Class 12 Economics — Chapter 5: Market Equilibrium

What you'll learn

• ▸Concept of Market Equilibrium
• ▸Excess Demand and Excess Supply
• ▸Price Adjustment Mechanism
• ▸Graphical Determination of Equilibrium
• ▸Algebraic Determination of Equilibrium
• ▸Application: Wage Determination in Labour Market

Chapter Summary

--- PAGE 1 --- Chapter 5 Market Equilibrium Price p₂ p* SS p₁ O q₁' q₁ q* q₂ q₃ Quantity This chapter will be built on the foundation laid down in Chapters 2 and 4 where we studied the consumer and firm behaviour when they are price takers. In Chapter 2, we have seen that an individual's demand curve for a commodity tells us what quantity a consumer is willing to buy at different prices when he takes price as given. The market demand curve in turn tells us how much of the commodity all the consumers taken together are willing to purchase at different prices when everyone takes price as given. In Chapter 4, we have seen that an individual firm's supply curve tells us the quantity of the commodity that a profit-maximising firm would wi…

Practice Questions from this Chapter

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1. Explain market equilibrium simply. Get Solution →
2. Give real examples of excess supply. Get Solution →
3. Illustrate the Invisible Hand concept. Get Solution →
4. What is the situation called where the plans of all consumers and firms in the market match and the market clears? Get Solution →
5. What is the price at which market supply equals market demand called? Get Solution →
6. What is said to exist in the market if market demand exceeds market supply at a given price? Get Solution →
7. According to Adam Smith, what is at play in a perfectly competitive market that changes the price whenever there is an imbalance? Get Solution →
8. In the labour market described in the chapter, who are the suppliers of labour? Get Solution →

Did you know?

• 💡 Ancient Roman soldiers were sometimes paid in salt, which was highly valuable.
• 💡 Tulip mania in 17th-century Holland caused bulb prices to skyrocket and then crash.
• 💡 Diamonds are less rare than you think; their high price is largely controlled.
• 💡 In medieval times, pepper was so expensive it was stored in strongboxes with gold.
• 💡 A single beaver pelt once bought 12 silver spoons in colonial times.

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