CA Foundation · Paper 4 · Business Economics

Chapter 4 · Unit 2 · Determination of Prices

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Question 01

In a market economy, price of a commodity is generally determined by:

government order alone interaction of demand and supply cost of production alone seller’s wish alone

Market price is determined through the interaction of market demand and market supply.

Question 02

The equilibrium price is the price at which:

demand is maximum supply is zero demand curve is horizontal quantity demanded equals quantity supplied

Equilibrium price is the price at which market demand equals market supply.

Question 03

The quantity bought and sold at equilibrium price is called:

equilibrium quantity average quantity surplus quantity reserve quantity

The quantity corresponding to the equilibrium price is called equilibrium quantity.

Question 04

If at a given price quantity demanded exceeds quantity supplied, the situation is called:

surplus equilibrium excess demand or shortage excess supply

When quantity demanded is more than quantity supplied, there is excess demand or shortage.

Question 05

If at a given price quantity supplied exceeds quantity demanded, the situation is called:

scarcity excess supply or surplus market clearing consumer equilibrium

When quantity supplied is greater than quantity demanded, there is excess supply or surplus.

Question 06

When there is excess demand in the market, price tends to:

fall remain fixed always become zero rise

Shortage creates upward pressure on price.

Question 07

When there is excess supply in the market, price tends to:

fall rise become maximum remain fixed forever

Surplus creates downward pressure on price.

Question 08

The market is in equilibrium when:

buyers are dissatisfied price is highest there is no tendency for price to change supply is greater than demand

At equilibrium, there is no inherent pressure for price to rise or fall.

Question 09

If demand increases while supply remains unchanged, equilibrium price will generally:

fall rise remain unchanged always become zero

A rightward shift in demand, with supply unchanged, raises equilibrium price.

Question 10

If demand decreases while supply remains unchanged, equilibrium price will generally:

rise remain fixed always increase sharply fall

A leftward shift in demand lowers equilibrium price when supply is unchanged.

Question 11

If supply increases while demand remains unchanged, equilibrium price will tend to:

fall rise remain unchanged always become maximum

A rightward shift in supply lowers equilibrium price.

Question 12

If supply decreases while demand remains unchanged, equilibrium price will tend to:

fall remain unchanged rise become zero

A leftward shift in supply raises equilibrium price.

Question 13

A simultaneous increase in both demand and supply will definitely increase:

price only equilibrium quantity price and reduce quantity nothing at all

If both demand and supply increase, equilibrium quantity rises for sure, but price may rise, fall, or remain unchanged depending on the extent of the shifts.

Question 14

A simultaneous decrease in both demand and supply will definitely decrease:

equilibrium quantity price only price always and everywhere none of these

If both demand and supply decrease, equilibrium quantity falls for sure, while price is uncertain.

Question 15

The intersection point of demand curve and supply curve indicates:

maximum price minimum output consumer surplus only market equilibrium

Demand-supply intersection gives equilibrium price and equilibrium quantity.

Question 16

At a price above equilibrium price, there will be:

excess demand market equilibrium excess supply zero supply

Above equilibrium price, sellers want to sell more than buyers want to buy, creating surplus.

Question 17

At a price below equilibrium price, there will be:

excess supply excess demand equilibrium supply normal profit

Below equilibrium price, buyers demand more than sellers supply, causing shortage.

Question 18

Which of the following best describes the function of price in market equilibrium?

it acts as a balancing force between demand and supply it removes demand completely it fixes supply by law it makes all markets monopolistic

Price adjusts to balance market demand and market supply.

Question 19

If demand and supply are both equal at ₹50 and 100 units, then ₹50 is the:

reservation price support price minimum price equilibrium price

When demand equals supply at a price, that price is the equilibrium price.

Question 20

If demand schedule and supply schedule show equality at 200 units, then 200 units is the:

surplus quantity deficient quantity equilibrium quantity market reserve

The quantity at which demand equals supply is equilibrium quantity.

Question 21

An increase in income that raises demand for a normal good, other things remaining same, will:

lower both price and quantity raise equilibrium price and quantity lower price and raise quantity leave quantity unchanged

Higher demand with unchanged supply raises both equilibrium price and equilibrium quantity.

Question 22

Improvement in production technology generally affects price determination through:

increase in supply decrease in demand fixed consumer taste elimination of buyers

Better technology tends to increase supply, which generally lowers price and raises quantity.

Question 23

If demand decreases and supply increases simultaneously, equilibrium price will:

rise remain unchanged always be uncertain fall

Lower demand and higher supply both push equilibrium price downward.

Question 24

If demand increases and supply decreases simultaneously, equilibrium price will:

rise fall remain unchanged always be zero

Higher demand and lower supply both push equilibrium price upward.

Question 25

If market price is above equilibrium price, sellers will tend to:

withhold all supply face excess demand reduce price to clear excess supply buy from consumers

At a price above equilibrium, surplus emerges and competitive pressure tends to reduce price.

Question 26

If market price is below equilibrium price, buyers will compete and this tends to:

reduce price further push price upward eliminate demand increase surplus

At a price below equilibrium, shortage pushes price upward toward equilibrium.

Question 27

The schedule that shows quantities buyers are willing to buy at different prices is called:

supply schedule cost schedule revenue schedule demand schedule

Demand schedule shows quantities demanded at different prices.

Question 28

The schedule that shows quantities sellers are willing to offer at different prices is called:

supply schedule demand schedule utility schedule income schedule

Supply schedule shows quantities supplied at various prices.

Question 29

Which of the following is true at equilibrium price?

there is always excess demand there is always excess supply market demand equals market supply price becomes minimum for all time

That equality is the defining condition of equilibrium price.

Question 30

The basic force that moves a market from disequilibrium toward equilibrium is:

fixed cost price adjustment under excess demand or excess supply consumer ignorance taxation only

Price rises under shortage and falls under surplus, moving the market toward equilibrium.

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