Detailed notes
Perfect competition has many buyers and sellers, homogeneous products, free entry/exit and firms that accept the market price. In the short run, market price is determined where demand equals supply. A binding ceiling below equilibrium can create shortage; a binding floor above equilibrium can create surplus. Explain effects with labelled curves and equilibrium points.
Worked interpretation
Let Qd=100−2P and Qs=20+2P. Equilibrium: 100−2P=20+2P, so P=₹20 and Q=60. A binding ceiling at ₹15 gives Qd=70 and Qs=50, a shortage of 20 units.
CBSE-style practice
- At price ₹20, Qd=Qs=80. A rightward demand shift with supply unchanged raises equilibrium price and quantity. A binding ceiling below ₹20 creates excess demand.
- Draw a labelled graph or table where it clarifies your reasoning.
- State one limitation or assumption.
Quick revision
Define the term precisely, show formula substitutions when relevant, and distinguish a change in the variable from a change in its determinants.