Tag: economics

True. Government expenditure increases demand. Its one of the components to determine demand. Aggregate demand takes into account all the expenditure incurred in the country during the year. Government spending can be in the form of welfare, pension etc which increases the purchasing power of the people thereby increasing demand. 

Equilibrium state is a state at which the quantity supplied is equal to the quantity demanded. Hence, neither buyers nor sellers want to change their behaviour. They are exact same. Hence, in economics, equilibrium is a situation in which there is no inherent tendency to change. Also, the market clears and becomes stable.

Equilibrium state is a state at which the quantity supplied is equal to the quantity demanded. Hence, neither buyers nor sellers want to change their behaviour. They are exact same. Hence, in economics, equilibrium is a situation in which there is no inherent tendency to change.

Foreign exchange reserves of India Consists of Foreign currency assets held by RBI, gold holding of RBI, Special drawings Rights. Foreign exchange reserves of India are holdings of cash, bank deposits, bonds and other financial assets. 

The period of time, when supply is fully adjusted to change in demand is called long term period. During the long period, all factors of production of inputs in the industry can be converted into variable. In the long run the firms can change the scale of production, the plant size can be changed, etc. Thus, in long run supply can be fully adjusted to the change in demand. 

Under monopolistic competition, if Price is more than Marginal cost there is no optimal utilisation of resources. Optimum utilisation of resources will be achieved only when price = marginal cost. 

In case of excess demand market supply will be less than market demand and equilibrium price and quantity will decrease. Its a situation in market when at the given price the quantity demanded id more than quantity supplied. Due to competition the prices will rise and then buyers will demanding less of the commodity. When the price is high suppliers increase the supply thereby increasing the supply as well as price of the commodity. 

Excess demand is a situation where the demand for a product is more than the supply for the product. In the given question, demand for good X is 30 units and supply for good X is 20 units. Hence, the excess demand is 10 units. 

Price ceiling means that a maximum price that can be charged for a product is fixed by the government. The sellers cannot charge a price beyond it. Price ceiling is done to help the people to get goods at a lower rate and save them from getting exploited. Hence, when the prices are reduced the demand for that commodity increases due to the mechanism of law of demand, while supply decreases, leading to excess demand.

True.
Excess demand generates pressure of demand on the existing supply. As an immediate impact, market price rises. It leads to extension of supply and contraction of demand. Finally, equilibrium is reached in the market where DX=SXDX=SX. This new equilibrium price happens to be higher than the initial equilibrium price.