Class 12 Economics Index Terms Part I, Chapter 5: Market Equilibrium

Learn CBSE Economics Index Terms for Class 12, Part 1, Chapter 5 Market Equilibrium

1. Market Equilibrium – In economics, market equilibrium occurs when the supply and demand of a commodity or service are such that the price is at its lowest point. This occurs when all buyers and sellers have made sufficient trades to exactly balance their portfolios.

Market equilibrium is a state of an economy that occurs when the supply and demand for a good or service are balanced. This results in a market price where buyers and sellers are each willing to purchase and sell at their current levels. Market equilibrium is one of the fundamental economic principles, which some may argue is mostly in accordance with political views rather than the broader spectrum of economics.

A market equilibrium happens when buyers are able to find the products they want at the price they seek. Market equilibrium arguably is most important in understanding the way in which the economic system functions, because without it, there would be no reason for prices to change in response to demand and supply (volumes).

The market equilibrium is the situation where supply and demand meet at prices that equalise total costs and revenues. This is a situation that will be reached when supply equals demand, with no change in quantity or price.

2. Excess Demand – Excess demand is a market situation in which there is more of the product than what is actually demanded. Excess demand is a demand for a good or service that exceeds the equilibrium quantity or level of output.

Excess demand is any change in quantity demanded that exceeds a change in price. An excess of demand means that there is not enough supply to satisfy consumer demands.

3. Excess Supply – An excess supply is a condition of an economy when a country has more than the normal level of production. In economics, excess supply is the condition where there is more of a product than the market needs to satisfy consumer demand.

In economics, excess supply is the situation in which there are more goods than the demand for them. An excess supply is a situation where there is more of a good than people want to consume. This can be caused by a mismatch between production and consumption levels.

4. Price Ceiling – In economics, the price ceiling is the maximum price allowed to be charged. Price ceilings deter speculation by limiting the amount of goods traded. A price ceiling is a policy that sets the maximum amount of money that a firm or individual may charge for a good or service. This can be used in an attempt to raise the overall price level, lower consumer spending, and encourage sales. A price floor represents a restriction on what the seller will spend on an item at any given time, making it hard for them to sell their goods for less than that price floor.

The price ceiling describes a price at which a good or service can be sold, while the price floor describes a minimum price acceptable for a given quality of goods or services. The most common price ceilings are minimum wages, maximum prices, and tax ceilings.

Price ceilings, also known as price floors, are policy measures that prohibit producers from charging a lower price to consumers than the pre-set price.

5. Price Floor – The significance of a price floor is that it can be used to help ensure that any assistance given comes with price controls. For instance, one might want to set a minimum wage rate as a form of government assistance. But if the lowest paid workers earn more than the minimum wage, then their employers have no reason to provide the benefit. Therefore, there can be no adequate employment for them. So setting a minimum wage does not go far enough to ensure that everyone would get hired at some point. In this case, establishing a price floor might solve this problem by ensuring that if companies do hire low-skilled workers at more than the minimum wage, then they will also pay them more than what they get from providing these services on their own.

A price floor is a price mechanism that ensures a particular minimum price for a product by the seller. This price is set by the government, based on which every seller of products cannot sell below this predetermined price. It does not come into effect when there are no restrictions imposed by the government, such as usury charges, taxes etc. It is an automatic mechanism which makes sure that no one will be able to sell their goods at lower rates than the fixed value stated on the price floor; it helps to keep retail prices affordable, and affordable prices encourage consumption.

The price floor is government intervention in the market, which mandates a minimum price for a specific good or service. The purpose of its establishment is to provide an economic incentive to producers of the good or service, who would otherwise be less inclined to produce due to their lack of profitability.

A price floor is a mandated minimum price that must be paid by all sellers. If a company has to pay more in their decision-making, then there will be less of a benefit from selling its goods or services at that price. The benefits are minimal for those on the lower ends of the market, and if firms are selling those goods and services that only have a small profit margin, then the cost of doing business would be too much for one as an entrepreneur.

6. Marginal Revenue Product of Labour – Marginal revenue product of labour is the additional revenue earned from the last unit of labour employed. It is measured as the additional revenue earned for every additional unit of labour employed.

The Marginal Revenue Product of Labour (MRPL) is the marginal revenue at which a firm will hire additional labour. The marginal revenue product of labour is the profit that accrues to a business from hiring and keeping an additional worker or unit of production. It is calculated by the company as the change in total revenue per unit of labour divided by the change in input costs.

Marginal revenue product is a measure of how much additional revenue an additional unit of output generates in a competitive market. With an increase in the amount of output, the marginal revenue increases, which is a direct result of increased demand.

7. Value of Marginal Product of Labour – The value of the marginal product of labour is the change in output from a given increase in the variable input. The value of the Marginal Product of Labour (MPPL) is the product of the marginal products of inputs, such as labour and capital, employed in an operation. It is used in calculating profit and loss from an operation, and to determine how much profit or loss from an operation can be expected from varying input quantities or technical skills applied to it.

In economics, the value of the marginal product is a measure of the incremental change in utility or value produced by an additional unit of input. It is calculated by multiplying each output (for example, price) and input (for example, the number of workers) to get the marginal product.

This is the rate of change in output or value per unit of input. It thus measures how much a worker’s productivity increases for every unit of labour the worker contributes. A higher value indicates that a worker produces more with each unit of labour, while a lower number indicates that it takes more from each worker to produce the same amount of goods.

We hope that the offered Economics Index Terms for Class 12 with respect to Chapter 5: Market Equilibrium will help you.

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