Supply & Demand
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Indian Economy and Indian Financial System — JAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is the Law of Demand and how does it relate to price and quantity?
The Law of Demand states that, ceteris paribus, as the price of a good rises, the quantity demanded falls, and vice versa, establishing an inverse relationship between price and quantity demanded.
What is the difference between a change in demand and a change in quantity demanded?
Change in demand shifts the curve; quantity demanded moves along it.
What is the Law of Supply and what relationship does it establish?
The Law of Supply states that, ceteris paribus, as the price of a good increases, the quantity supplied also increases, establishing a direct (positive) relationship between price and quantity supplied.
What does a rightward shift in the supply curve indicate?
An increase in supply at every given price level.
What is meant by 'equilibrium price' in a market?
Equilibrium price is the price at which the quantity demanded by consumers exactly equals the quantity supplied by producers, leaving no surplus or shortage in the market.
What is the concept of 'market equilibrium' and how is it reached?
Point where quantity demanded equals quantity supplied, reached via price adjustment.
How does RBI use interest rates to influence the supply of money in the economy?
RBI raises the repo rate to make borrowing costlier, thereby reducing the money supply and credit demand; it lowers the repo rate to increase liquidity and stimulate demand in the economy.
What is the concept of 'consumer surplus' in demand theory?
Difference between what consumers are willing to pay and what they actually pay.
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