12 worked answers · short steps first, explanations when you need them
Questions and activities
Textbook pages 210–214
Question 1
An increase in income always leads to a rise in demand for goods. Defend or refute, giving reasons.
Steps only
Refute the word “always.” Higher income often increases demand for normal goods, but demand depends on the type of good, tastes and priorities.
Answer
Refute the word “always.” Higher income often increases demand for normal goods, but demand depends on the type of good, tastes and priorities. People may buy more of some goods, switch to better alternatives, save more, or stop buying inferior goods. So income is one influence, not the only one.
Question 2
If petrol prices double, what happens to demand for (a) diesel cars (b) electric cars (c) car accessories (d) public transport?
Steps only
(a) Diesel cars may become more attractive as substitutes for petrol cars, though diesel prices and other factors matter.
Answer
(a) Diesel cars may become more attractive as substitutes for petrol cars, though diesel prices and other factors matter. (b) Demand for electric cars may rise because they can substitute for petrol cars. (c) Demand for accessories may fall if people delay buying cars or drive less; the effect is indirect. (d) Demand for public transport may rise as people seek alternatives to driving. These are likely effects, not guarantees.
Question 3
A farmer installs drip irrigation that reduces water use by 40% and increases yield by 30%. How does this affect (a) production cost (b) willingness to supply at different prices (c) market supply if many farmers adopt it?
Steps only
(a) Initial installation costs may rise, but lower water use and more output can reduce cost per unit over time.
Answer
(a) Initial installation costs may rise, but lower water use and more output can reduce cost per unit over time. (b) With higher productivity, the farmer may be willing to supply more at each price. (c) If many farmers adopt it, total market supply can increase, assuming other conditions such as demand and weather stay similar.
Question 4
During online festival sales, prices are very low. Use demand and supply to explain why. What happens to equilibrium when price is lowered? Does this benefit only consumers or sellers too?
Steps only
Sellers may lower prices to attract more buyers, clear stock, compete with other shops or sell in larger quantities.
Answer
Sellers may lower prices to attract more buyers, clear stock, compete with other shops or sell in larger quantities. A price below equilibrium can increase quantity demanded and reduce quantity supplied, creating a shortage if it lasts. Consumers who buy at the discount benefit; sellers may also benefit if higher sales and lower storage costs make up for the lower price.
Question 5
If the government sets a maximum sale price for an essential vaccine below its market-driven price, what is likely to happen: surplus, shortage, no effect or fall in demand? Explain.
Steps only
The likely answer is shortage.
Answer
The likely answer is shortage. At the lower price, more people may want the vaccine, while suppliers may offer less if costs are not covered. The government may need to support production and ensure fair distribution so that the price cap does not reduce availability.
Question 6
The government levies higher taxes on tobacco and alcohol to promote healthier choices. Name other goods where price controls have been used and explain why.
Steps only
Examples include some essential medicines and, in some situations, food staples, fuel or public utilities.
Answer
Examples include some essential medicines and, in some situations, food staples, fuel or public utilities. Governments may limit prices to keep essential goods affordable, prevent exploitation or protect consumers when competition is weak. Exact controls vary by time and policy; students can check current official examples.
Question 7
Can excessive government regulation hurt markets? Explain with examples.
Steps only
Yes.
Answer
Yes. Rules that are unclear, very costly or slow can discourage new businesses, delay supply and raise prices. For example, a complicated permit process may prevent a small producer from entering a market. However, suitable rules protect safety, workers and consumers. The aim is effective regulation without unnecessary barriers.
Question 8
For the guava price table, decide how much you would buy at ₹100, ₹80, ₹50 and ₹20 per kg; survey three friends and graph individual and total quantities.
Steps only
There is no single correct quantity because people have different budgets and preferences.
Answer
There is no single correct quantity because people have different budgets and preferences. Record each person’s chosen quantity at all four prices. Usually a lower price leads to buying the same or more, other things equal. Add the four quantities at each price for total market demand, then draw price on the vertical axis and quantity on the horizontal axis.
Question 9
Visit a vegetable market: (a) who decides prices? (b) why can prices be high or low? (c) why might tomatoes cost more in the morning and less by evening?
Steps only
(a) Prices emerge from sellers’ offers and buyers’ willingness to pay, influenced by wholesale prices and competition.
Answer
(a) Prices emerge from sellers’ offers and buyers’ willingness to pay, influenced by wholesale prices and competition. (b) Weather, harvests, transport, season, demand and supply affect prices. (c) Fresh vegetables may be sold more cheaply later to avoid spoilage, or prices may change as supply and buyers change. Observe a local market to test this explanation.
Question 10
Classify these pairs as substitutes or complements: (a) cinema ticket and popcorn (b) eraser and pencil (c) laptop and computer (d) air conditioner and cooler (e) notebook and pen (f) apple and banana (g) mobile and earphones.
(a) Complements; (b) complements; (c) generally substitutes; (d) substitutes; (e) complements; (f) substitutes; (g) complements. Complements are often used together. Substitutes can replace one another, although whether people treat two products as substitutes depends on their needs.
Question 11
Using Fig. 9.8, explain: (a) point E (b) equilibrium price and quantity (c) points A and B and their gap at the upper price (d) points F and C and their gap at the lower price (e) what may happen if the lower price continues.
Steps only
(a) E is where demand and supply curves meet.
Answer
(a) E is where demand and supply curves meet. (b) The graph shows equilibrium at ₹200 and 30 kg. (c) At the upper price of ₹300, A shows quantity demanded of about 20 kg and B quantity supplied of about 40 kg; the gap is a surplus of 20 kg. (d) At ₹100, F shows demand of about 40 kg and C supply of about 20 kg; the gap is a shortage of 20 kg. (e) Buyers may compete for limited goods, putting upward pressure on price toward equilibrium.
Question 12
Draw demand and supply curves for the schedule: prices ₹10, ₹20, ₹30, ₹40, ₹50; demand 5, 10, 15, 20, 25 kg; supply 25, 20, 15, 10, 5 kg. Find equilibrium and explain what happens at ₹20 and ₹40.
Steps only
Plot each price–quantity pair, with quantity on the horizontal axis and price on the vertical axis.
Answer
Plot each price–quantity pair, with quantity on the horizontal axis and price on the vertical axis. The curves meet at ₹30 and 15 kg, so that is equilibrium. At ₹20, demand is 10 kg and supply 20 kg: surplus 10 kg, which puts downward pressure on price. At ₹40, demand is 20 kg and supply 10 kg: shortage 10 kg, which puts upward pressure on price.