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The Price Puzzle: What Drives the Market: CBSE Class 9 Economics practice questions

Practise 50 questions on The Price Puzzle: What Drives the Market, free, with an explanation for each answer.

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Sample questions

Mangoes are costly at the start of the season and much cheaper a few weeks later. The prices of snacks, movie tickets, phones, vegetables and all other goods and services are decided by two powerful forces. What are they?

Two mango stalls, one early in the season and one later, with price tags
  1. Advertising and packaging
  2. Demand and supply
  3. Shop rent and electricity bills
  4. Rumours and festivals
Show the answer

B. Demand and supply

The chapter says prices do not change randomly: they are set by demand (what buyers want and can pay for) and supply (what sellers offer). Seasons, festivals, trends and even rumours matter only because they change demand or supply. Early in the season few mangoes reach the market, so they are dear; when the harvest arrives in bulk, the price falls.

Using Srivalli's demand schedule (₹150 → 1 kg, ₹100 → 2 kg, ₹50 → 3 kg), at which price does she spend the most money on mangoes?

A demand curve for mangoes with three plotted points
  1. ₹100 per kg, spending ₹200
  2. ₹50 per kg, because she buys the most
  3. ₹150 per kg, because the price is highest
  4. She spends the same amount at every price
Show the answer

A. ₹100 per kg, spending ₹200

Total spending = price × quantity: ₹150 × 1 = ₹150, ₹100 × 2 = ₹200, and ₹50 × 3 = ₹150. So she spends the most at ₹100 per kg. Buying the largest quantity (3 kg) or paying the highest price (₹150) does not by itself give the biggest bill, because the other factor is small. The three amounts are not equal, so the last option is wrong too.

In the chapter's mango example, the price falls from ₹150 to ₹50 per kg. Srivalli then buys 2 kg more. But market demand (Srivalli, Alex and Israt together) goes up by 12 kg. Why is the market demand curve flatter than Srivalli's demand curve?

Two demand curves, P and Q, on the same price–quantity axes
  1. Market demand adds up many buyers, so the same fall in price produces a much larger change in total quantity
  2. Sellers charge lower prices in the market than they charge Srivalli on her own
  3. The Law of Demand applies to the whole market but not to individual buyers
  4. Market demand is the average of all buyers' demands, which smooths out the curve
Show the answer

A. Market demand adds up many buyers, so the same fall in price produces a much larger change in total quantity

Market demand aggregates many consumers. For the same ₹100 fall in price, Srivalli's quantity rises by 2 kg (1 → 3 kg) but the market's rises by 12 kg (6 → 18 kg), so the market curve is flatter and more responsive. Everyone faces the same price, the Law of Demand applies to every buyer, and market demand is a sum, not an average.

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