Chapter 9 Solutions — The Price Puzzle: What Drives the Market

Questions and activities

1. 1.
   An increase in income always leads to a rise in demand for goods. Defend or refute, giving reasons for the same.
2. 2.
   If petrol prices double, what happens to a. Demand for diesel cars b. Demand for electric cars c. Demand for car accessories d. Demand for public transport
3. 3.
   A farmer traditionally irrigates fields manually (labour-intensive). He installs drip irrigation (a technology upgrade) that reduces water use by 40 per cent and increases yield by 30 per cent. How does this affect a. His cost of production b. His willingness to supply at different prices c. The overall market supply if many farmers adopt this technology
4. 4.
   During online festival sales, the prices of many products are very low. Use the concept of demand and supply to explain why the 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.
5. 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. a. Surplus b. Shortage c. No effect d. Fall in demand
6. 6.
   The government levies higher taxes on products such as tobacco and alcohol to promote healthier choices among citizens. Can you find out other goods where price controls have been set in place? What are the reasons for the same?
7. 7.
   Can excessive government regulation hurt markets? Explain with suitable examples.
8. 8.
   In the table below, different prices of guava are given. a. Think and write how much guava you will buy at each price. b. Ask the same question to three of your friends and fill in the table. c. Also make a graph for each one of you and one final graph for the total quantity. Price | You | Friend 1 | Friend 2 | Friend 3 | Total ₹100/kg ₹80/kg ₹50/kg ₹20/kg
9. 9.
   Visit the nearby vegetable market and try to find answers to the following questions. a. Who decides the prices of different vegetables in the vegetable market? b. Sometimes the prices of a few vegetables is too high, and sometimes too low. Why is this? c. The price of tomatoes is high in the morning and eventually gets lower by the evening. Have you ever noticed this? Comment.
10. 10.
    Categorise the following combination of goods into substitute goods and complementary goods. a. Movie ticket in the cinema hall and popcorn b. Eraser and pencil c. Laptop and computer d. Air Conditioner and cooler e. Notebook and pen f. Apple and banana g. Mobile and earphones
11. 11.
    Fig. 9.8 shows the demand curve DD' and Supply curve SS'. Based on the figure, answer the following questions: a. What does point E represent in this market? b. What is the equilibrium price and equilibrium quantity at point E? c. 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…
12. 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 a. Plot the demand and supply curve using the above data. b. Identify the equilibrium price and quantity. c. Observe the above data and analyse what happens if the price is set at ₹20 or ₹40.