Economics (030) Class Xii (2014-15) Worksheet Page 13
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21(1)
When the price of apples and grapes rises, consumers will substitute with these fruits
with the relatively cheaper oranges. Thus, demand for oranges will increase and the
demand curve shifts rightwards to D’D’.
(1)
At the prevailing market price (OP), there was an excess demand of AE. In this situation,
buyers would react by competing with each other and raise the market price. As market
price rises, quantity demanded of oranges contracts and the quantity supplied expands.
This process will continued till a new equilibrium price is reached at OP
, where market
1
demand is equal to market supply. OP
is higher than the old price of oranges. (3)
1
Therefore, the equilibrium price of oranges increases and the equilibrium quantity also
increases when the price of apples and grapes rises in Southern India.
(1)
14. Let a consumer consume Good X and Good Y. A consumer attains equilibrium when:
1)
MRS
=
XY
2)
MRS
must be decreasing due to the law of diminishing marginal utility. (1)
XY
MRS
is the number of units of Good Y a consumer in willing to sacrifice for an extra
XY
unit of Good X.
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