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In a competitive industry the demand and supply schedules are: at ₹ 1 demand 60 and supply 5; at ₹ 2 demand 35 and supply 35; at ₹ 3 demand 20 and supply 45. What is the equilibrium price?
A₹ 2
B₹ 1
C₹ 3
D₹ 4
Answer & Solution
Correct answer: A. ₹ 2
1. Equilibrium price is where quantity demanded equals quantity supplied.
2. At ₹ 1, demand 60 exceeds supply 5, so there is shortage.
3. At ₹ 3, supply 45 exceeds demand 20, so there is surplus.
4. At ₹ 2, demand 35 equals supply 35, so equilibrium price is ₹ 2.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit III "Price-Output Determination under Different Market Forms", p.3_
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