Chapter 9-The Price Puzzle: What Drives the Market-Class 9-Question Answers-Social Science

 

Class 9 History Chapter 9: The Price Puzzle: What Drives the Market – Questions and Answers

The Big Questions:

1. What are the factors that influence the demand for and supply of goods and services in a market? 

1. Demand depends on the price of the good, consumers' income, tastes and preferences, and the prices of related goods.

2. Supply depends on the price of the good, cost of production, technology, and availability of resources.

3. An increase in demand generally raises the quantity demanded, while an increase in supply raises the quantity supplied.

4. Changes in consumer preferences, seasons, and government policies also affect demand and supply.

5. Thus, many economic factors together influence the demand and supply of goods and services in a market.

2. How are prices of goods and services determined through demand and supply interactions? 

1. Prices are determined by the interaction of demand and supply in the market.

2. When demand is greater than supply, prices tend to increase.

3. When supply is greater than demand, prices tend to decrease.

4. When demand equals supply, the market reaches equilibrium price.

5. Therefore, demand and supply together determine the price of goods and services.

3. What is market equilibrium, and does it exist in the real world? 

1. Market equilibrium is the situation where demand equals supply.

2. At equilibrium, buyers and sellers agree on the market price.

3. There is neither excess demand nor excess supply.

4. In the real world, equilibrium may exist only temporarily because demand and supply keep changing.

5. Therefore, market equilibrium is a useful concept for understanding how markets work.

4. How and why does the government intervene in the market? 

1. The government intervenes to protect consumers and producers from unfair practices.

2. It controls the prices of essential goods whenever necessary.

3. It provides subsidies and support to farmers and weaker sections.

4. The government makes laws to promote fair competition and prevent monopolies.

5. Thus, government intervention ensures market stability, consumer welfare, and inclusive economic development.

Questions and Activities

1. An increase in income always leads to a rise in demand for goods. Defend or refute, giving reasons.

Answer:

The statement is not always true.

1. Higher income usually increases the demand for normal goods.

2. Demand for inferior goods may decrease as income rises.

3. People's tastes and preferences also affect demand.

4. Prices of substitute and complementary goods influence demand.

5. Therefore, an increase in income does not always increase demand for all goods.

2. If petrol prices double, what happens to:

a. Demand for diesel cars

Answer: Demand is likely to increase because diesel cars become relatively cheaper to operate.

b. Demand for electric cars

Answer: Demand will increase as people look for alternatives to petrol vehicles.

c. Demand for car accessories

Answer: Demand may decrease because fewer people may buy new petrol cars.

d. Demand for public transport

Answer: Demand will increase because travelling by buses and trains becomes more economical.

3. A farmer traditionally irrigates fields manually (labour-intensive). He installs drip irrigation (a technology upgrade) that reduces water use by 40 per cent and increases yield by 30 per cent. How does this affect?

a. Cost of production

Answer: Cost of production decreases because water and labour are saved.

b. Willingness to supply

Answer: The farmer is willing to supply more at different prices because production becomes more efficient.

c. Overall market supply

Answer: If many farmers adopt this technology, the market supply increases.

4. During online festival sales, the prices of many products are very low. Use the concept of demand and supply to explain why the sellers sell at such a low price. What happens to the equilibrium when the price is lowered? Does this benefit only consumers or sellers as well? Explain.  

Answer:

1. Sellers reduce prices to attract more customers.

2. Lower prices increase the demand for products.

3. Higher sales help sellers clear old stock.

4. Large sales increase total revenue despite lower prices.

5. Consumers get discounts while sellers increase sales and market share.

5. Suppose the government sets a maximum sale price for an essential vaccine below the market-driven price. What is likely to happen? Choose from the options below and elucidate your point. 

Answer: (b) Shortage

Reason:

1. Lower prices increase demand.

2. Producers may reduce supply because profits fall.

3. Demand becomes greater than supply.

4. This creates a shortage of vaccines.

5. Therefore, the correct answer is Shortage.

6. The government levies higher taxes on products such as tobacco and alcohol to promote healthier choices among citizens. Can you find out other goods where price controls have been set in place? What are the reasons for the same?  

Answer:

Examples include:

• Essential medicines

• LPG cylinders

• Electricity tariffs

• Bus fares

• Minimum wages

Reasons:

1. To protect consumers.

2. To prevent overcharging.

3. To ensure affordable essential services.

4. To promote social welfare.

5. To reduce exploitation.

7. Can excessive government regulation hurt markets? Explain with suitable examples.  

Answer:

Yes.

1. It may reduce producers' profits.

2. It can discourage investment and innovation.

3. Businesses face more rules and paperwork.

4. Small businesses may find it difficult to operate.

5. Therefore, government intervention should be balanced.