This statement is not always true — it should be refuted partially.

For most goods (called normal goods), an increase in income does lead to a rise in demand. When people earn more, they can afford to buy more goods and services, even if prices stay the same.

However, for some goods called inferior goods, demand actually falls when income rises. For example, if a person's income increases, they may stop buying cheap low-quality instant noodles and switch to better food — so demand for the inferior good decreases.

Therefore, while an income rise generally increases demand, it is not a universal rule for all types of goods.

• (a) Demand for diesel cars: Increases. Petrol and diesel cars are substitutes. If petrol becomes too expensive, people may switch to diesel cars, so demand for diesel cars rises.
• (b) Demand for electric cars: Increases significantly. People look for cheaper alternatives to petrol. Electric cars do not use petrol at all, so they become much more attractive — demand rises sharply.
• (c) Demand for car accessories: Likely decreases. If petrol is expensive, people drive less or avoid buying new cars, so demand for car accessories (seat covers, car audio, etc.) may also fall.
• (d) Demand for public transport: Increases. As driving a personal car becomes more expensive, people switch to buses, trains, and metros — complementary shift toward cheaper alternatives. Demand for public transport rises.

• (a) Cost of production: The cost of production decreases. Less water is used and yield increases, so the farmer spends less to produce more. Input cost per unit of output falls.
• (b) Willingness to supply: The farmer is now willing to supply more at the same prices because production is cheaper and yield is higher. His supply curve shifts to the right (increases).
• (c) Overall market supply: If many farmers adopt drip irrigation, market supply increases significantly. More crops are available in the market. This increased supply can lead to lower prices for consumers.

Why sellers sell at low prices: During festival sales, sellers deliberately lower prices to attract a very large number of buyers. They aim to sell huge quantities — even at lower profit per item — to earn more total revenue. They also want to clear old stock before new products arrive.

What happens to equilibrium: When prices are lowered below the normal equilibrium price, quantity demanded increases sharply (people buy more). This creates excess demand — sellers may run out of stock. Over time, the market adjusts — either prices rise back or sellers bring more stock.

Who benefits: Both consumers and sellers benefit. Consumers get products at cheaper rates. Sellers benefit from higher total sales volume, brand awareness, and customer loyalty. Sellers also save on storage costs by moving old stock quickly.

Answer: (b) Shortage

When the government sets a price ceiling (maximum price) below the market equilibrium price, it means sellers receive less than what they would earn in a free market. This reduces their incentive to produce and supply the vaccine. At the same time, the lower price increases the quantity demanded by buyers. The result is that quantity demanded exceeds quantity supplied — creating a shortage.

This is why government price ceilings on essential goods sometimes lead to shortages, black-marketing, or rationing, even though they are intended to make goods affordable.

Yes, excessive government regulation can hurt markets. While some regulation is necessary, too much can cause several problems:

• Price distortions: If the government fixes the price of wheat at ₹20/kg while the market price would be ₹30/kg, farmers earn less than their effort deserves. This reduces their motivation to grow wheat, leading to shortages in the long run.
• Difficulty for small businesses: A small restaurant may need dozens of licenses and clearances — for food safety, fire safety, local permissions, and pollution control. The time and cost of complying with all these rules can force small entrepreneurs to give up or avoid starting a business at all.
• Reduced innovation: When price controls prevent sellers from earning good profits, they have no reason to invest in better technology or new products. Farmers will not buy better seeds if they cannot earn adequate returns. This reduces long-term productivity and economic growth.
• Black markets: When legal prices are kept too low, sellers sometimes create black markets where goods are sold illegally at higher prices — making regulation counterproductive.

The correct approach is balanced regulation — enough to protect people but not so much that it discourages business and innovation.

Below is a sample filled table (students should fill their own actual choices). The numbers below are for illustration only:

Graph Observation: As price falls, quantity demanded increases for each person and in total. Each individual demand curve will slope downward. The total (market) demand curve will also slope downward but will be flatter and wider because it aggregates everyone's demand — the same price drop creates a much larger total quantity response.

• (a) Who decides prices: In a vegetable market, prices are mostly decided by the interaction between buyers and sellers. Wholesale prices are set at mandis (wholesale markets) based on the day's supply. Retail sellers then decide their selling price based on what they paid and what local buyers are willing to pay. There is no single person setting prices — it is a market process.
• (b) Why prices are sometimes too high or too low: Prices fluctuate because of changes in supply and demand. Heavy rains or crop failure reduce supply — prices go up. A bumper crop means excess supply — prices fall. Festival season increases demand — prices rise. Off-season demand is low — prices fall. These natural and seasonal forces continuously push prices up or down.
• (c) Tomato prices falling from morning to evening: In the morning, buyers are more and fresh stock is available, so sellers price higher. As the day goes on, leftover tomatoes start to spoil. Sellers prefer to sell remaining stock rather than carry it home (tomatoes cannot be stored for long), so they lower prices in the evening to attract buyers and clear their stock. This is a real-world example of how perishability and remaining supply affect prices within the same day.

• (a) Point E: Point E is the market equilibrium — the point where the demand curve DD' and supply curve SS' intersect. Here, quantity demanded equals quantity supplied.
• (b) Equilibrium Price and Quantity at E: From the graph, the equilibrium price is approximately ₹250 and the equilibrium quantity is approximately 30 kg.
• (c) Points A and B (upper dashed line at ₹300): Point A lies on the demand curve DD' — at ₹300, buyers want a smaller quantity. Point B lies on the supply curve SS' — at ₹300, sellers want to supply a larger quantity. The gap between A and B shows excess supply (surplus) — sellers are offering more than buyers are willing to buy at that high price.
• (d) Points F and C (lower dashed line at ₹200): Point F lies on the demand curve DD' — at ₹200, buyers want a larger quantity. Point C lies on the supply curve SS' — at ₹200, sellers supply a smaller quantity. The gap between C and F shows excess demand (shortage) — buyers want more than sellers are offering at that low price.
• (e) If price stays at the lower dashed line (₹200): There is excess demand — more buyers than goods available. In a free market, competition among buyers pushes prices upward. Sellers realise they can charge more. Prices will rise naturally toward the equilibrium price of ₹250, where demand and supply balance out.

Equilibrium Price = ₹30  |  Equilibrium Quantity = 15 kg

(b) Equilibrium: At price ₹30, QD = QS = 15 kg. This is the market equilibrium.

(c) Analysis at ₹20 and ₹40:

• At ₹20: QD = 20 kg but QS = 10 kg. Demand exceeds supply — Excess Demand of 10 kg (Shortage). Many buyers cannot get the product. Competition among buyers pushes prices upward toward equilibrium at ₹30.
• At ₹40: QD = 10 kg but QS = 20 kg. Supply exceeds demand — Excess Supply of 10 kg (Surplus). Sellers have unsold stock and are forced to lower prices to attract buyers. Price moves downward toward equilibrium at ₹30.