CUET UG Booster Economics 5 Test (M2) -

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CUET UG Booster Economics 5 Test (M2)

⏱️ 30 Minutes

❓ 20 Questions

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Booster Economics 5 Test (M2)

1 / 20

QUESTION 1 OF 20

Match the Following terms from the concept of equilibrium:

List I	List II
1. Self-interested objective of consumers	a. Maximise their respective profits
2. Self-interested objective of firms	b. Maximise their respective preference
3. Equilibrium definition	c. Plans of all consumers and firms match
4. Market disequilibrium	d. Excess demand or excess supply exists

Answer Review

1 Match the Following terms from the concept of equilibrium:

List I	List II
1. Self-interested objective of consumers	a. Maximise their respective profits
2. Self-interested objective of firms	b. Maximise their respective preference
3. Equilibrium definition	c. Plans of all consumers and firms match
4. Market disequilibrium	d. Excess demand or excess supply exists

A 1-b, 2-a, 3-c, 4-d

B 1-a, 2-b, 3-c, 4-d

C 1-b, 2-c, 3-a, 4-d

D 1-c, 2-a, 3-b, 4-d

💡 Short Explanation

Consumers aim to maximize satisfaction (preferences/utility). Firms aim to maximize profits. Equilibrium exists when market plans of buyers and sellers are compatible.

✅ Correct Answer Explanation

In a competitive market, consumers purchase goods to maximize their preferences (utility) while firms produce goods to maximize their profits. Market equilibrium occurs when the quantity demanded equals the quantity supplied, meaning the plans of consumers and firms are compatible. Disequilibrium exists whenever excess demand or excess supply is present. Thus, 1 → b (Consumers maximize preferences.) 2 → a (Firms maximize profits.) 3 → c (Equilibrium means all market plans are compatible.) 4 → d (Disequilibrium means excess demand or excess supply exists.) Therefore, Option A correctly matches every pair according to NCERT.

❓ Why Other Options Are Incorrect

Option B → Incorrect because consumers do not maximize profits; firms do.
Option C → Incorrect because firms do not represent the equilibrium definition.
Option D → Incorrect because equilibrium is not the objective of consumers.

🎯 Strategy

Used

Option Grouping

Application:

First identify the obvious pair:
Firms → Profit
Consumers → Preference
The remaining two pairs automatically match equilibrium and disequilibrium.

Final Logic:

Correct economic objectives immediately eliminate all options except Option A.

🧠 Memory Trick

Consumers → Preference | Firms → Profit

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Meaning of Market Equilibrium

2 Which of the following statements about equilibrium conditions are correct?
I. Both the consumers' and firms' objectives are compatible in equilibrium.
II. The market demand is greater than market supply in equilibrium.
III. Equilibrium is a zero excess demand-zero excess supply situation.

A I and II only

B II and III only

C I and III only

D I, II, and III

💡 Short Explanation

Equilibrium means demand equals supply. Excess demand is zero. Buyers' and sellers' plans are compatible.

✅ Correct Answer Explanation

In market equilibrium, the quantity demanded equals the quantity supplied. Therefore, there is neither excess demand nor excess supply. Statement I is correct because consumers maximize utility while firms maximize profits, and both objectives are simultaneously fulfilled in equilibrium. Statement II is incorrect because demand cannot exceed supply in equilibrium. If it did, excess demand would exist. Statement III is correct because equilibrium is precisely a zero excess demand and zero excess supply situation. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → Incorrect because Statement II is false.
Option B → Incorrect because Statement II is false.
Option D → Incorrect because all three statements are not correct.

🎯 Strategy

Used

Elimination

Application:

Check Statement II first. Since equilibrium requires demand = supply, Statement II is false. Eliminate every option containing Statement II.

Final Logic:

Only Option C excludes the incorrect statement.

🧠 Memory Trick

Equilibrium = Demand = Supply = Zero Excess

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Equilibrium Conditions

3 In a perfectly competitive market with free entry and exit, how is the equilibrium price determined?

A It is set at the maximum price consumers are willing to pay.

B It is determined by the intersection of the market demand curve and the market supply curve.

C It is fixed by government price ceiling policies.

D It is always equal to the minimum average cost of the firms.

💡 Short Explanation

Equilibrium price is determined by market demand and market supply. It is established where the two curves intersect. At this point, quantity demanded equals quantity supplied.

✅ Correct Answer Explanation

According to NCERT, the equilibrium price is determined at the point where the market demand curve intersects the market supply curve. At this point: Quantity demanded equals quantity supplied. The market clears without shortage or surplus. The equilibrium price and equilibrium quantity are simultaneously determined. Therefore: Option B correctly states the NCERT concept. Option A is incorrect because consumers' maximum willingness to pay alone does not determine market equilibrium. Option C is incorrect because government price ceilings are market interventions and do not determine competitive equilibrium. Option D is incorrect because the equilibrium price is not always equal to the minimum average cost. Although this may occur under specific long-run perfectly competitive conditions, it is not the general rule for determining market equilibrium price. Therefore, Option B is correct.

❓ Why Other Options Are Incorrect

Option A) It is set at the maximum price consumers are willing to pay. → Market equilibrium depends on both demand and supply, not consumers alone.
Option C) It is fixed by government price ceiling policies. → Price ceilings are government interventions that alter market outcomes rather than determine competitive equilibrium.
Option D) It is always equal to the minimum average cost of the firms. → This is not the general condition for determining equilibrium price, and the word "always" makes the statement incorrect.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Recall the NCERT definition of market equilibrium and identify the option that exactly matches it.

Final Logic:

Equilibrium price is determined where the market demand curve intersects the market supply curve; therefore, Option B is correct.

🧠 Memory Trick

Demand ∩ Supply = Equilibrium Price

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Determination of Equilibrium Price

4 Arrange the logical sequence showing how a market clears when demand shifts rightward:
1. Initial equilibrium is at p0, q0.
2. Market demand shifts rightward to DD2.
3. At p0, there is excess demand, causing consumers to pay a higher price.
4. Price rises until a new equilibrium is reached where market clears at a higher price and quantity.

A 2, 1, 4, 3

B 1, 2, 3, 4

C 3, 4, 1, 2

D 1, 3, 2, 4

💡 Short Explanation

Begin at initial equilibrium. Demand increases. Excess demand raises price. New equilibrium is established.

✅ Correct Answer Explanation

Initially, the market is in equilibrium at (p0, q0). When market demand shifts rightward to DD2, the original equilibrium price p0 is no longer sufficient to clear the market. At p0, quantity demanded exceeds quantity supplied, creating excess demand. Buyers compete for the limited quantity available, causing the market price to rise. As the price increases, quantity demanded falls and quantity supplied rises until a new equilibrium is established at a higher price and a higher quantity. Therefore, the correct logical sequence is: 1 → 2 → 3 → 4 Hence, Option B is correct.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Follow the chronological sequence of market adjustment after a rightward shift in demand.

Final Logic:

Initial Equilibrium → Demand Shift → Excess Demand → New Equilibrium, therefore Option A is correct.

🧠 Memory Trick

Equilibrium → Shift → Shortage → New Equilibrium

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Price Adjustment Process

5 If the demand curve is qD = 200 – p and the supply curve is qS = 120 + p, calculate the equilibrium quantity.

A 40

B 80

C 160

D 200

💡 Short Explanation

At equilibrium, demand equals supply. Solve for price first. Substitute the equilibrium price into either equation.

✅ Correct Answer Explanation

At equilibrium, qD = qS Therefore, 200 − p = 120 + p 80 = 2p p = 40 Substitute p = 40 into either equation: q = 200 − 40 = 160 or q = 120 + 40 = 160 Thus, the equilibrium quantity is 160. Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A) 40 → This is the equilibrium price, not the equilibrium quantity.
Option B) 80 → This results from an incorrect calculation.
Option D) 200 → This does not satisfy both the demand and supply equations simultaneously.

🎯 Strategy

Used

Substitution

Application:

Set qD = qS, solve for the equilibrium price, and substitute it into either equation to obtain the equilibrium quantity.

Final Logic:

qD = qS → p = 40 → q = 160, therefore Option C is correct.

🧠 Memory Trick

Demand = Supply → Solve p → Find q

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Algebraic Determination of Equilibrium Price and Quantity

6 At equilibrium, if the government imposes a specific tax 't' per unit, the balance condition shifts. However, in the standard free market, the balance condition for equilibrium quantity implies that excess demand equals ________ and excess supply equals ________.

A positive, negative

B 100, 100

C price, cost

D zero, zero

💡 Short Explanation

Market equilibrium occurs when demand equals supply. There is no shortage or surplus at equilibrium. Hence, both excess demand and excess supply are zero.

✅ Correct Answer Explanation

In a perfectly competitive market, equilibrium exists when the quantity demanded equals the quantity supplied. Mathematically, qD = qS Therefore, Excess Demand = qD − qS = 0 and Excess Supply = qS − qD = 0 When the government imposes a specific tax t per unit, the supply curve shifts and a new equilibrium is established. However, the question specifically refers to the standard free-market equilibrium, where both excess demand and excess supply are zero. Therefore: Option D is correct. Option A is incorrect because equilibrium cannot have positive excess demand or negative excess supply. Option B is incorrect because equilibrium is not represented by arbitrary numerical values. Option C is incorrect because price and cost do not describe equilibrium conditions.

🎯 Strategy

Used

Elimination

Application:

Recall the basic equilibrium condition where neither shortage nor surplus exists.

Final Logic:

Excess Demand = 0 and Excess Supply = 0; therefore, Option D is correct.

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Equilibrium Condition

7 Assertion (A): Excess demand occurs at any price greater than the equilibrium price.
Reason (R): At a price greater than p*, the quantity demanded qD is greater than the quantity supplied qS.

A Both false

B A true, R false

C Both true, R explains A

D A false, R true

💡 Short Explanation

Excess demand occurs below equilibrium price. Excess supply occurs above equilibrium price. Therefore, both Assertion and Reason are incorrect.

✅ Correct Answer Explanation

According to NCERT, *excess demand exists when the prevailing market price is below the equilibrium price (p)**. When price is below equilibrium: qD > qS When price is above equilibrium: qS > qD Hence: The Assertion is false because excess demand does not occur above the equilibrium price. The Reason is also false because at a price greater than p*, quantity demanded (qD) is less than quantity supplied (qS). Therefore, Option A is correct.

🎯 Strategy

Used

Conceptual Elimination

Application:

Recall the relationship between market price and excess demand/excess supply.

Final Logic:

Below p* → qD > qS (Excess Demand)
Above p* → qS > qD (Excess Supply)
Hence, both statements are false.

🧠 Memory Trick

High Price → Surplus

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Excess Demand

8 Arrange the events that cause and resolve excess demand:
1. Prevailing price is below equilibrium.
2. Consumers are unable to obtain the commodity.
3. Consumers are willing to pay more, pushing the price up.
4. Quantity demanded falls and quantity supplied increases until equilibrium.

A 1, 3, 2, 4

B 1, 2, 3, 4

C 2, 1, 4, 3

D 4, 3, 2, 1

💡 Short Explanation

Price is below equilibrium. Shortage develops. Buyers compete by offering higher prices. Market returns to equilibrium.

✅ Correct Answer Explanation

The adjustment process follows a logical sequence: 1. The prevailing price is below equilibrium. 2. Quantity demanded exceeds quantity supplied, creating a shortage. 3. Consumers compete by offering higher prices. 4. As price rises, quantity demanded falls and quantity supplied increases until equilibrium is restored. Thus, the correct order is: 1 → 2 → 3 → 4 Hence, Option B is correct.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Arrange the events according to the natural market adjustment process.

Final Logic:

Low Price → Shortage → Higher Price → Equilibrium, therefore Option B is correct.

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Adjustment under Excess Demand

9 Match the following expressions algebraically:

List I	List II
1. Excess Demand (ED)	a. qS − qD
2. Excess Supply (ES)	b. qD − qS
3. Market equilibrium	c. qD = qS
4. Shortage situation	d. qD>qS

A 1-a, 2-b, 3-c, 4-d

B 1-a, 2-a, 3-c, 4-d

C 1-b, 2-a, 3-d, 4-c

D 1-b, 2-a, 3-c, 4-d

💡 Short Explanation

Excess demand means demand exceeds supply. Excess supply means supply exceeds demand. Equilibrium occurs when demand equals supply.

✅ Correct Answer Explanation

Definitions: Excess Demand (ED): ED = qD − qS Excess Supply (ES): ES = qS − qD Market Equilibrium: qD = qS Shortage Situation: qD > qS Therefore: 1 → b 2 → a 3 → c 4 → d Hence, Option B is correct.

🎯 Strategy

Used

Option Grouping

Application:

Match each concept with its corresponding algebraic expression.

Final Logic:

Only Option B correctly matches all four expressions.

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Excess Demand and Excess Supply

10 When the government imposes a price floor above the equilibrium price, it directly causes an ________ in the market.

A invisible hand

B excess demand

C excess supply

D equilibrium shift

💡 Short Explanation

A price floor is a minimum legal price. When set above equilibrium, producers supply more than consumers demand. This creates a surplus (excess supply).

✅ Correct Answer Explanation

A price floor is a government-imposed minimum legal price. When it is fixed above the equilibrium price, producers are willing to supply more, while consumers demand less. Therefore, qS > qD This creates excess supply (surplus) in the market. Hence: Option C is correct. Option A is incorrect because the invisible hand refers to the market mechanism, not the direct effect of a price floor. Option B is incorrect because excess demand occurs when price is below equilibrium. Option D is incorrect because the immediate effect of a binding price floor is excess supply, not simply an equilibrium shift.

🎯 Strategy

Used

Conceptual Elimination

Application:

Recall the effect of a binding price floor on demand and supply.

Final Logic:

Price Floor Above Equilibrium → qS > qD → Excess Supply, therefore Option C is correct.

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Price Floor and Excess Supply

11 Which of the following accurately describes the adjustment when the price rises due to excess demand?

A Firms lower the price to sell more.

B Consumers buy less, and firms produce less.

C The demand curve shifts leftwards to balance the market.

D Price increases, causing quantity demanded to fall and quantity supplied to increase until equilibrium is reached.

💡 Short Explanation

Excess demand occurs when quantity demanded exceeds quantity supplied. Buyers compete for limited goods, pushing the price upward. A higher price reduces demand and encourages greater supply until equilibrium is restored.

✅ Correct Answer Explanation

When there is excess demand (qD > qS), the prevailing market price is below the equilibrium price. Consumers compete for the limited quantity available, causing the market price to rise. As the price increases: Quantity demanded decreases (movement upward along the demand curve). Quantity supplied increases (movement upward along the supply curve). The adjustment continues until: qD = qS At this point, the market reaches equilibrium. Therefore, Option D correctly explains the market adjustment process according to NCERT.

❓ Why Other Options Are Incorrect

Option A → Incorrect because firms do not lower the price when excess demand exists. Market forces push the price upward.
Option B → Incorrect because although consumers buy less as the price rises, firms generally supply more, not less.
Option C → Incorrect because excess demand is corrected through a movement along the demand and supply curves, not by a shift in the demand curve itself.

🎯 Strategy

Used

Elimination

Application:

Eliminate options that involve price reduction, incorrect supply response, or curve shifts instead of movements along the curves.

Final Logic:

Only Option D correctly describes the adjustment mechanism under excess demand.

🧠 Memory Trick

Shortage → Price ↑ → Demand ↓ → Supply ↑ → Equilibrium

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Price Adjustment under Excess Demand

12 Which of the following statements is/are correct about a fall in market price?
I. A fall in price occurs when there is excess supply.
II. As price falls, quantity demanded rises.
III. As price falls, quantity supplied increases.

A I and II only

B I and III only

C II and III only

D I, II, and III

💡 Short Explanation

Excess supply causes the market price to fall. A lower price increases quantity demanded. A lower price decreases quantity supplied.

✅ Correct Answer Explanation

When excess supply exists (qS > qD), sellers compete to sell their products by lowering prices. As the market price falls: Quantity demanded increases because consumers are willing to purchase more at a lower price. Quantity supplied decreases because producers are willing to supply less at lower prices. Therefore: Statement I is correct. Statement II is correct. Statement III is incorrect because supply decreases rather than increases when price falls. Hence, Option A is the correct answer.

❓ Why Other Options Are Incorrect

Option B → Incorrect because Statement III is false.
Option C → Incorrect because Statement III is false.
Option D → Incorrect because all three statements are not correct.

🎯 Strategy

Used

Elimination

Application:

Recall the law of supply: a fall in price reduces quantity supplied, immediately eliminating all options containing Statement III.

Final Logic:

Only Option A contains the correct combination of statements.

🧠 Memory Trick

Price ↓ → Demand ↑ → Supply ↓

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Price Adjustment under Excess Supply

13 Match the Following concepts related to Adam Smith's Invisible Hand:

List I	List II
1. Imbalance with excess demand	a. Invisible hand reaches equilibrium
2. Imbalance with excess supply	b. Invisible hand lowers the price
3. Reaching zero excess demand	c. Invisible hand raises the price
4. Persistent shortage situation	d. Price continues to rise until equilibrium

A 1-c, 2-b, 3-a, 4-d

B 1-b, 2-c, 3-a, 4-d

C 1-a, 2-b, 3-c, 4-d

D 1-c, 2-a, 3-b, 4-d

💡 Short Explanation

Excess demand pushes prices upward. Excess supply pushes prices downward. The invisible hand guides the market toward equilibrium.

✅ Correct Answer Explanation

According to Adam Smith's concept of the Invisible Hand, self-interested actions of buyers and sellers automatically move the market toward equilibrium. Thus, Excess demand leads to a rise in price. Excess supply leads to a fall in price. Zero excess demand indicates that equilibrium has been reached. A persistent shortage continues to increase the market price until equilibrium is restored. Hence, the correct matching is: 1 → c 2 → b 3 → a 4 → d Therefore, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Incorrect because excess demand does not lower the price.
Option C → Incorrect because equilibrium is not the immediate outcome of excess demand.
Option D → Incorrect because zero excess demand signifies equilibrium, not a fall in price.

🎯 Strategy

Used

Option Grouping

Application:

First identify the obvious relationships:
Excess demand → Price rises.
Excess supply → Price falls.
The remaining matches follow automatically.

Final Logic:

Only Option A correctly matches all four concepts.

🧠 Memory Trick

Supply ↑ → Price ↓

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Invisible Hand and Market Adjustment

14 Concept Equation:
If the Invisible Hand adjusts price based on the gap between demand and supply, then Δp\Delta pΔp (change in price) is directly proportional to:

A qS / qD

B qS + qD

C qD - qS

D qD * qS

💡 Short Explanation

Price changes according to the imbalance between demand and supply. Excess demand raises price. Excess supply lowers price.

✅ Correct Answer Explanation

The Invisible Hand adjusts prices according to the difference between quantity demanded and quantity supplied. When: qD > qS there is excess demand and prices rise. When: qS > qD there is excess supply and prices fall. Therefore, Δp ∝ (qD − qS) Hence, Option C is correct.

❓ Why Other Options Are Incorrect

Option A → The ratio of supply to demand does not directly determine the price adjustment.
Option B → The total of demand and supply does not measure market imbalance.
Option D → The product of demand and supply has no role in the NCERT explanation of market equilibrium.

🎯 Strategy

Used

Dimensional/Conceptual Analysis

Application:

The market adjusts according to the difference, not the sum, ratio, or product of demand and supply.

Final Logic:

Only Option C represents the market imbalance responsible for price adjustment.

🧠 Memory Trick

ED = qD − qS

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Market Adjustment Mechanism

15 Whenever market supply is not equal to market demand, the market is not in equilibrium, resulting in a tendency for the ________ to change.

A government

B price

C product quality

D total cost

💡 Short Explanation

Disequilibrium exists when demand differs from supply. Market forces automatically adjust the price. Price changes restore equilibrium.

✅ Correct Answer Explanation

Whenever qD ≠ qS the market is in disequilibrium. This creates either excess demand or excess supply. The market adjusts through changes in price until qD = qS Therefore, the variable that changes naturally is price, making Option B correct.

❓ Why Other Options Are Incorrect

Option A → Incorrect because the government does not automatically intervene whenever disequilibrium occurs.
Option C → Incorrect because product quality is unrelated to the market adjustment process.
Option D → Incorrect because total cost is not the variable that adjusts to eliminate market disequilibrium.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Identify the variable that responds automatically to market shortages or surpluses.

Final Logic:

Only price changes automatically through market forces to restore equilibrium.

🧠 Memory Trick

No Balance → Price Changes

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Disequilibrium and Price Adjustment

16 Arrange the sequence of adjustment when the supply curve shifts leftward:
1. Excess demand is created at the prevailing price.
2. Market supply curve shifts leftward to SS2.
3. The new equilibrium is attained at a higher price.
4. Consumers willing to pay higher prices drive the market price up.

A 1, 2, 4, 3

B 2, 4, 1, 3

C 4, 2, 1, 3

D 2, 1, 4, 3

💡 Short Explanation

Supply decreases first. Excess demand arises at the existing price. Buyers bid up the price. A new equilibrium is established at a higher price.

✅ Correct Answer Explanation

The correct adjustment sequence is: 1. Market supply shifts leftward to SS2. 2. At the prevailing price, qD > qS, creating excess demand. 3. Consumers compete by offering higher prices. 4. As price rises, quantity demanded falls and quantity supplied increases until a new equilibrium is reached. Therefore, the correct order is: 2 → 1 → 4 → 3 Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Incorrect because excess demand cannot occur before the supply curve shifts.
Option B → Incorrect because consumers cannot bid up prices before excess demand arises.
Option C → Incorrect because price cannot rise before the supply shift occurs.

🎯 Strategy

Used

Contextual/Tonal Matching

Application:

Arrange the events according to the natural market adjustment process after a decrease in supply.

Final Logic:

Supply decreases → Excess demand → Price rises → New equilibrium.

🧠 Memory Trick

Supply ↓ → Shortage → Price ↑ → Balance

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Adjustment after a Decrease in Supply

17 Match the Following graphical shifts with their outcomes on the intersection point:

List I	List II
1. Demand shifts right, supply constant	a. Price decreases, quantity increases
2. Supply shifts right, demand constant	b. Price decreases, quantity decreases
3. Demand shifts left, supply constant	c. Price increases, quantity increases
4. Supply shifts left, demand constant	d. Price increases, quantity decreases

A 1-b, 2-a, 3-c, 4-d

B 1-a, 2-c, 3-b, 4-d

C 1-c, 2-b, 3-a, 4-d

D 1-c, 2-a, 3-b, 4-d

💡 Short Explanation

Rightward demand shift raises both price and quantity. Rightward supply shift lowers price and increases quantity. Leftward demand shift lowers both price and quantity. Leftward supply shift raises price and lowers quantity.

✅ Correct Answer Explanation

The equilibrium outcomes are: Demand shifts right → Price ↑, Quantity ↑ Supply shifts right → Price ↓, Quantity ↑ Demand shifts left → Price ↓, Quantity ↓ Supply shifts left → Price ↑, Quantity ↓ Therefore, the correct matching is: 1 → c 2 → a 3 → b 4 → d Hence, Option D is correct.

❓ Why Other Options Are Incorrect

Option A → Incorrect because a rightward demand shift does not reduce price.
Option B → Incorrect because a rightward supply shift decreases price rather than increases it.
Option C → Incorrect because a leftward demand shift cannot increase quantity.

🎯 Strategy

Used

Option Grouping

Application:

Recall the four standard demand-supply graph outcomes and match each shift with its corresponding price and quantity change.

Final Logic:

Only Option C correctly matches all four graphical outcomes.

🧠 Memory Trick

Supply → Price Opposite, Quantity Same

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Effects of Demand and Supply Shifts

18 In the equilibrium graph (Figure 5.1), what is located on the y-axis?

A Quantity

B Excess Demand

C Firms' Profit

D Price

💡 Short Explanation

The demand-supply graph uses price and quantity axes. Price is measured vertically. Quantity is measured horizontally.

✅ Correct Answer Explanation

According to the standard NCERT demand-supply diagram: Y-axis (Vertical Axis): Price X-axis (Horizontal Axis): Quantity The equilibrium point is determined by the intersection of the demand and supply curves. Thus, the vertical axis always measures price, making Option D correct.

❓ Why Other Options Are Incorrect

Option A → Incorrect because quantity is plotted on the horizontal (x) axis.
Option B → Incorrect because excess demand is represented by the gap between demand and supply, not as an axis.
Option C → Incorrect because firms' profit is not represented on the equilibrium graph.

🎯 Strategy

Used

Odd One Out

Application:

Recognize the standard axes used in demand-supply graphs and eliminate unrelated concepts.

Final Logic:

The vertical axis in an equilibrium graph always represents price.

🧠 Memory Trick

X = Quantity

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Demand-Supply Diagram

📄 Passage

"Let us consider the example of a market consisting of identical farms producing same quality of wheat. Suppose the market demand curve and the market supply curve for wheat are given by: qD = 200 – p for 0 ≤ p ≤ 200... qS = 120 + p for p ≥ 10. Since at equilibrium price market clears, we find the equilibrium price (denoted by p*) by equating market demand and supply and solve for p*."

**According to the passage, what is the initial algebraic step to find p*? **

A 200 – p* = 120 + p*

B 200 + p* = 120 – p*

C p* = 200 – 120

D 2p* = 200 + 120

💡 Short Explanation

Equilibrium occurs where demand equals supply. Equate the two equations first. Solve for equilibrium price afterward.

✅ Correct Answer Explanation

The passage gives: qD = 200 − p qS = 120 + p At equilibrium, qD = qS Substituting the equations, 200 − p = 120 + p* This is the first algebraic step in finding the equilibrium price. Therefore, Option A is correct.

❓ Why Other Options Are Incorrect

Option B → Incorrect because the demand and supply equations are written incorrectly.
Option C → Incorrect because the equilibrium price cannot be obtained without first equating demand and supply.
Option D → Incorrect because this equation appears only after simplifying the correct first equation.

🎯 Strategy

Used

Substitution

Application:

Substitute the demand and supply equations into the equilibrium condition qD = qS.

Final Logic:

The first algebraic step is:
200 − p = 120 + p*

🧠 Memory Trick

Equilibrium ⇒ Demand = Supply

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Algebraic Determination of Equilibrium Price

📄 Passage

Based on the equations in the passage, what is the calculated equilibrium price (p∗)?

A 20

B 40

C 80

D 160

💡 Short Explanation

Equate demand and supply. Solve for equilibrium price. The equilibrium price is ₹40.

✅ Correct Answer Explanation

At equilibrium, qD = qS Substitute the given equations: 200 − p = 120 + p Rearranging, 80 = 2p p = 40 Therefore, p = 40* Hence, Option B is correct.

❓ Why Other Options Are Incorrect

Option A → Substituting p = 20 does not satisfy qD = qS.
Option C → Substituting p = 80 does not satisfy qD = qS.
Option D → 160 is the equilibrium quantity (q*), not the equilibrium price (p*).

🎯 Strategy

Used

Substitution

Application:

Set qD = qS and solve for p.

Final Logic:

200 − p = 120 + p ⇒ p = 40 ⇒ p = 40*

🧠 Memory Trick

Demand = Supply → Solve p First*

📚 Class XII – Introductory Microeconomics – Chapter: Market Equilibrium – Topic: Algebraic Determination of Equilibrium Price and Quantity

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