3.  Market is a place in which buyers
and sellers come into contact for the
purchase and sale of goods and
services.

4.  refers to number of firms operating in
an industry, nature of competition
between them and the nature of
product.

5.  Perfect competition.
 Monopoly.
 Monopolistic Competition
 Oligopoly.

6.  It refers to a market situation in
which there are large number of
buyers and sellers. Firms sell
homogeneous products at a uniform
price.

7. Monopoly is a market situation
dominated by a single seller who
has full control over the price.

8. It refers to a market situation in
which there are many firms who
sell closely related but
differentiated products.

9. It is a market structure in which
there are few large sellers of a
commodity and large number of
buyers.

10.  Very large number of buyers and sellers.
 Homogeneous product.
 Free entry and exit of firms.
 Perfect knowledge.
 Firm is a price taker and industry is price
maker.
 Perfectly elastic demand curve (AR=MR)
 Perfect mobility of factors of production.
 Absence of transportation cost.
 Absence of selling cost.

11.  Single seller of a commodity.
 Absence of close substitute of the product.
 Difficulty of entry of a new firm.
 Negatively sloped demand curve(AR>MR)
 Full control over price.
 Price discrimination exists
 Existence of abnormal profit

12.  Large number of buyers and sellers but less
than perfect competition.
 Product differentiation.
 Freedom of entry and exit.
 Selling cost.
 Lack of perfect knowledge.
 High transportation cost.
 Partial control over price.

13.  Few dominant firms who are large in
size
 Mutual interdependence.
 Barrier to entry.
 Homogeneous or differentiated
product.
 Price rigidity.

14. Large number of buyers and
sellers.
Homogeneous products.
 Free entry and exit of firm.

16.  Demand, describing the behaviour of
consumers in the market
 Supply, describing the behaviour of
firms in the market
 Market Equilibrium, connecting
demand and supply and describing
how consumers and producers
interact in the market.

17.  Perfect Competition is a market
structure where each firm is a price-
taker and price is determined by the
market forces of demanded and
supply. We know, equilibrium is
determined when market demand is
equal to market supply.

18.  Market Demand is the sum total of
demand for a commodity by all the
buyers in the market. Its curve
slopes downwards due to operation
of law of demand.

19.  Market Supply is the sum total of
supplies of a commodity by all the
producers in the market . Its curves
slopes upwards due to operation of
law of supply.

20.  Market Equilibrium is determined
when the quantity demanded of a
commodity becomes equal to the
quantity supplied.

21.  In Fig Market Demand
curve DD and market
supply curve SS
intersect each other at
point E, which is the
market equilibrium . At
this point, Rs6 is
determined as the
equilibrium price and 60
chocolates as the
equilibrium Quantity.
This equilibrium price
and quantity has a
tendency to persist.

22.  Any price above Rs6 is not the
equilibrium price as the resulting
surplus, i.e. excess supply would cause
competition among sellers. In order to
sell the excess stock, price would come
down to the equilibrium price of Rs 6.
 Any price below Rs6 is also not the
equilibrium price as due to excess
demand, buyers would be ready to pay
higher price to meet their demand. As a
result, price would rise upto the
equilibrium price of Rs 6.

23.  Each firm is a price-taker industry is the price-
maker.
 Each firm earns only normal profits in the long
run ( as discussed in the previous chapter).
 Decisions of consumers and producers in the
market are coordinated through free flow of
prices known as price mechanism.
 It is assumed that both law of demand and law
of supply operate.
 Equilibrium Price, there is neither shortage nor
excess of demand and supply.
 At equilibrium price, there is neither shortage
nor excess of demand and supply.
 Equilibrium Quantity is the quantity demanded
and supplied at the equilibrium price.

24.  Excess Demand refers to a situation,
when quantity demanded is more
than quantity supplied at the
prevailing market price.

25.  The excess demand of Q1,Q2
will lead to competition
amongst the buyers as each
buyers as each buyer wants
to have the commodity.
 Buyers would be ready to
pay higher price to meet
their demand, which will
lead to rise in price.
 With increase in price,
market demand will fall due
to law of demand and
market supply will rise due
to law of supply.
 The price will continue to
rise till excess demand is
wiped out.

26.  Excess Supply refers to a situation,
where the quantity supplied is more
than the quantity demanded at the
prevailing market price.

27.  Excess Supply of Q1Q2 will
lead to competition amongst
sellers as each seller wants to
sell his product.
 Sellers would be ready to
charge lower price to sell the
excess stock, which will lead
to fall in price.
 With decrease in price,
market supply will fall due to
LAW OF DEMAND .
 The price will continue to fall
till excess supply is wiped out.
This is shown by diagram.
Eventually, price will decrease
to a level where market
demand becomes equal to
market supply at OQ and
equilibrium price of OP is
attained.

28.  Viable Industry refers to an industry
for which supply curve and the
demand curve intersect each other in
positive axes.

29.  In the viable
industry, supply
and demand curves
must intersect at
some positive point
as shown in Fig. As
seen in the given
diagram, both
demand and supply
curves intersect
each other in the
positive range of X-
axis and Y-axis.

30.  Non-Viable Industry refers to an
industry for which supply curve and
demand curve never intersect each
other in the positive axes.

31.  As seen in FIG ,
demand and
supply curve
never intersect
each other in
the positive
range of both
the axes

32.  Equilibrium price and equilibrium
quantity are determined when
quantity demanded is equal to
quantity supplied . So, if there is any
change, which leads to shift in
either demand curve or supply curve
or both, then equilibrium price and
equilibrium quantity are bound to
change.

33.  Change in price of complementary
goods
 Change in price of substitute goods
 Change in income(normal and inferior
goods)
 Change in tastes and preferences
 Expectation of Change in the price in
future
 Change in Population

34.  Change in prices of factors of
production
 Change in prices of other goods
 Change in the state of technology
 Change in the taxation policy
 Expectation of change in price in future
 Change in the goals of firms
 Change in the number of Firms

35.  Change in Demand or shift in the demand
curve occurs due to change in any of the
factors that were assumed constant under
the law of demand. The Change may be
either an 'Increase in Demand' or 'Decrease
in Demand'. Original Market equilibrium is
determined at point E, when the original
demand curve DD and supply curve SS
intersect each other. OQ is the equilibrium
quantity and OP is the equilibrium price.

36.  An Increase in demand (assuming no
change in supply) leads to a
rightward shift in demand curve
from DD to D1D1.

37.  When demand increases
to D1D1, it creates an
excess demand at the
old equilibrium price of
OP. This leads to a
competition among
buyers, which raises the
price. These change
continue till the new
equilibrium is
established at point E1.
As there is an increase
in demand only,
equilibrium price rises
from OP to OP1 and
equilibrium quantity
rises from OQ to OQ1.

38.  In case of decrease in demand
(supply remaining unchanged ),
demand curve shifts to the left from
DD to D2D2.

39.  When Demand decreases
to D2D2, it creates an
excess supply at the old
equilibrium price of OP.
This leads to competition
among sellers, which
reduces the price .
Decrease in price leads to
rise in demand and fall
in supply. These changes
continue till the new
equilibrium is established
at point E2. Equilibrium
price falls from OP to OP2
and equilibrium quantity
falls from OQ to OQ2

40.  Change in supply or shift in the supply
curve occurs due to change in any of
the factors constant under the law of
supply. The change may be either an
'Increase in Supply' or 'Decrease in
Supply'. Original Equilibrium is
determined at point E, when demand
curve DD and the original supply curve
intersect each other. OQ is the
equilibrium quantity and Op is the
equilibrium price.

41.  When there is an increase in supply,
demand remaining unchanged , the
supply curve shifts towards right
from SS to S1S1.

42.  These changes
continue till the
new equilibrium
is established at
point E1.
Equilibrium
price falls from
OP to Op1 and
equilibrium
quantity rises
from OQ to OQ1.

43.  When there is an decrease in supply,
demand remaining unchanged , the
supply curve shifts to the left from to
S2S2.

44.  These changes
continue till the
new established
at point E2.
Equilibrium
price rises from
OP to OP2 and
equilibrium
quantity falls
from OQ to OQ2.

45.