ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Market prices are dependent upon the interaction of demand and supply. An equilibrium price is a balance of demand and supply factors. There is a tendency for prices to return to this equilibrium unless some characteristics of demand or supply change.

Detailed explanation-2: -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-3: -In a market economy, the producer gets to decide what to produce, how much to produce, what to charge customers for those goods, and what to pay employees. These decisions in a free-market economy are influenced by the pressures of competition, supply, and demand.

Detailed explanation-4: -Supply is generally considered to slope upward: as the price rises, suppliers are willing to produce more. Demand is generally considered to slope downward: at higher prices, consumers buy less.

Detailed explanation-5: -An increase in income leads to increased purchasing power and demand, whereas a fall in income leads to decreased purchasing power and demand. There is also a link between income and commodity quality. Quality items will see an increase in demand as income rises, whereas poorer goods would see a reduction in demand.