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1.1 Demand and Supply by Ayussh Sanghi
1.1 Demand and Supply by Ayussh Sanghi
Supply
UPSC Prelims
PDF FILE OF PPT
And
The theory of
the firm
The theory of the consumer deals with
consumption (the demand for goods and
The theory of the firm deals with the supply of goods and services by profit-
maximizing firms.
The theory of the consumer and the theory of the firm are important because they
help us understand the foundations of demand and supply.
A market is any arrangement that enables buyers and sellers to get information and do
business with each other.
A competitive market is a market that has many buyers and many sellers so no single
buyer or seller can influence the price.
Correct Answer: B
1. Want it,
❖ Income effect
The term demand refers to the entire relationship between the price of the good
and quantity demanded of the good.
A demand curve shows the relationship between the quantity demanded of a good
and its price when all other influences on consumers’ planned purchases remain
the same.
The greater the difference between those two values, the greater is the
willingness of producers to supply the good
The law of supply results from the general tendency for the marginal cost of producing
a good or service to increase as the quantity produced increases.
Price
The lowest price at which someone is
willing to sell an additional unit rises.
This lowest price is marginal cost.
Change in The six main factors that change supply of
a good are
Supply
(a) producer
(b) consumer
Previous Year
MCQ (c) global economy
(d) middle-man
Correct Answer: B
The equilibrium price is the price at which the quantity demanded equals the quantity
supplied.
The equilibrium quantity is the quantity bought and sold at the equilibrium price.
Factors of production is an The factors of production At the core, land, labor, capital
economic term that describes include land, labor, capital and and entrepreneurship
the inputs that are used in the entrepreneurship encompass all of the inputs
production of goods or services needed to produce a good or
in order to make an economic service
profit
(b) illiteracy
Correct Answer: D
● In market economies, there are a variety of
different market systems that exist, depending
on the industry and the companies within that
industry
1. Monopolistic
2. Oligopoly and
3. Perfect Competition
Types of
Markets
● Monopolistic competition is a type of market system combining elements
1. Normal
2. Inferior
3. Giffen
4. Durable and Non-Durable Goods
Inferior good
Non-durable goods
Correct Answer: D