Market Equilibrium (12 Economics)
Practise chapter-wise MCQs for Class 12 Economics — Market Equilibrium. Every question comes with the correct answer and an explanation.
TL;DR: Practise chapter-wise MCQs for Class 12 Economics — Market Equilibrium. Every question comes with the correct answer and an explanation.
Written & reviewed by the Syllab.in Academic Team (CBSE/NCERT subject experts) · Updated
Practise chapter-wise MCQs for Class 12 Economics — Market Equilibrium. Every question comes with the correct answer and an explanation.
Market Equilibrium MCQs with Answers & Explanations
Q1. Consider a market for a normal good. If consumer income rises and simultaneously the cost of production decreases, what can be definitively said about the equilibrium price and quantity?
- Equilibrium quantity will definitely decrease, price will be indeterminate.
- Equilibrium quantity will definitely increase, price will be indeterminate. ✓ (correct)
- Equilibrium price will definitely increase, quantity will be indeterminate.
- Equilibrium price will definitely decrease, quantity will be indeterminate.
Explanation: An increase in income for a normal good shifts demand to the right (increasing quantity and price). A decrease in production cost shifts supply to the right (increasing quantity and decreasing price). The effect on price is uncertain as it depends on the magnitude of the shifts, but quantity will definitely increase.
Q2. Which of the following is a characteristic of a market in disequilibrium?
- The price is such that quantity demanded equals quantity supplied.
- Buyers and sellers are satisfied with the current price and quantity.
- Either a surplus or a shortage exists. ✓ (correct)
- There is no tendency for price to change.
Explanation: Disequilibrium occurs when the market price is not at the equilibrium level. This leads to a situation where either quantity demanded exceeds quantity supplied (shortage) or quantity supplied exceeds quantity demanded (surplus), creating pressure for the price to adjust.
Q3. In the context of market equilibrium, a 'movement along' the demand curve is caused by a change in:
- Consumer income.
- Consumer tastes and preferences.
- The price of related goods.
- The price of the good itself. ✓ (correct)
Explanation: A movement along the demand curve occurs when there is a change in the quantity demanded solely due to a change in the price of the good itself, assuming all other factors remain constant. Changes in income, related goods' prices, or tastes cause shifts of the entire demand curve.
Q4. If the demand for a luxury good decreases significantly due to an economic recession, what will likely happen to its equilibrium price and quantity?
- Equilibrium price will decrease, and equilibrium quantity will decrease. ✓ (correct)
- Equilibrium price will increase, and equilibrium quantity will decrease.
- Equilibrium price will decrease, and equilibrium quantity will increase.
- Equilibrium price will increase, and equilibrium quantity will increase.
Explanation: A recession typically leads to a decrease in consumer income. For luxury goods, this causes a significant decrease in demand (a leftward shift of the demand curve). With supply remaining constant, this leads to a lower equilibrium price and a lower equilibrium quantity.
Q5. The concept of 'market equilibrium' implies that at the prevailing price:
- Quantity demanded is greater than quantity supplied.
- Quantity demanded is equal to quantity supplied. ✓ (correct)
- Quantity supplied is greater than quantity demanded.
- There is a shortage of the good.
Explanation: Market equilibrium is the state where the quantity of a good that consumers are willing and able to buy is exactly equal to the quantity that producers are willing and able to sell at a given price. This point represents a balance between supply and demand.
Q6. If the price of a substitute good increases, what will be the impact on the equilibrium price and quantity of the original good?
- Equilibrium price will increase, quantity will decrease.
- Both equilibrium price and quantity will decrease.
- Both equilibrium price and quantity will increase. ✓ (correct)
- Equilibrium price will decrease, quantity will increase.
Explanation: If the price of a substitute good increases, consumers will switch to the original good, increasing its demand. This rightward shift in the demand curve will lead to an increase in both the equilibrium price and quantity of the original good.
Q7. Which of the following scenarios will lead to a simultaneous increase in both equilibrium price and equilibrium quantity in a market?
- A decrease in supply.
- A simultaneous decrease in both demand and supply.
- A decrease in demand.
- An increase in demand. ✓ (correct)
Explanation: An increase in demand, with supply remaining constant, shifts the demand curve to the right. This leads to a higher equilibrium price and a higher equilibrium quantity. A decrease in supply would increase price but decrease quantity.
Q8. If the government imposes a price ceiling below the equilibrium price, what is the likely outcome in the market?
- A shortage of the good. ✓ (correct)
- No change in price or quantity.
- A surplus of the good.
- The market will reach a new, stable equilibrium.
Explanation: A price ceiling set below the equilibrium price prevents the price from rising to its natural level. At the lower price, quantity demanded exceeds quantity supplied, leading to a shortage.
Q9. What happens to the equilibrium quantity and price if the government introduces a subsidy for producers of a good?
- Both equilibrium quantity and price will decrease.
- Equilibrium quantity will increase, and equilibrium price will decrease. ✓ (correct)
- Equilibrium quantity will decrease, and equilibrium price will increase.
- Both equilibrium quantity and price will increase.
Explanation: A subsidy to producers effectively lowers their cost of production, leading to an increase in supply (a rightward shift of the supply curve). This results in a lower equilibrium price and a higher equilibrium quantity.
Q10. In a perfectly competitive market, if the demand for a good increases while the supply remains constant, what will be the immediate effect on the equilibrium price and quantity?
- Equilibrium price will increase, equilibrium quantity will decrease.
- Equilibrium price will decrease, equilibrium quantity will increase.
- Equilibrium price will increase, equilibrium quantity will increase. ✓ (correct)
- Equilibrium price will decrease, equilibrium quantity will decrease.
Explanation: An increase in demand, with supply unchanged, leads to a rightward shift of the demand curve. This results in a higher equilibrium price and a higher equilibrium quantity as consumers are willing to buy more at a higher price.
More 12 Economics MCQs
- Introduction to Microeconomics
- Theory of Consumer Behaviour
- Production and Costs
- The Theory of the Firm under Perfect Competition
- Non-competitive Markets
- Introduction to Macroeconomics
🤖 Stuck on any of these? Ask Syllab's free AI Tutor to explain step by step →