ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If there is a decrease in supply of goods and services while demand remains the same, prices tend to rise to a higher equilibrium price and a lower quantity of goods and services.

Detailed explanation-2: -In the face of a shortage, sellers are likely to begin to raise their prices. As the price rises, there will be an increase in the quantity supplied (but not a change in supply) and a reduction in the quantity demanded (but not a change in demand) until the equilibrium price is achieved.

Detailed explanation-3: -A shortage is a situation in which demand for a product or service exceeds the available supply. When this occurs, the market is said to be in a state of disequilibrium. Usually, this condition is temporary as the product will be replenished and the market regains equilibrium.

Detailed explanation-4: -There are two main causes of inflation: demand-pull and cost-push. Both are responsible for a general rise in prices in an economy, but each works differently to put pressure on prices. Demand-pull conditions occur when demand from consumers pulls prices up, while cost-push occurs when supply costs force prices higher.

Detailed explanation-5: -The higher the price, the higher the quantity supplied. Lower prices mean reduced supply, all else held equal. Higher prices give suppliers an incentive to supply more of the product or commodity, assuming their costs aren’t increasing as much. Lower prices result in a cost squeeze that curbs supply.