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A schedule shows that at a price of ₹3 demand is 20 units and supply is 45 units, while at ₹2 demand is 35 units and supply is 35 units. The equilibrium price is:
A₹3, because supply is highest there
B₹1, because demand is highest there
C₹2, because demand equals supply there
D₹5, because the price is highest there
Answer & Solution
Correct answer: C. ₹2, because demand equals supply there
1. Equilibrium requires quantity demanded = quantity supplied.
2. At ₹3 there is a surplus (45 supplied vs 20 demanded), so it is not equilibrium; that rules out option A.
3. At ₹2 both demand and supply are 35 units.
4. The market clears only at ₹2, so option C is correct.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit II "Determination of Prices", p.2_
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