5 Marks Questions

Economics
Chapter 1 Class 7 Economics - Introduction to Demand and Supply

Explain how supply and demand determine the price and quantity of a product in a market using an example of your choice.

• Supply and demand are two forces that affect the price and quantity of a product in a market. Supply is how much of a product sellers are willing and able to offer for sale at different prices. Demand is how much of a product buyers are willing and able to buy at different prices.

• An example of a product that is affected by supply and demand is ice cream . Ice cream is a popular dessert that people like to eat on hot days. The supply and demand of ice cream can change depending on the season , the weather , the cost of production , and the preferences of consumers.

• The price and quantity of ice cream are determined by the interaction of supply and demand in the market. The price is the amount of money that buyers have to pay to buy one unit of ice cream. The quantity is the amount of ice cream that is sold in the market.

• When supply and demand are balanced , there is no excess or shortage of ice cream in the market. This is called the equilibrium point , where the supply curve and the demand curve intersect on a graph. The equilibrium price and quantity are the price and quantity at this point.

• When supply and demand are not balanced, there is either a surplus or a shortage of ice cream in the market. A surplus occurs when the supply of ice cream is greater than the demand for it at the current price. A shortage occurs when the demand for ice cream is greater than the supply of it at the current price. In both cases, the price will adjust until supply and demand are equal again.

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