Arrange the following statements in correct sequence to determine the market equilibrium when the number of firms is fixed.
(A) There is excess demand in the market.
(B) Quantity demanded falls due to law of demand and quantity supplied increases due to law of supply(keeping other factors constant)
(C) The market price would tend to increase.
(D) The market moves towards the point where the quantity that the firms want to sell is equal to the quantity that the consumers want to buy.
Choose the correct answer from the options given below:
Arrange the following statements in correct sequence to determine the market equilibrium when the number of firms is fixed.
(A) There is excess demand in the market.
(B) Quantity demanded falls due to law of demand and quantity supplied increases due to law of supply(keeping other factors constant)
(C) The market price would tend to increase.
(D) The market moves towards the point where the quantity that the firms want to sell is equal to the quantity that the consumers want to buy.
Choose the correct answer from the options given below:
Solution
Starting from excess demand in the market (A), competition among buyers pushes the market price upward (C). As price rises, quantity demanded falls by the law of demand and quantity supplied rises by the law of supply (B). This continues until the quantity firms want to sell equals the quantity consumers want to buy, i.e., equilibrium (D). Sequence: (A), (C), (B), (D).
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