In a market for a normal good, qD = 300 – 2p and qS = 60 + 2p (p in rupees). Consumers’ incomes rise, so that 40 more units are demanded at every price. At the same time, new firms join, so that 20 more units are supplied at every price. Compared with the old equilibrium:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → the price rises by Rs 5 and the quantity rises by 30 units
Given:
Old demand: qD = 300 − 2p
Old supply: qS = 60 + 2p
New: qD = 340 − 2p (40 more at every price)
New: qS = 80 + 2p (20 more at every price)
Find each equilibrium by setting market demand equal to market supply.
Old equilibrium:
\( 300 - 2p = 60 + 2p \)
\( 4p = 240 \)
\( p = 60 \)
\( q = 300 - 120 = 180 \)
New equilibrium:
\( 340 - 2p = 80 + 2p \)
\( 4p = 260 \)
\( p = 65 \)
\( q = 340 - 130 = 210 \)
The price rises by Rs 5 and the quantity rises by 30 units.
Option (1) the price rises by Rs 10 and the quantity rises by 20 units — this takes only the demand shift, which gives Rs 70 and 200 units.
NCERT (2026-27):
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