The table shows the market supply of a good and its market demand before and after a change in consumers’ tastes (fixed number of firms).
| Price (Rs) | Quantity supplied | Quantity demanded (before) | Quantity demanded (after) |
|---|---|---|---|
| 10 | 20 | 100 | 140 |
| 20 | 40 | 80 | 120 |
| 30 | 60 | 60 | 100 |
| 40 | 80 | 40 | 80 |
| 50 | 100 | 20 | 60 |
What are the equilibrium price and quantity before and after the change?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs 30 and 60 units before; Rs 40 and 80 units after
Equilibrium is the price at which quantity demanded equals quantity supplied. Before the change, both are 60 units at Rs 30. After the change, both are 80 units at Rs 40.
Tastes moved in favour of the good, so the demand curve shifted right while supply stayed the same. Both the price and the quantity rose.
NCERT (2026-27): “5.1 Equilibrium, Excess Demand, Excess Supply A perfectly competitive market consists of buyers and sellers who are driven by their self-interested objectives. Recall from Chapters 2 and 4 that objectives of the consumers are to maximise their respective preference and that of the firms are to maximise their respective profits. Both the consumers’ and firms’ objectives are compatible in the equilibrium. An equilibrium is defined as a situation where the plans of all consumers and firms in the market match and the market clears. In equilibrium, the aggregate quantity that all firms wish to sell equals the quantity that all the consumers in the market wish to buy; in other words, market supply equals market demand. The price at which equilibrium is reached is called equilibrium price and the quantity bought and sold at this price is called equilibrium quantity.” “Demand Shift … Now suppose the market demand curve shifts rightward to DD2 with supply curve remaining unchanged at SS0, as shown in panel (a). This shift indicates that at any price the quantity demanded is more than before. Therefore, at price p0 now there is excess demand in the market equal to q0q''0 . In response to this excess demand some individuals will be willing to pay higher price and the price would tend to rise. The new equilibrium is attained at G where the equilibrium quantity q2 is greater than q0 and the equilibrium price p2 is greater than p0.” |