sellers as well? Explain.
Answer:
During online festival sales, sellers reduce prices to increase demand. According to the law of demand, when the price of a product falls, the quantity demanded rises. Low prices attract more buyers, help sellers clear old stock, increase sales volume, and attract new customers.
When the price is lowered below the usual equilibrium price, demand rises sharply. If sellers have enough stock, a new temporary equilibrium may form at a lower price with higher quantity sold.
This benefits consumers because they get products at cheaper prices. It also benefits sellers because they sell more units, clear inventory, increase revenue through large sales, and attract customers to their platform.
5. Suppose the government sets a maximum sale price for an essential vaccine below the market-driven price. What is likely to happen? Choose from the options below and elucidate your point.
Options:
a. Surplus
b. Shortage
c. No effect
d. Fall in demand
Answer:
The correct option is:
b. Shortage
If the government sets a maximum sale price below the market price, it is called a price ceiling. Since the vaccine becomes cheaper, more people will demand it. But producers may supply less because the price is lower than what they could get in the free market.
As a result, quantity demanded becomes greater than quantity supplied, creating a shortage. This may lead to long queues, rationing, or even black marketing if the supply is not managed properly.
6. The government levies higher taxes on products such as tobacco and alcohol to promote healthier choices among citizens. Can you find out other government price controls have been set in place? What are the reasons for the same?
Answer:
Yes, governments use different price controls and interventions in many areas.
Examples include:
- Price ceiling on essential medicines
The government may fix maximum prices for medicines so that poor and vulnerable people can afford them. - Minimum support price for crops
The government announces MSP for some crops to protect farmers from very low market prices. - Minimum wages
The government fixes minimum wages to ensure workers get fair payment for their labour. - Subsidised food through ration shops
Food grains are provided at lower prices to help poor families meet basic needs. - Controlled fares in public transport
Bus, metro, or railway fares may be regulated so that transport remains affordable.
The main reasons for such price controls are to protect consumers, support farmers and workers, prevent exploitation, control unfair practices, and ensure access to essential goods and services.
7. Can excessive government regulation hurt markets? Explain with suitable examples.
Answer:
Yes, excessive government regulation can hurt markets if it is not implemented carefully. Regulation is necessary to protect consumers, workers, and producers, but too much control can create problems.
For example, if the government fixes the price of wheat much below the market price, farmers may lose motivation to produce more wheat. This can reduce supply and create shortages.
Similarly, if small businesses need too many licences, permits, and approvals, it becomes difficult and costly for them to start or expand their business. This reduces ease of doing business.
Too much price control can also discourage innovation. If producers cannot earn enough profit, they may not invest in better technology, better seeds, irrigation, or improved production methods.
Therefore, government intervention is important, but it should be balanced. It should protect people without reducing production, competition, innovation, and efficiency.
8. In the table below, different prices of guava are given.
8(a), 8(b), 8(c). Think and write how much guava you and your friends will buy at each price. Also make graphs.
Answer:
| Price | You | Friend 1 | Friend 2 | Friend 3 | Total |
|---|---|---|---|---|---|
| ₹100/kg | 1 kg | 1 kg | 0 kg | 2 kg | 4 kg |
| ₹80/kg | 2 kg | 2 kg | 1 kg | 3 kg | 8 kg |
| ₹50/kg | 4 kg | 3 kg | 2 kg | 5 kg | 14 kg |
| ₹20/kg | 6 kg | 5 kg | 4 kg | 7 kg | 22 kg |
This table shows the law of demand. When the price of guava is high, people buy less. When the price falls, people buy more.
For the graph, take quantity of guava on the X-axis and price on the Y-axis. Draw separate demand curves for yourself and each friend. Then draw one final graph for the total quantity. The total demand curve will slope downward because quantity demanded increases as price decreases.
9. Visit the nearby vegetable market and try to find answers to the following questions.
9(a). Who decides the prices of different vegetables in the vegetable market?
Answer:
The prices of vegetables are mainly decided by the interaction of demand and supply. Farmers, wholesalers, retailers, and buyers all influence the price. If supply is high and demand is low, prices fall. If supply is low and demand is high, prices rise. Weather, transport cost, season, freshness, and availability also affect vegetable prices.
9(b). Sometimes the prices of a few vegetables are too high, and sometimes too low. Why is this?
Answer:
Vegetable prices become high when supply is low or demand is high. This can happen due to crop failure, heavy rainfall, drought, transport problems, festivals, or seasonal demand.
Prices become low when supply is more than demand. For example, during harvest season, many farmers bring the same vegetable to the market, so supply increases and prices fall.
9(c). The price of tomatoes is high in the morning and eventually gets lower by the evening. Have you ever noticed this? Comment.
Answer:
Yes, this often happens in vegetable markets. In the morning, tomatoes are fresh and demand is usually high, so sellers charge higher prices. By evening, sellers want to clear their remaining stock because tomatoes are perishable and may spoil soon. Therefore, they reduce the price to sell them quickly.
This shows how prices change according to demand, supply, freshness, and time of the day.
10. Categorise the following combination of goods into substitute goods and complementary goods.
Answer:
| Combination of goods | Category | Reason |
|---|---|---|
| Movie ticket in the cinema hall and popcorn | Complementary goods | They are often consumed together. |
| Eraser and pencil | Complementary goods | An eraser is used along with a pencil. |
| Laptop and computer | Substitute goods | One can replace the other for many tasks. |
| Air conditioner and cooler | Substitute goods | Both are used for cooling. |
| Notebook and pen | Complementary goods | They are used together for writing. |
| Apple and banana | Substitute goods | Both are fruits and one can be chosen instead of the other. |
| Mobile and earphones | Complementary goods | Earphones are used with a mobile. |
11. Figure 9.8 shows the demand curve DD’ and supply curve SS’. Based on the figure, answer the following questions:
11(i). What does point E represent in this market?
Answer:
Point E represents the market equilibrium. It is the point where the demand curve DD’ and the supply curve SS’ intersect. At this point, the quantity demanded is equal to the quantity supplied, so there is neither excess demand nor excess supply in the market.
11(ii). What is the equilibrium price and equilibrium quantity at point E?
Answer:
At point E, the equilibrium price is approximately ₹250, and the equilibrium quantity is 30 kg.
So,
Equilibrium Price = ₹250
Equilibrium Quantity = 30 kg
11(iii). Point A lies on DD’. Point B lies on SS’. What do the points A and B indicate about demand and supply? What does the gap between A and B, both on the upper dashed price line, represent?
Answer:
At the upper dashed price line, the price is about ₹300.
Point A on the demand curve shows the quantity demanded at ₹300.
Point B on the supply curve shows the quantity supplied at ₹300.
At this higher price, the quantity supplied is more than the quantity demanded. Therefore, the gap between A and B represents excess supply or surplus.
This means sellers are willing to sell more, but buyers are willing to buy less at this high price.
11(iv). Point F lies on DD’. Point C lies on SS’. What do the points F and C indicate about demand and supply? What does the gap between C and F, both on the lower dashed price line, represent?
Answer:
At the lower dashed price line, the price is about ₹160.
Point F on the demand curve shows the quantity demanded at this lower price.
Point C on the supply curve shows the quantity supplied at this lower price.
At this lower price, the quantity demanded is more than the quantity supplied. Therefore, the gap between C and F represents excess demand or shortage.
This means buyers want to buy more, but sellers are supplying less at this low price.
11(v). If the price stays at the lower dashed line, what could happen next in a free market?
Answer:
If the price stays at the lower dashed line, there will be excess demand because buyers will demand more than sellers are willing to supply.
In a free market, this shortage will put upward pressure on the price. Buyers may compete to get the product, and sellers may raise the price. As the price rises, demand will gradually decrease and supply will increase.
This process will continue until the market reaches the equilibrium point E, where quantity demanded equals quantity supplied.
12. Draw a market equilibrium graph using the following demand schedule.
| Price (₹) | 10 | 20 | 30 | 40 | 50 |
|---|---|---|---|---|---|
| Q.D. (kg) | 5 | 10 | 15 | 20 | 25 |
| Q.S. (kg) | 25 | 20 | 15 | 10 | 5 |
12(a). Plot the demand and supply curve using the above data.
Answer:
To draw the graph, take Quantity on the X-axis and Price on the Y-axis.
Plot the demand points:
- ₹10 = 5 kg
- ₹20 = 10 kg
- ₹30 = 15 kg
- ₹40 = 20 kg
- ₹50 = 25 kg
Plot the supply points:
- ₹10 = 25 kg
- ₹20 = 20 kg
- ₹30 = 15 kg
- ₹40 = 10 kg
- ₹50 = 5 kg
After plotting, join the demand points to form the demand curve and join the supply points to form the supply curve.
12(b). Identify the equilibrium price and quantity.
Answer:
Market equilibrium occurs where quantity demanded equals quantity supplied.
According to the table:
At ₹30,
Quantity demanded = 15 kg
Quantity supplied = 15 kg
So,
Equilibrium Price = ₹30
Equilibrium Quantity = 15 kg
At this point, there is neither excess demand nor excess supply.
12(c). Observe the above data and analyse what happens if the price is set at ₹20 or ₹40.
Answer:
At ₹20:
- Quantity demanded = 10 kg
- Quantity supplied = 20 kg
Here, supply is more than demand.
So, there is excess supply of 10 kg.
At ₹40:
- Quantity demanded = 20 kg
- Quantity supplied = 10 kg
Here, demand is more than supply.
So, there is excess demand of 10 kg.
Thus, the market is balanced only at ₹30, where demand and supply are equal at 15 kg. This point is called the market equilibrium.