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: -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.