Ans.
(i) Market price is determined by the equilibrium between demand and
supply in a market period or very short run. The market period is a period in
which the maximum that can be supplied is limited by the existing stock. The
market period is so short that more cannot be produced in response to increased
demand. The firms can sell only what they have already produced.
(ii) This market period
may be an hour, a day or a few days or even a few weeks depending upon the
nature of the product. For example, in the case of perishable commodities like
fish, this market period may be a day, and for cotton textile industry it may
be a few weeks. What will be the nature of supply curve in a market period? Two
cases are prominent—one is that of perishable goods and the other is that of
non- perishable durable goods which are reproducible.
