ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -It’s a fundamental economic principle that when supply exceeds demand for a good or service, prices fall. When demand exceeds supply, prices tend to rise. There is an inverse relationship between the supply and prices of goods and services when demand is unchanged.

Detailed explanation-2: -A decrease in demand and an increase in supply will cause a fall in equilibrium price, but the effect on equilibrium quantity cannot be determined. 1. For any quantity, consumers now place a lower value on the good, and producers are willing to accept a lower price; therefore, price will fall.

Detailed explanation-3: -When supply increases, it results in an excess supply at the earlier equilibrium price. So there will be competition among sellers, which reduces the price. Price fall leads to a rise in demand and fall in supply. These changes will continue until the new equilibrium is established.

Detailed explanation-4: -Key Takeaways. The law of demand holds that the demand level for a product or a resource will decline as its price rises, and rise as the price drops. Conversely, the law of supply says higher prices boost supply of an economic good while lower ones tend to diminish it.

Detailed explanation-5: -Key points. The law of supply states that a higher price leads to a higher quantity supplied and that a lower price leads to a lower quantity supplied. Supply curves and supply schedules are tools used to summarize the relationship between supply and price.