NCERT Solutions Class 7 Social Science Chapter 12 Understanding Markets

F R E E S T U D Y M AT E R I A L F O R E V E R Y S T U D E N T

CLASS 7 · SOCIAL SCIENCE

NCERT Solutions

Chapter 12: Understanding
Markets

NCERT Textbook — Exploring Society: India And Beyond (Part I)

BOOK PAGES SECTIONS QUESTIONS MEDIUM

247 – 272 25 50 English

Solutions, notes, sample papers & more at 64 pages

Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

CLASS 7 · SOCIAL SCIENCE · EXPLORING SOCIETY: INDIA AND BEYOND (PART I)

NCERT Solutions — Chapter 12: Understanding Markets
Complete NCERT Solutions for Class 7 Social Science Chapter 12 Understanding Markets — the closing
chapter of Theme E, Economic Life Around Us, in Exploring Society: India and Beyond (Grade 7, Part 1). Every
question in the chapter is answered here: The Big Questions, all eight LET'S EXPLORE boxes, all seven THINK
ABOUT IT boxes, the DON'T MISS OUT question on the Surat map, every question asked in the running text,
Before we move on …, and all ten Questions and activities.

TEXTBOOK BOOK PAGES

Exploring Society: India and Beyond (Part I) (Class 247 – 272
7)

SECTIONS QUESTIONS

25 50

MEDIUM

English

The Big Questions — Page 247
Chapter opening — Theme E, Economic Life Around Us

THE BIG QUESTIONS

Q1 What are markets and how do they function?

A market is any place where people buy and sell goods and services. The chapter's own
definition: “A place where people buy and sell goods is called a market. It is also known as
bazaar, haat (in Hindi), and mārukatté (in Kannada).” It need not be a place at all — today a
market can be an app or a website.
A market functions when three things come together:

a buyer who wants the goods

+ a seller who has the goods
+ a price both of them accept

= a transaction

Watch it work on the guava cart of Fig. 12.4–12.7:

The seller asks ₹80 per kg. The buyer thinks this is too high and offers less.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

The seller refuses at first, because too low a price would not be profitable.
They negotiate and bargain until a mutually agreeable price is reached — and only then
does the sale happen. If no such point is reached, “the transaction may not take place”.

Repeat this thousands of times and something bigger appears. The quantity that sellers bring
and the quantity that buyers want together settle a price “that is just right, high enough for the
seller, and low enough for the buyer”. The seller also learns roughly how many kilos the market
wants, and brings that much next time.

Why it happens: price is a message, not just a number. A high price tells sellers
“bring more”; a low price tells buyers “buy more”. The market keeps adjusting until
the two messages agree.

Q2 What is the role of markets in people's lives?

The market's first role is economic: it lets people get what they cannot make themselves.

ROLE WHAT THE CHAPTER SHOWS

Access to goods and Individuals, households and businesses obtain food, clothes, phones,
services refrigerators and services through markets — “markets connect people,
traditions, and ideas”.

Linking producers The chain of Fig. 12.11 carries a farmer's grain or a Surat saree all the way to a
and consumers shop near your home.

Supplying inputs to Surat's cloth makers buy raw cotton from cotton mandīs in Maharashtra and
producers Gujarat; without that market the looms would stop.

Employment and About 3,000 women own and run every shop in Ima Keithal, Imphal — an
income important source of income for thousands of families.

Guiding what gets When many buyers ask for low-electricity refrigerators, producers get the signal
produced and make them — and society gains energy-efficient appliances.

Relationships and Families keep the same tailor, jeweller and doctor for decades and run a
culture monthly account with the local grocer; Ima Keithal is “a melting pot of cultures”.

So markets have a non-economic significance too. As the chapter puts it, interactions in
markets “often move beyond just enquiring about the product or service or negotiations
between parties”.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Q3 What role does the government play in markets?

Markets run on demand and supply, but “there are some situations in which this may not work
very well”. The government is the referee in those situations. The chapter names four jobs.

WHAT THE EXAMPLE FROM THE CHAPTER
GOVERNMENT DOES

1. Controls prices to protect Maximum price on essentials such as life-saving drugs; minimum price for wheat,
buyers and sellers paddy and maize so farmers do not make a loss; minimum wages so employers
pay workers fairly

2. Ensures quality and safety Sets approval procedures for medicines and does sample testing so an unsafe
standards drug never reaches a patient

3. Mitigates the external Strict regulation where production pollutes — for example single-use plastics;
effects of markets systems to check the weights and measures of packaged goods

4. Provides public goods Public parks, roads, policing and welfare provisions, which no producer would
supply because there is no profit in them

Tip: the chapter also warns of the opposite danger — “too many rules can make it
difficult for markets to function properly”, and a price cap fixed too low leaves
producers with no motivation to produce. Good regulation is a balance, not a
maximum.

Q4 How can consumers assess the quality of goods and services they purchase?

Three practical ways, all used in the chapter.

Read the label. The gram-flour packet of Fig. 12.29 carries ten pieces of information: net
quantity, date of manufacture, best-before date, MRP, batch number, name and address of
the manufacturer, nutrition facts panel, ingredients list, allergen declaration, and the FSSAI
mark with its licence number.
Look for the government certification mark. Its presence “confirms that the product
fulfills the minimum quality standards”.
Use other people's experience — the reputation built by word of mouth, and online
reviews and feedback from other consumers when shopping online.

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Class 7 Social Science Chapter 12 Understanding Markets
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co m
m.
MARK STANDS FOR FOUND ON

m as e
FSSAI
.coIndia
Food Safety & Standards Authority of
a g l
Food packets and cartons — food tested

a s em by the government and safe to consume

l
aISIg Mark Indian Standards Institution mark, issued Electrical appliances, construction
by the Bureau of India Standards (BIS) materials, automotive tyres, paper

co m
AGMARK “Ag” for agriculture
e m . Vegetables, fruits, cereals, pulses, spices, ag
g l as honey

BEE Star Bureau of Energy Efficiency
a TVs, laptops, air conditioners — more
rating stars = less energy used
co m
em.
m l as
.co
Why it happens: a buyer cannot test a medicine or weigh a sealed packet in the
a g
a s em A certification mark transfers the testing job to a government agency the
gl buyer can trust, so a quick glance replaces a laboratory.
shop.
a
m a s
em
.co agl
las
In-text Questions — Page 250
ag
What is a Market? — the many names of the bazaar

co m
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Q1 What is it called in your region?
m as e
.co a g l
a s em
gl

a The same idea carries a different name in almost every Indian language — and often more than

se m
com a
one name, depending on whether it is a daily shopping street or a market that appears on a
fixed day.
. a g l
m
ase
agl

co m
m .
m as e
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se m
g l a
a c
m .
m a s e
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g l as
a

co m
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m as e
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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

LANGUAGE / REGION WORD FOR A MARKET

Hindi, Urdu, and much of north India bāzār; a periodic village market is a haat or penth

Kannada (Karnataka) mārukatté, sante

Tamil Nadu kaḍai vīdhi, sandhai

Telugu (Andhra Pradesh, Telangana) bajāru, santa

Malayalam (Kerala) chanta, angāḍi

Marathi (Maharashtra) bāzārpeth, āṭhavḍī bāzār (weekly market)

Bengali, Odia, Assamese (east and north-east) bāzār, hāṭ

Gujarati bajār, gujarī

Punjabi bāzār, maṇḍī

Check it yourself: ask at home for the local word for the market that comes only on
one day of the week. That word is usually much older than the word for the
shopping street, because periodic markets are the older form.

LET'S EXPLORE — Page 251
The Glorious Hampi Bazaar, Karnataka

LET'S EXPLORE

Q1 Can you imagine what this bazaar must have looked like during its peak?

Yes — and the two Portuguese travellers quoted in the chapter give us enough to picture it.
Stand in front of the Virupaksha temple in the 16th century. A long, straight, colonnaded street
runs away from the temple gopuram, lined on both sides with pillared stone pavilions. Under
them, sellers sit behind heaps of goods:

Food and farm produce — grains, seeds, milk, oil.
Cloth — silk, and “sellers of cloths… they being of cotton”.
Live animals and birds — cows, rabbits, horses, even quails and partridges.
Precious goods — “golden jewels and gewgaws… all kinds of rubies and diamonds and
pearls, with every other kind of precious stone for sale”.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Fodder — “grass and straw in infinite abundance” for the horses and cattle.

Craftsmen are not hidden away in workshops: “There were craftsmen, also, working in their
streets, so that you saw made there…”. So the buyer watched the goldsmith beat the metal and
then bought the finished ornament from the same spot. Add the noise of bargaining in many
languages, foreign traders from Persia and Portugal, temple bells, and the smell of oil and
spices, and you have the market that Domingos Paes called “the best-provided city in the
world”.

Why it happens: Hampi was the capital of the Vijayanagara Empire and “the centre
of flourishing trade”. A powerful, stable capital attracts producers and long-distance
traders, because they know buyers with money will be there. Nuniz himself found
this astonishing — the surrounding country looked “so barren”, yet the city had “an
abundance of everything”. That abundance came from trade, not from local
farming.

Q2 Do you know of any old markets from your state? How would they be similar or
different from today's markets? Discuss with elders in the family and community.

Method. Pick one market in your state that is at least a few generations old — the chapter itself
names four: Khari Baoli spice market in Old Delhi (Fig. 12.15), Johari Bazaar in Jaipur for gems
and jewellery (Fig. 12.17), the flower market of Bengaluru (Fig. 12.16), and Ima Keithal in
Imphal. Then ask an elder three questions: What was sold here when you were young? How did
people pay? How did goods arrive?
A good answer must compare the old and the new on the same points, not just say “it was
different”.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

POINT OF THE OLD MARKET TODAY'S MARKET
COMPARISON

Where it is Usually beside a temple, fort, Same place — old markets rarely move;
river ghat or railway station new ones follow roads and highways

Who sells The same family for Family shops plus chain stores, malls and
generations, often one street online sellers
per trade

Price Fixed by bargaining, every time Mostly printed MRP; bargaining survives
on carts and in haats

Payment Cash, and a credit book settled Cash, cards and UPI / QR code — look at
at month-end the QR code on the guava cart in Fig. 12.4

How goods arrive Bullock cart, boat, head-load Truck, railway, cold-chain van, courier

What stays the same A buyer, a seller, an agreed price — and a relationship of trust that lasts for
decades

Sample answer: “My grandmother shopped at the weekly haat that still sits behind
our bus stand. She says only vegetables, pots, rope and bangles were sold then, and
every price was argued over. Traders came by bullock cart from three villages away.
Today the same haat sells plastic buckets and mobile covers as well, the vegetable
seller has a QR code taped to his weighing scale, and a tempo brings the vegetables
from the mandī by six in the morning. What has not changed is the day — it is still
held on Tuesday, as it has been for as long as anyone remembers.”

LET'S EXPLORE — Page 251

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Fig. 12.4 — the guava seller and the buyer

LET'S EXPLORE

Q1 Observe the illustration. What are these people discussing? Imagine you and your
partner as a buyer and a seller of guavas. Prepare a set of dialogues between both
of you and present it in your class as a skit.

Fig. 12.4, page 251 — redrawn: a guava seller at his hand-cart, a weighing scale and a
QR-code sign on the cart, handing a paper bag to a customer.

What they are discussing: the price. In Fig. 12.4 the seller stands behind a cart heaped with
guavas, a weighing scale on one side and a QR code for digital payment propped against the
fruit. He is holding out a filled paper bag; the buyer has not yet taken it and is still talking. That
is the moment of a market — the goods are ready, the money is ready, and the two are settling
how much.
Skit — a set of dialogues you can use. Two speakers, about two minutes.

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Class 7 Social Science Chapter 12 Understanding Markets
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co m
m.
SPEAKER DIALOGUE WHAT IS HAPPENING

m how much for the guavas?” as e
Buyer
.co
“Bhaiya, Enquiry
a g l
se m “Sixty rupees a kilo, didi. Fresh from Allahabad,
g l a
a
Seller Seller quotes a price and gives a
picked yesterday.” reason for it

m
.co ag
Buyer “Sixty? The cart at the corner is selling at forty-five.” Buyer uses competition as an

sem
argument

Seller
a gla
“His are small and half of them are marked. Look at Seller defends on quality and
mine — no spots. Give me fifty-five.” lowers the price a little

m
Buyer “Forty-five, and I will take two kilos.”
lower price em
.co
Buyer offers a bigger quantity for a

c om g l as
. a
a s em “Two kilos at fifty. Below that I make a loss — I
agl
Seller Seller names his cost: the price
bought them from the mandī at forty.” cannot go below it

a s
com
Buyer “Fifty it is. Weigh them, and put in a couple of extra Agreement

. agl
ones for the child.”

e m
g l as Cash or scan?”
a
Seller “Done. One hundred rupees. Transaction completed

co m
Seller's first ask: ₹60 per kg
m .
m as e
.co
Buyer's first offer: ₹45 per kg
a g l
se m
a
Seller's cost from the mandī: ₹40 per kg
ag l
Agreed price: ₹50 per kg → for 2 kg, ₹50 × 2 = ₹100

se m
Seller's profit: (₹50 − ₹40) × 2 = ₹20
com g l a
m . a
ase
agl
Tip for the skit: keep one prop — a bag of guavas — and make sure the class can
hear three things clearly: the first price, at least two offers in between, and the price
co m
both accept. Those three things are the market.
m .
m as e
.co a g l
a s em
agl In-text Questions — Page 252
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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

After the skit — negotiation and bargaining

Q1 Often the buyers and sellers negotiate and bargain to arrive at an acceptable price.
What type of negotiation and bargaining took place in your skit?

In the skit above the bargaining moved through five recognisable moves. Name them when
you answer — that is what turns a description into an explanation.

1. Anchoring. The seller opened high (₹60) so that even after coming down he would still earn
a profit.
2. Comparison bargaining. The buyer quoted a rival cart's price (₹45) — the commonest move
in any Indian market.
3. Quality bargaining. The seller answered not with a number but with an argument: his fruit
is unspotted and freshly picked, so it is worth more.
4. Quantity bargaining. The buyer offered to take two kilos instead of one. A bigger sale is
worth a lower price per kilo to the seller.
5. The cost floor. The seller revealed that he had paid ₹40 at the mandī. Below that he would
make a loss, so that is the point past which he simply will not go.

The two then met at ₹50 — above the seller's floor of ₹40 and below the buyer's original ceiling.
A small extra (“a couple for the child”) closed the deal without changing the price.

Why it happens: bargaining is really an exchange of information. Neither side
knows the other's limit, so each reveals a little at a time — cost, quality, quantity,
alternatives — until the two limits overlap. If they never overlap, “the transaction
may not take place”, exactly as the chapter says.

THINK ABOUT IT — Page 252
Where bargaining stops

THINK ABOUT IT

Q1 Can you think of a type of market where negotiation is less common and why?

Yes — several. The clearest is the online market, and after it any market where the price is
printed, regulated or fixed by a machine.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

MARKET WHY BARGAINING ALMOST NEVER HAPPENS THERE

Online shopping apps and The buyer and the seller never meet. The aggregator's software
websites shows one price to lakhs of buyers at once; there is no person on the
other side to argue with.

Malls, supermarkets and Goods carry a printed MRP and are billed at a counter. The
branded stores salesperson has no authority to change the price, and the same price
must apply to every customer.

Medicines and other price- The government fixes an upper limit for life-saving drugs. The
controlled goods chemist may not charge more, and has little room to charge less.

Petrol pumps, railway and bus The price is set centrally and the same for everyone; the seller is not
tickets, cinema tickets the price-setter.

Sale of wheat, paddy or maize at The whole point of a minimum support price is that it is not
the government's minimum price negotiable downwards — that is what protects the farmer.

Bargaining survives in exactly the opposite conditions — a haat, a vegetable cart, a fish market,
a bazaar for cloth or jewellery — where each seller sets his own price, no two lots of goods are
identical, and buyer and seller stand face to face.

Why it happens: bargaining is possible only when one seller can charge two
buyers differently. The moment a price has to be the same for everyone — because
it is printed, regulated, or shown on a screen — there is nothing left to bargain
about.

In-text Questions — Pages 252–253
Prices and Markets — the three guava scenarios (Fig. 12.5, 12.6, 12.7)

Q1 What happens when there are many buyers and sellers in the market? How do
prices respond to how buyers and sellers interact in the market?

With many buyers and many sellers, no single person can decide the price. Each buyer can
walk to the next cart; each seller can wait for the next customer. Out of thousands of such small
choices a common, going price appears.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Many buyers wanting guavas → sellers can hold out for more → price rises

Many sellers with guavas → buyers can walk away → price falls

Both forces together → a price “high enough for the seller, and low enough for the buyer”

Prices respond in two directions:

Price responds to the interaction — it moves up when buyers compete for scarce guavas
and down when sellers compete for scarce buyers.
The interaction responds to the price — a high price makes buyers buy less and sellers
bring more; a low price does the reverse. The chapter's own conclusion: over time “the
amount of goods offered by the sellers and the amount required by the buyers help
determine the price”.

Why it happens: with only one seller, the buyer's only choice is to accept or go
home. With many sellers, the buyer's real weapon is the next cart — and it is that
alternative, not the argument, that pulls prices towards a common level.

Q2 What happens in case the seller fixes the price very high?

Look carefully at Fig. 12.5. The price board reads ₹80/-. The cart is still heaped full of guavas.
Seven or eight people are in the picture and almost all of them are walking past; only one or
two have stopped, and nobody is carrying a bag of guavas away.
So at too high a price:

Demand collapses. Buyers find the price “very high” and either offer less or leave.
The goods stay unsold. Guavas are perishable — unsold fruit will rot within days, so this is a
real loss, not just a delayed sale.
The seller's earnings fall, even though the price per kilo is high.

Say the cart holds 50 kg.

At ₹80/kg, suppose only 5 kg sell → earnings = ₹80 × 5 = ₹400

And 45 kg are left to spoil.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Tip: a high price is not the same as high earnings. What the seller actually takes
home is price × quantity sold — and a very high price cuts the second number
faster than it raises the first.

Q3 What happens in case the seller fixes the price very low?

Now look at Fig. 12.6. The board reads ₹20/- and the cart is completely empty — only a few
loose leaves are left on the wooden tray. On the left, buyers are walking away with full bags of
guavas. On the right, a customer is still holding out his money and the seller is spreading his
hands: there is nothing left to sell. A child and several other buyers are still waiting.
So at too low a price:

Demand shoots up and the stock is sold out very quickly.
Many buyers go home empty-handed — being cheap is no use if the goods are gone.
The seller earns too little, perhaps less than his own cost, so he makes a loss and may not
be able to buy stock for tomorrow.

Same cart of 50 kg.

At ₹20/kg all 50 kg sell → earnings = ₹20 × 50 = ₹1,000

If he had paid the mandī ₹25/kg, his cost = ₹25 × 50 = ₹1,250

Result: a loss of ₹250 — and a queue of unhappy customers.

Why it happens: a price that is “not profitable for him”, as the chapter puts it,
cannot last. If sellers keep losing money they stop bringing guavas at all — and then
the buyers who were delighted by the ₹20 price find no guavas in the market next
week.

Q4 Over time the price of guavas is fixed at one that is just right, not very high for the
buyer, not too low for the seller!

Fig. 12.7 shows what “just right” looks like at ₹40/-. The cart still has plenty of guavas on it, the
seller is weighing a lot on his scale, one customer is being served while another examines a
fruit, and two buyers are already walking away with filled bags. Nobody is turned away and

Page 13 of 64

as e
Class 7 Social Science Chapter 12 Understanding Markets
a g l AglaSem · NCERT Solutions

nothing is left to rot. A QR code on the cart shows the payment is as easy as the price is fair.
co m
m.
seSELLER
m l a
.co ag
PRICE FIGURE THE CART AT THE THE BUYERS THE

m
ase
END OF THE DAY

l
a₹g80/kg 12.5 Still full Walk past — priced out Unsold, perishing
stock

m left out, still
coMany
₹20/kg 12.6 Empty within minutes
e m . Sells at a loss ag
g l as holding money

₹40/kg 12.7 Steadily clearing
a Everyone who wants Covers his cost and
guavas gets them
co m
earns a profit

em.
com half of ₹80 and exactly double ₹20 —
₹40 is .exactly g l as
e m a
s
a glathe middle rung of the ladder the seller climbed down and up again.
m a s
. c o agl
And there is a second lesson, which the chapter states straight after the pictures: “the seller can
assess approximately what quantity of m
s e guavas are needed by the buyers and offer that quantity
a does not only settle today's sale — it tells the seller how
in the market in future.” The right lprice
much to bring tomorrow. a g

com
Why it happens: a market has no manager announcing the correct price. It is
m .
o m l a se
g
.c and settles where the cart clears and the profit asurvives.
discovered by trial and error — the seller tries too high, tries too low, watches what

m
ase
happens,

agl
se m
com g l a
THINK ABOUT IT — Page 254
m . a
ase
agl
Late-night vegetables and end-of-season woollens

THINK ABOUT IT

co m
m .
Q1
as e
Vegetables are sold cheaper late at night at the weekly market compared to during
mthe day. Why do you think this is so?
.co a g l
a s em
agl ANSWER
.c
Because by late night the seller's choice is no longer “sell cheap or sell dear” — it is “sell cheap
s e m
m a
. co agl
or lose everything”.

em
g l as
a

com
m .
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.co


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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Vegetables are perishable — spinach and tomatoes will not survive the night on a cart

+ the weekly market closes; there is no shop to store them in

+ carrying unsold stock home costs money and it will be worth even less tomorrow

→ any price above zero is better than throwing them away

→ the seller cuts the price

Two more things push in the same direction:

Fewer buyers are left. Demand falls as the crowd thins, and the remaining sellers compete
hard for the few customers still walking around.
The stock is no longer the best. The freshest bunches were picked by the morning buyers;
what is left is limp, and worth less.

Why it happens: this is supply and demand at their sharpest. Late at night the
supply on the cart cannot be stored and the demand has shrunk. When supply
cannot wait and demand has gone, price is the only thing that can move.

Tip: notice that the buyer pays for the discount too — in freshness. A cheap late-
night purchase must be cooked the same night.

Q2 Garment stores offer heavy discounts on woollen clothing at the end of the winter
season. Why does this happen?

Same logic, stretched over a season instead of a night.

Demand disappears with the cold. Once March arrives nobody wants a sweater, so the
number of buyers falls close to zero.
Storing the stock is expensive. Unsold woollens must be packed, protected from moths
and damp, and kept for eight or nine months — and shelf space is needed for the summer
collection that is already arriving.
Fashions and sizes change. Next winter's designs will be different, so this year's stock will
be harder to sell even then.
Money is locked up. A shopkeeper who has paid the wholesaler for 500 sweaters needs that
money back to buy summer stock. Cash today is worth more than a full godown.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Cost price of a sweater: ₹800 · Normal selling price: ₹1,500

End-of-season price at 40% off: ₹1,500 − ₹600 = ₹900

Profit if sold now: ₹900 − ₹800 = ₹100
Profit if stored for nine months and then sold cheap: close to nothing, plus storage cost

Why it happens: the discount is not generosity. A smaller profit taken today beats a
larger profit that may never arrive — and it frees both money and shelf space for
goods that will sell.

THINK ABOUT IT — Page 255
Physical and online markets compared

THINK ABOUT IT

Q1 What do you think are the pros and cons of online and physical shopping
respectively? Explore this question from the point of view of both, sellers and
buyers.

Four points of view, so build the answer as a four-box grid.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

PROS CONS

Online — Shop from home at any hour, even “thousands of Cannot touch, smell, try on or test the
the buyer kilometres away”; huge variety; prices easy to goods; must wait for delivery; risk of a
compare; online reviews from other consumers; wrong or damaged item; returns are
home delivery; online payment; services such as troublesome; no bargaining; needs a
online classes without stepping out phone, internet and some digital
confidence

Online — Reaches buyers all over the country and abroad Must compete with thousands of other
the seller without a shop; no costly shop rent; open 24 sellers on one screen, so mostly on price;
hours; the aggregator handles packing and pays a commission to the aggregator; bad
delivery; manufacturers can also buy their reviews spread fast; cost of returns and of
inputs online packing perishables

Physical See, touch and test before paying; take the goods Must travel and spend time; limited to
— the home at once; bargain; deal with a shopkeeper what the nearby shops stock; shop
buyer the family has trusted for years; easy exchange; timings; harder to compare prices across
no delivery charge shops

Physical Can persuade a customer face to face; builds a Rent, electricity and staff to pay; only
— the long relationship, even “across generations”; nearby customers; the shop must be
seller immediate payment; no packing or courier cost manned all day; stock is limited by the size
of the shop

Tip: the two are not enemies. Many families now see the product in a physical shop
and buy it online, or order online and collect from the store. A good answer says so.

Q2 Some services require in-person contact like tailoring and cannot be provided
online. Can you suggest other services where physical markets are needed?

Any service where the person, the body or the object must physically be there. The chapter's
own photographs already show two — the salon (Fig. 12.19) and the garment shop (Fig. 12.18).

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

SERVICE WHY IT CANNOT BE DONE ONLINE

Haircut, salon, spa The barber's hands must reach your hair

Dentist, surgery, physiotherapy, vaccination The body must be examined and treated in person

Repairing a cycle, a car, a mobile phone, a washing The mechanic must open the machine
machine

Plumbing, electrical work, carpentry, painting a house The work is on a building that cannot be sent
anywhere

Restaurant meal, roadside chai, street food Cooked food must be eaten hot and fresh, on the
spot

Cinema hall, sports stadium, theatre, temple fair Half the value is being in the crowd

Buying jewellery, spectacles, shoes or a mattress Fit, weight and feel must be checked before buying

Cutting hair of a bride, tailoring a wedding outfit Measurement and fitting need several in-person
sittings

Why it happens: a service can go online only if the whole of it can travel as
information — words, pictures, sound, money. An online class works because
teaching is information. A haircut is not information, so it stays in a physical market.

LET'S EXPLORE — Page 257

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Class 7 Social Science Chapter 12 Understanding Markets
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Fig. 12.11, Movement of Physical Goods in Markets
co m
e m.
m as
LET'S EXPLORE

.co a g l
a s em the diagram and describe the flow of goods from the manufacturer /
gl
Observe
a
Q1
producer to the consumer. What is the role of the wholesaler and the retailer in the
flow?

co m
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g l as
a
Movement of Physical Goods in Markets
manufacture &
purchased by go to
Inputs/ converted into Finished

m
Producers

co
Raw Materials Goods

em.
m l as
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send to reach

sem
Mandis / Warehouses &
Wholesalers

a
Wholesale Markets Distributors

agl
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Retailers Consumers

se m
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a
Fig. 12.11, page 257 — redrawn from the English edition.

co m
m .
m as e
.co a g l
a s em
Fig. 12.11 is a chain of eight links. Read it in order and the whole journey of a shirt, a kilo of rice

agl or a bag of cement becomes clear.
se m
com g l a
m . a
ase
agl

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m as e
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se m
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m a s e
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g l as
a

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m as e
.co


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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Inputs / Raw Materials

purchased by

Producers

manufacture & converted into

Finished Goods

go to

Wholesalers

reach

Warehouses & Distributors

send to

Mandīs / Wholesale Markets

Retailers

Consumers

The chain of Fig. 12.11, redrawn as a single line. The two links the question asks about — the
wholesaler and the retailer — are ringed in orange.

The flow, link by link.

1. Inputs / raw materials — cotton, iron ore, grain, chemicals — are purchased by…
2. Producers, who manufacture and convert them into…
3. Finished goods — cloth, a refrigerator, packed flour — which go to…
4. Wholesalers, who buy in very large quantities. From them the goods reach…
5. Warehouses and distributors, where stock is stored — godowns for grain, cold storage for
perishables — and from where the goods are sent to…
6. Mandīs / wholesale markets, the trading floors for each commodity, from which they go
to…

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

7. Retailers, the shops and stores near your house — and finally to…
8. Consumers — us.

WHOLESALER RETAILER

Buys from The producer or manufacturer directly — The wholesaler, or through a distributor
grains, vegetables and fruits “directly from
the farms”

Quantity Large / bulk Small

Sells to Retailers and big retail stores, in India and The final consumer
abroad

Purpose of Resale Consumption
the sale

Storage Godowns and cold storage (Figs. 12.12, A shop counter and a small back room
12.13, 12.14)

Special job Assesses how much retailers will need, so Increases availability — puts goods and services
in the chain the manufacturer knows what stock to within walking distance of every household; also
keep and supply is never interrupted runs service retail such as salons, cinemas and
restaurants

Why it happens: a mill that makes ten lakh metres of cloth cannot deal with a lakh
of small shopkeepers, and a small shopkeeper cannot buy ten lakh metres. The
wholesaler breaks the bulk and the retailer breaks it again. Where distance or
difficult terrain makes even that hard, distributors bridge the gap — like the milk
middlemen in the AMUL story from Grade 6.

Did you know? The online market skips several of these links. Manufacturers send
bulk stock straight to the warehouse of an aggregator — a website or app that
combines offers from many sellers — which packs the order and delivers it to your
door.

LET'S EXPLORE — Page 262

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Tracing a real supply chain in your own neighbourhood

LET'S EXPLORE

Q1 Ask your nearest retailer about a product, its place of origin, and the chain of
suppliers in the process of the product reaching the shop. Trace this using a flow
chart like Fig. 12.11 and share it in class.

Movement of Physical Goods in Markets
manufacture &
purchased by go to
Inputs/ converted into Finished
Producers
Raw Materials Goods

send to reach
Mandis / Warehouses &
Wholesalers
Wholesale Markets Distributors

Retailers Consumers

Fig. 12.11, page 257 — redrawn from the English edition.

Method — four steps.

1. Choose a product with a clear origin. A packet of tea, a bar of soap, a bag of rice, a school
notebook or a mobile charger works better than a loose vegetable, because the packet itself
prints the manufacturer's name and address.
2. Ask the shopkeeper five questions and write the answers down: Who delivers this to you —
a company van, a distributor, or do you fetch it from the wholesale market? Where is that
wholesale market? Who makes it, and where? How often does the stock come? Does the price you
pay change during the year?
3. Read the label for the manufacturer's name and address and the date of manufacture. That
gives you the far end of the chain even if the shopkeeper does not know it.
4. Draw the flow chart in the shape of Fig. 12.11 — one box per link, one arrow per
movement, and write on each arrow who moves the goods.

What a good answer must contain: at least four named links; the real place at each link, not
just the word “factory”; the arrow labels (“purchased by”, “sent to”, “delivered by”); and one
sentence on what would break if that link disappeared.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Sample answer: “I asked Suresh bhaiya at the grocery shop about a 1 kg packet of
tea.
Tea gardens, Jorhat district, Assam → leaves auctioned at → Guwahati Tea
Auction Centre → bought in bulk by → the blending and packing factory of the
company, near Kolkata → despatched by truck to → the company's distributor in
our district headquarters → whose van delivers every Thursday to → Suresh
bhaiya's shop → sold in 250 g and 1 kg packets to → our family.
He said the distributor's van is the link that matters most to him — when it did not
come during the monsoon floods last year, he had no tea to sell for nine days even
though the factory had plenty in stock.”

DON'T MISS OUT — Page 262

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Surat — the diamond city and its transport network (Fig. 12.24)
co m
em.
m as
DON'T MISS OUT

.co a g l
a s emyou spot the port, highway and railway network on the map in Fig. 12.24? How
gl
Can
a
Q1
do you think they helped make Surat a trading hub?

co m
e m . ag
g l as
a

co m
e m.
m l as
m .co a g
l a se
ag
m a s
m .co agl
l a se
a g Port
River

Airport Surat City

m
.co
0 2.5 5 10 km Railway
Textile Market

em
Road

m a s
l with the same legend.
. co Fig. 12.24, page 261 — Surat City Map, redrawn in simplified
a gform
a sem
agl
se m
m l a
o
Yes — here is where each one is. Look.cat the key in the bottom-right corner of Fig. 12.24 (Surat ag
s m map.
ethe
a
agl
City Map), then find the symbols on

co m
m .
m as e
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se m
g l a
a c
m .
m a s e
e m . co agl
g l as
a

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m .
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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

FEATURE SYMBOL IN THE WHERE YOU SEE IT ON THE MAP
KEY

Port A small ship Two ship symbols on the coast to the south-west of the city,
where the Tapi river meets the Arabian Sea

Railway A hatched (cross- Runs right through the middle of the city, roughly north-east to
barred) line south-west, crossing the river

Road / A plain black line Several, radiating out of the city in every direction and crossing
highway one another at the centre

Airport An aeroplane South-west of the built-up area, close to the coast

Textile A small yellow-green In the heart of the city — sitting almost on top of the railway
Market square line

River (Tapi) Pale blue band Curving through the city from the east and out to the sea

How they made Surat a trading hub.

The port brought the world to Surat. Because the city sits on the west coast, ships could
carry goods to and from West Asia, Africa and Europe. The chapter says exactly this: “The
city's location on the west coast led to the setting up of ports and road networks that
continue to be important today.” Trade here “flourished from the 16th century onwards”.
The railway brings raw material in and finished cloth out. Raw cotton reaches Surat
through cotton mandīs from Maharashtra and other parts of Gujarat (Fig. 12.23); finished
sarees and garments leave for shops all over the country. The textile market sits beside the
railway for exactly that reason.
Roads and highways connect the last mile. Trucks carry cotton from the mandī to the
power looms, cloth from the looms to the dyeing units, and dyed fabric to the wholesale
market — a product “moves from one stage to another through markets”, and every one of
those moves is a road journey.
The airport carries what is small and precious. Surat has the largest diamond industry in
the world, with about 1.5 million (15 lakh) artisans cutting and polishing. Diamonds travel
by air, not by ship.
Together they lower the cost of trade. A city where goods can arrive by sea, rail and road
and leave the same way is a cheap place to buy and sell — so traders, artisans and
wholesalers gather there, and the gathering itself attracts more of them.

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Why it happens: a market needs more than buyers and sellers — it needs a way for
goods to reach the buyers and sellers. Transport is what turns a good location into a
trading hub. Surat also had the second ingredient: “communities of expert artisans
and skilled persons have lived here for centuries; their skills have been passed on
over generations.”

THINK ABOUT IT — Page 263
The Role of Markets in People's Lives

THINK ABOUT IT

Q1 We have discussed different dimensions of markets. Can we imagine what life
might be like without markets? What would happen if farmers did not bring rice,
wheat, dal, vegetables and fruits to the market? What would happen if the
producers of cloth in Surat could not procure inputs like cotton from markets?

Life without markets would mean that every household could use only what it could make
itself. Nobody would be able to specialise, and almost everything we own would vanish from our
lives.

No market → no exchange → every family must produce everything it needs

→ nobody can become skilled at one thing

→ less is produced, and of poorer quality

→ everyone becomes poorer

If farmers did not bring rice, wheat, dal, vegetables and fruits to the market:

Cities and towns would have no food at all, because a city grows nothing. Shops would
empty in days.
Prices of whatever little food remained would shoot up, and the poorest would suffer first.
The farmer too would lose. He would have no income — no money for seeds, fertiliser,
school fees or medicines — and his surplus grain would rot in the village.
Farmers would stop growing a surplus at all and grow only what their own family eats. The
next harvest would be far smaller.

If the cloth producers of Surat could not get cotton:

The power looms would stop. Thousands of factories that spin, weave and dye would fall
idle.

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Everyone down the chain would be hit — dyeing units, wholesalers, the small shopkeepers
and big retail stores across India and abroad who depend on Surat's sarees and ready-made
garments.
Jobs would go, in Surat and in the cotton-growing districts of Maharashtra and Gujarat,
whose farmers would lose their buyer.
Cloth would become scarce and expensive for consumers everywhere.

Why it happens: markets do two jobs at once — they carry goods to those who
need them, and they carry inputs to those who produce. Break either half and the
chain of Fig. 12.11 snaps in the middle. That is why the chapter says markets “help
individuals, households and businesses access goods and services that they need
and cannot produce themselves”.

Tip: the epigraph makes the same point in one line — prosperity comes from the
market that develops “when people need goods and services that they can't create
themselves”.

In-text Questions — Page 263
Aakriti the painter — a product with no ready market

Q1 Can you think of other products which do not have a ready market?

Aakriti paints in oils on canvas. Her work is admired, but “unlike the case of guavas, there are
fewer local buyers and sellers for artwork”. Several other goods and services are in the same
position.

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PRODUCT OR SERVICE WHY THERE IS NO READY MARKET

Paintings, sculpture, art photography Every piece is one of a kind, so there is no going
price to compare with

Handmade crafts — Madhubani painting, bamboo work, Buyers are far away in cities and abroad; the
Channapatna toys, tribal jewellery artisan's village has few of them

Handloom sarees and traditional textiles Compete with cheap mill cloth; buyers who
value them are scattered

Classical music, dance and theatre performances Audiences are small and occasional

A second-hand house, a family's old farmland Very few buyers, and each property is unique

Rare books, manuscripts, antiques, coins Only a handful of collectors want them

Highly specialised skills — a Sanskrit manuscript reader, Very few employers need that skill in any one
a temple-chariot carpenter place

Custom-built machinery Made for one customer; nobody else can use it

Why it happens: a market forms easily when many buyers want the same thing and
many sellers offer it — guavas, rice, soap. When each item is unique and buyers are
few and scattered, no common price ever appears, and buyer and seller struggle
even to find each other.

Q2 How does it affect those willing to buy or sell?

Both sides lose, and in mirror-image ways.

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Class 7 Social Science Chapter 12 Understanding Markets
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co m
m.
THE SELLER (AAKRITI, THE ARTISAN, THE THE BUYER (THE ART LOVER, THE

as e
com
FARMER WITH AN UNUSUAL CROP) COLLECTOR)

. a g l
s em
Cannot find buyers — Aakriti “finds it difficult to find
a
Cannot find the work; may never learn it exists

agl
buyers”

Does not know what price to ask; may sell far below the Cannot judge whether the price asked is fair, because

m
.co ag
true worth there is nothing to compare it with

m
oreto buy
Income is irregular and uncertain; hard to plan s
a
agl
Must travel far or wait long; risk of being cheated by
materials for the next work a fake

Depends on a middleman or gallery that may take a Pays extra for that middleman
co m
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large share

m l as
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Many give up the craft and take other work — the skill
a g
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The choice available shrinks further, and a tradition

l a
dies out is lost

a g
m
Tip: notice the trap. Few buyers → low, uncertain earnings → artists leave the work
a s
m .co
→ even fewer sellers → the market shrinks further. Breaking that circle is exactly
agl
l a se
what fairs, exhibitions and online platforms try to do.
a g

co m
m .
e
What are the different ways in which artists can find buyers for their work today?
as
Q3
m l
.co a g
a s em
gl

a The internet has done for artists what the mandī did for farmers — it has brought scattered
buyers together in one place.
se m
o m g l a
m .c apps that sell art and crafts, and government a
se emporium websites. One listing reaches buyers “thousands
Online marketplaces and aggregator

l a
platforms such as GeM and state
of kilometres away”. ag
Her own social media and website, where she can post photographs of new work, show

. c om
the painting being made, and take orders directly — with no middleman's commission.
m artists gather on the
Exhibitions, art galleries and art fairs, where many buyers andemany
s
m a
o days — a market created on purpose.
.csame agl
m Craft melas and haats such as Dilli Haat and state handicraft emporia, and school, college
l a se
ag and housing-society fairs.
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Commissioned work — portraits, murals for hotels, offices, schools and metro stations;
s e m
. c om
illustrations for books, magazines and packaging.
a g la
s e m
Co-operatives and artisan collectives, which pool many artists' work so that buyers get
asame idea as AMUL for milk.
agl
variety in one place — the

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m .
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.co


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Teaching — art classes, workshops and online courses turn the skill itself into a saleable
service.
Word of mouth, still the strongest of all: one satisfied buyer who shows the painting to
friends brings the next three.

Why it happens: Aakriti's problem was never that nobody wanted her paintings — it
was that the few people who wanted them could not find her. Every solution above
is really a way of solving that one problem: making buyer and seller visible to each
other.

LET'S EXPLORE — Page 263
How markets benefit society — the energy-efficient refrigerator

LET'S EXPLORE

Q1 Consumers prefer to buy refrigerators that use less electricity. When a large
number of consumers begin to ask for refrigerators that use less electricity, what
do you think happens in the network you saw in Fig. 12.11?

Movement of Physical Goods in Markets
manufacture &
purchased by go to
Inputs/ converted into Finished
Producers
Raw Materials Goods

send to reach
Mandis / Warehouses &
Wholesalers
Wholesale Markets Distributors

Retailers Consumers

Fig. 12.11, page 257 — redrawn from the English edition.

The demand travels backwards along the chain of Fig. 12.11 — from the last box to the first —
and every link changes what it does.

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Consumers ask retailers for 5-star, low-electricity models

↑ Retailers see those models sell out and the old ones sit unsold; they order more of them

↑ Mandīs / wholesale markets and distributors pass the order on

↑ Wholesalers — whose job is to “assess how much product is required by retailers” — buy

fewer old models and more efficient ones

↑ Producers get the signal about what consumers would buy and redesign their refrigerators

↑ They order different inputs / raw materials — better compressors, thicker insulation,

improved motors

→ Energy-efficient refrigerators fill the market

What follows:

Producers who do not change lose sales; those who do, gain. Competition pushes efficiency
up further, and the BEE Star rating on the box becomes a selling point.
Consumers gain twice — the appliance costs less to run, so the electricity bill falls.
Society gains: less electricity used means less coal burnt, less pollution, and less pressure on
power stations. The chapter calls this exactly that — “This benefits society through the
production of energy-efficient refrigerators.”

Why it happens: nobody ordered the factory to build a better refrigerator. The
purchase decisions of ordinary buyers acted as a message, and the supply chain
carried that message from the shop counter all the way back to the design table.
This is how markets can serve society even though every person in the chain is only
looking after their own interest.

Try this: look at the star label on the refrigerator at home. Every extra star means a
real saving — a 5-star model can use roughly a third less electricity than a 2-star one
of the same size.

LET'S EXPLORE — Page 265

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Traditions that go beyond buying and selling

LET'S EXPLORE

Q1 Have you observed any such practices in your community or neighbourhood?
Describe the practice as a drawing or in a short paragraph.

What the question is about. The DON'T MISS OUT box on page 265 gives the model: in south
India, sellers of haldi and kumkum give a small quantity of each, free, “as a mark of
auspiciousness and good wishes to the buyer”. It is not a discount and it is not advertising — it
is a courtesy that turns a transaction into a relationship.
What a good answer must contain: (i) who does it — which kind of seller; (ii) what exactly is
given or done; (iii) when — every time, or on a festival, or only for the first sale of the day; (iv)
why people say it is done; (v) one line on what it shows about markets.
Practices you may well find near you:

Jhonga / jhungi / dastūri — the vegetable or grain seller adds a handful extra after
weighing, at no charge.
Bohni or bouni — the first sale of the day is treated as auspicious; the seller may accept a
lower price and touch the money to his forehead or to the goods.
A free sprig of coriander and green chillies with every vegetable purchase; free curry
leaves; a free lemon.
Saunf and mishri (fennel and sugar crystals) offered after a meal at a restaurant or dhaba.
A kalash, coconut or sweet given by the jeweller or cloth merchant at Dhanteras, Pongal,
Bihu or Onam.
The monthly credit book at the grocer's — goods taken all month and paid for at the end,
on trust alone, which the chapter itself mentions.
A free thread and button tucked into the pocket by the tailor; free water at the shop on a
hot day.

Sample answer: “At the flower stall outside our temple, Lakshmi amma has sold
jasmine for as long as I can remember. Whatever we buy, she pulls two extra strands
off the garland and tucks them into the bag ‘for the child'. On the first day of the
month she will not take money from her first customer without touching the coins to
her eyes. She says the extra strands are not a loss — the family that gets them
comes back next week. Amma has bought flowers from her for eighteen years, and
Lakshmi amma still asks after my grandmother by name. It shows that a market is
not only about the price; it is also a place where people know one another.”

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Why it happens: a seller who gives a little extra buys something that money cannot:
trust and a returning customer. That is why the chapter says the market “also has
non-economic significance in many people's lives”.

LET'S EXPLORE — Page 266
Government's Role — controlling prices; the onion

LET'S EXPLORE

Q1 Onions are an important part of the cuisine in most parts of India. In some seasons,
the supply of onions comes down in the market. What do you think happens to the
price of onions when this happens?

The price rises, and often very sharply.

Supply of onions in the market falls

Demand stays almost the same — nearly every kitchen in India needs onions

→ many buyers chase few onions
→ buyers offer more rather than go without

→ the price shoots up

Why the rise is unusually steep for onions in particular:

Demand hardly falls when the price rises. A family that cooks with onions daily will pay
₹60 a kilo rather than change how it cooks — it will simply buy a little less.
Supply cannot be increased quickly. A crop takes months to grow; you cannot manufacture
onions the week they run short.
Onions do not keep well. Storing them for months means losses to rot and sprouting, so
stocks are limited.
Some traders may hold back stock hoping for still higher prices, which makes the shortage
worse.

Why it happens: this is the guava story in reverse. There, too many guavas at too
high a price left the cart full. Here, too few onions with unchanged demand leave
the price climbing until enough buyers drop out for the small supply to go round.

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co m
m.
What will happen if the people supplying onions do not bring the required
e
Q2

com
quantities to the market? What do you think the government should do in this
g l as
. a
em
situation?

a s
a gl

m
What will happen.

Prices rise steeply and stay high; poorerm . c o ag
s e households have to cut onions out of their meals
altogether.
a g la
Some sellers hoard — hold back stock deliberately — because they expect a still higher price

m
tomorrow. That makes the shortage sharper than the crop failure alone would have done.
co
m.
Adulterated, rotten or undersized onions get sold at good prices, because buyers have no

o
choice.
m l a se
m .c dhabas and street-food sellers see their costs jump,asog the price of everything
se cook rises too.
Restaurants,

g l athey
a Farmers who do have onions gain — but only those who kept some stock; the ones whose

a s
com principle is that the government “monitors the
crop failed gain nothing.

.
em and fair determination of price”. Applied to
What the government should do. The chapter's agl
s
interaction between consumers andaproducers,
onions: agl

co m
STEP WHAT IT DOES
m .
m as e
.co
Release its own buffer stock into the market
a g l
Adds supply immediately and pulls the price down

a s eFixma maximum price (an upper limit) on
agl
Stops sellers from charging whatever they like — but must be
onions, as it does for life-saving drugs done carefully, because a limit set too low leaves producers with
“no motivation to produce”
se m
com g l a
m . a
ase
Set stock limits and act against hoarding Forces held-back onions into the market

Import onions from other countries agl Uses the international market to fill the gap at home

Sell onions directly through fair-price outlets
co m
Guarantees at least some onions at a fixed rate to ordinary

m .
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and co-operative vans households

m l as
.co a g
em
Restrict exports for a while Keeps the home market supplied first

a s
agl Longer term: build cold storage and better Fewer onions rot, so the shortage is smaller next time — and

.c
m
warehouses; support farmers with a minimum farmers do not stop growing them after a year of low prices

m a s e
co agl
price in good years

m .
as e
a g l

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m .
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Tip: a complete answer must protect both sides. The consumer needs affordable
onions this month; the farmer needs a price worth growing them for next year.
Protect only one and the problem returns.

THINK ABOUT IT — Page 267
Kauṭilya's Arthaśhāstra on the ghee trade

THINK ABOUT IT

Q1 The practice of rulers protecting consumers is not a phenomenon of modern India.
Kauṭilya's Arthaśhāstra includes instructions for the traders trading in clarified
butter (ghee). It mentions that buyers shall be given 1 / 50 part more as mānasrāva
to compensate for the reduction in quantity owing to (the ghee)…sticking to the
measuring can.

This little rule, more than two thousand years old, is doing exactly what a modern weights-and-
measures law does — making sure the buyer actually receives what the buyer pays for.
The problem it solves. Ghee is thick and sticky. When it is poured out of a measuring can, a film
of it clings to the inside of the can. So a buyer who pays for one measure of ghee carries home
slightly less than one measure. Nobody has cheated; the loss is caused by the ghee itself.
The remedy. The trader must add an extra 1/50 part — called mānasrāva, literally the “flow of
the measure” — to make up for what sticks.

1 ÷ 50 = 0.02 = 2%

On 50 units measured out, the buyer gets 1 extra unit

Buy 1 kg (1000 g) of ghee → extra = 1000 ÷ 50 = 20 g → the buyer takes home 1,020 g

Buy 5 kg → extra = 5000 ÷ 50 = 100 g → the buyer takes home 5,100 g

Why it is remarkable:

It is a consumer-protection law, not a tax or a price rule. Its whole purpose is the buyer's
fair measure.
It is precise — a stated fraction, not a vague instruction to “be generous”. Precision is what
makes a rule enforceable.
It is practical — it accepts that some loss is unavoidable and simply decides who should
bear it: the seller, not the buyer.

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It shows the state taking responsibility for honest weights and measures — precisely what
the paragraph just above it says the government does today for packaged goods.

Why it happens: in any market the seller knows more about the goods than the
buyer does. A buyer cannot see the ghee clinging inside the can. Rules like
mānasrāva — and, today, the FSSAI mark and the printed net quantity — exist to
close that gap in knowledge, so that trust does not depend on the honesty of each
individual trader.

Did you know? The chapter adds a warning immediately after: governments make
rules so that markets work fairly and consumers are not exploited, “however, too
many rules can make it difficult for markets to function properly”. The Arthaśhāstra's
rule works because it is small, clear and easy to follow.

THINK ABOUT IT — Page 267
Providing public goods — how far should the government go?

THINK ABOUT IT

Q1 What are the other areas where you can see the government being involved in the
markets?

Beyond the four roles named in the chapter, the government turns up in the market in many
other ways. Group them and the answer becomes easy to remember.

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ROLE EVERYDAY EXAMPLES YOU CAN SEE

As a buyer Buys wheat and paddy from farmers for the food stores; buys textbooks,
uniforms, medicines, vaccines, buses and defence equipment

As a seller and Railways, post office, electricity boards, public sector banks, oil and steel
producer companies, LPG and kerosene through ration shops

As a builder of Lays out mandīs and regulated agricultural markets, weekly haat grounds, bus
market places stands, cold storage and warehouses, roads and ports

As a rule-maker Licences for shops; food safety inspections; stamping of weighing scales;
printing of MRP; rules for medicine shops; pollution clearances for factories

As a protector of Consumer courts and helplines; action against adulteration and misleading
consumers advertisements; compulsory warning labels on tobacco

As a taxer GST on goods and services; customs duty on imports — which changes what
things cost in the market

As a protector of Minimum wages, safety rules in factories and mines, limits on working hours,
workers ban on child labour

As a supporter of Loans and subsidies for farmers, weavers and small industries; government e-
small producers marketplaces for artisans and small firms

Q2 Are there areas where government intervention needs to be reduced? Discuss with
family or relatives.

How to discuss this. This is a genuine debate, not a question with one right answer — so a
good answer gives a clear position and the other side. The chapter itself supplies the balance:
rules are needed so “consumers are not exploited”, but “too many rules can make it difficult for
markets to function properly”.

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WHERE PEOPLE OFTEN WHY BUT BE CAREFUL,
SAY INTERVENTION BECAUSE…
SHOULD BE REDUCED

Too many licences and Delay and paperwork discourage new Some licences protect safety
permissions to open or run a small sellers; fewer sellers means less — a food stall or a chemist's
shop or business competition and higher prices shop cannot be unchecked

Price caps set too low “If the price is too low, producers Remove the cap on life-saving
would not have any motivation to drugs and the sick cannot
produce” — and the goods vanish afford treatment
from the shelves altogether

Restrictions on where farmers A farmer free to sell to any buyer may The regulated mandī also
may sell get a better price than at one fixed protects the farmer from
mandī being cheated on weight and
payment

Heavy rules on very small traders The paperwork can cost more than Basic hygiene rules must still
— a cart, a haat stall, a home baker the trader earns apply where food is sold

Sample answer: “My uncle runs a small printing press. He said the rule he finds
hardest is not any safety rule but the number of separate offices he must visit each
year to renew permissions — three departments, the same information each time.
He would keep every safety and pollution rule, but wants one online form instead of
three visits. My grandmother disagreed about medicines: she said the price limit on
heart medicines is the only reason my grandfather's treatment is affordable, and
that it must never be removed. We ended up agreeing on a test: keep the rule if
removing it would let someone be harmed or cheated; simplify it if it only costs
time.”

THINK ABOUT IT — Page 268

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Class 7 Social Science Chapter 12 Understanding Markets
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How can consumers assess the quality of products and services? — the marbles
co m
em.
m as
THINK ABOUT IT

.co a g l
a s em is a marbles competition in your neighbourhood with the team in the next
gl
There
a
Q1
street. You want to buy new marbles for the competition. You have ₹150 saved up.
You go to a shop to buy the marbles. What are the qualities you would look for in

co m
. ag
the marbles so that you can win the competition?
e m
g l as
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Two different judgements have to be made at the same time — which marbles are good, and

co m
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how many ₹150 will buy.

m as e
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Qualities to look for

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se m
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QUALITY WHY IT HELPS YOU WIN HOW TO CHECK IT IN THE SHOP
a Strength A marble that chips or cracks on the first Look for cracks and air bubbles inside

m a s
.co agl
strike is useless for a whole competition the glass; tap two together and listen

em
for a clear ring

a s
Size
a gl — a heavier striker
Must suit the game Hold one between finger and thumb; it
hits harder, small marbles are easier to must sit comfortably for a flick

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aim and to pocket

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Roll it on the e
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com a
A truly round marble rolls straight; a flat shop

agl
Roundness and

m.
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l a seWeight
ag
Heavier marbles knock others further Compare two in the palm of your hand
out of the ring

se m
com g l a
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Uniformity If all your marbles behave the same way, Check that the ones in the packet are

m
ase
your practice actually improves your aim of the same size

Attractive colours agl
Easy to spot yours in the dust — and, Look at the packet
honestly, half the pleasure of the game

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Price The budget is fixed at ₹150 Compare price per marble, not price

m l as
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per packet

emSpending the ₹150 well a
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Packet A: 10 marbles for ₹50 → ₹50 ÷ 10 = ₹5 each → ₹150 buys 30 marbles

Packet B: 20 marbles for ₹75 → ₹75 ÷ 20 = ₹3.75 each → ₹150 buys 40 marbles

But if half of Packet B chips in the first round, only 20 are still usable —
fewer than the 30 good ones from Packet A.

The cheaper marble is not the better buy unless it also lasts.

Why it happens: this is exactly what the chapter is teaching. “Every consumer would
need to assess the quality of products that they are buying” — and quality is judged
against the purpose. For a display shelf you would buy the prettiest marbles; for a
competition you buy the strongest and roundest. Same shop, same ₹150, different
choice.

In-text Questions — Page 268

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Fig. 12.29 — reading the label on a packet of gram flour

Q1 Suppose your parent asks you to get a 1 kg packet of gram flour from the nearby
grocer. There are different types of packets available at the shop such as the one
shown below. Observe it carefully. How would you determine that the quality of
gram flour meets the required standards?

Net Quantity : 2 kg Net quantity
Mfg. Date :

Expiry Date : Date of manufacture
Batch No. :
Batch number
Best before date
M.R.P. :

Unit Sale Price :
MRP
Name & address of
the manufacturer
RAISED IN INDIA
JOIN OUR COMMUNITY

MANUFACTURED & MARKETED BY
NUTRITIONAL INFORMATION FSSAI mark &
license number
Nutrition facts panel

fssai
Lic No.

Ingredients list

Allergen declaration

Fig. 12.29, page 268 — redrawn: the back of the packet and the parts of the label the
book points to.

Turn the packet over and read the back. Fig. 12.29 labels ten things printed there, and each one
answers a different question.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

ON THE LABEL WHAT IT TELLS YOU WHAT TO CHECK

FSSAI mark & licence The food has been tested by the The most important single check. No
number government and is safe to FSSAI mark and licence number — do
consume not buy it

Net quantity How much flour is actually inside, Your parent asked for 1 kg — read this
not counting the packet number, do not judge by the size of the
bag

Date of manufacture When it was packed Prefer a recent date; gram flour goes
rancid with age

Best before date Until when it stays good Must be well in the future — never buy
an expired packet

MRP The maximum price the Do not pay a rupee more; compare MRP
shopkeeper may charge, all taxes per kilo across brands
included

Ingredients list What is actually in the packet Pure besan should say gram (chana dal)
and nothing else — watch for cheaper
fillers

Nutrition facts panel Energy, protein, fat, carbohydrate Useful for comparing two brands
per 100 g honestly

Allergen declaration Warns anyone in the family who is Read it if anyone at home has a food
allergic allergy

Batch number Identifies this particular lot Needed if you ever have to complain or
return the packet

Name & address of the Who is responsible for it A real, complete address means a real,
manufacturer traceable company

Then check the packet itself: that it is properly sealed and not torn; that there are no insects,
lumps or damp patches; and that the colour is an even pale yellow.

Check it yourself: look closely at the packet drawn in Fig. 12.29 — its net quantity
reads 2 kg, not 1 kg. So this particular packet is not the one your parent asked for.
That is precisely the point of the exercise: the label, not the look of the bag, tells you
what you are buying.

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Why it happens: you cannot open the packet in the shop, taste the flour or send it
to a laboratory. The printed label and the government mark are the only evidence
available at the moment of buying — which is why the law makes them compulsory.

LET'S EXPLORE — Page 269
BEE Star labels at home

LET'S EXPLORE

Q1 Check out the BEE Star labels on the electronic devices in your home and make a
chart of all the devices in an increasing order of their energy efficiency.

Method. The BEE Star label is a red-and-white sticker or a printed panel that says POWER
SAVINGS GUIDE and shows a row of stars. Look for it on the back or side of the refrigerator, the
air conditioner, the washing machine, the ceiling fan, the water heater, the TV, the LED bulbs and
the inverter. Note the device, the number of stars, and the year on the label. Then arrange the
list from fewest stars to most stars — that is “increasing order of energy efficiency”.

ORDER DEVICE BEE STAR YEAR ON WHAT IT MEANS
RATING LABEL

1 (least Old ceiling fan, ★ (1 star) 2016 Uses the most electricity for
efficient) bedroom the work it does

2 Water heater ★★ 2019
(geyser)

3 Washing machine ★★★ 2021

4 Refrigerator ★★★★ 2022

5 (most Air conditioner ★★★★★ 2024 Uses the least electricity —
efficient) “more stars, more savings”

What a good chart must contain: every device you actually found (not invented ones), its exact
star count, and one line at the end saying which appliance would save the most if it were
replaced. Add a note for any device that carries no star label at all — many older appliances do
not.

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co m
em.
A 5-star refrigerator using about 0.6 units a day vs a 2-star one using about 1.0 unit a day
m l as
.co
Saving = 0.4 units/day → 0.4 × 365 = 146 units a year
m a g
l a se
At ₹7 per unit → 146 × 7 = about ₹1,022 saved every year
a g

. com
Why it happens: BEE stands for the Bureau of Energy Efficiency, and the rating is a
ag
a s
government certification just like FSSAI emor ISI. It turns something invisible — how
much electricity a machine will g l
a consume over ten years — into something a buyer
can see in one glance in the shop. Good for the electricity bill, and good for the
environment.
co m
e m.
m l as
.co a g
em
ag las Questions — Page 269
In-text
Reputation, word of mouth and online reviews

om a s
e
. c
m some product because their friends or relatives agl
s
Have your family members bought
a
Q1

agl
suggested it to them?

c o m
.
m older than any
s e
Almost every family has — and this is one of the oldest ways of judging quality,

. com mark.
certification
a gla
a s em examples: the tailor a cousin recommended; the brand of cement an uncle used for his
gl house; the school bag that lasted a neighbour's child three years; the doctor a colleague
Typical

a
trusted; the tuition teacher an elder sister's friend named; the make of cycle a classmate's family
se m
swears by.
com g l a
m . a
e
ascalls this the reputation of the product, “built through
g l
a has no reason to mislead you and has actually used the
Why it happens: the chapter
word of mouth”. A relative
product for months — so their opinion carries information that no advertisement
co m
m .
se
can. It is free, it is trusted, and it comes from a person you can go back and question.

o m g l a
Its.cmodern form. When you shop online there are no friendsastanding
m
a s e beside you, so the

agl
platform supplies thousands of strangers instead: “online reviews and feedback from other
consumers about products and services help us decide whether to buy or not while shopping
.c
s e m
m a
online.”

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WORD OF MOUTH ONLINE REVIEWS

Who tells A few people you know and trust Thousands of strangers
you

Strength You can ask follow-up questions and see the Sheer numbers, star ratings, photographs and
product at their home videos from real buyers

Weakness Very few opinions; may not suit your need Some reviews are fake or paid for; hard to know
who wrote them

Tip: use reviews the way you would use a friend's advice — read a few of the
middling ones, not only the five-star and one-star extremes. They usually tell you
what the product is actually like.

Before we move on … — Page 270
The chapter in four points

BEFORE WE MOVE ON …

Q1 Markets facilitate exchange between buyers and sellers at a mutually agreed price
which is determined by the demand from buyers and supply by sellers.

This is the heart of the chapter. Unpack it in three moves.

Exchange — a market brings together someone who has goods and someone who wants
them. Without the market, both are stuck.
Mutually agreed price — neither side can impose it. Buyer and seller “negotiate until a
mutually agreeable price is reached”, and if they never reach it, “the transaction may not take
place”.
Determined by demand and supply — with many buyers and many sellers, the price settles
where the quantity offered matches the quantity wanted.

Demand = quantity consumers are willing and able to buy at a price at a given time

Supply = quantity sellers are willing and able to sell at a price at a given time

Guavas at ₹80 → supply large, demand tiny → cart stays full

Guavas at ₹20 → demand large, supply tiny → cart empties, buyers left out

Guavas at ₹40 → the two match → the market clears

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Why it happens: price is the only signal both sides can see. Raise it and buyers step
back; lower it and sellers step back. The agreed price is simply the point where
nobody wants to step back any further.

Q2 Markets have a chain of participants like manufacturers, wholesalers, distributors
and retailers that enables supply of goods to the final consumers.

The chain of Fig. 12.11, in one line: inputs → producers → finished goods → wholesalers →
warehouses and distributors → mandīs → retailers → consumers.

PARTICIPANT JOB IN THE CHAIN

Manufacturer / producer Buys inputs and converts them into finished goods — Surat's power looms
and dyeing units

Wholesaler Buys in bulk from the producer, stores it, and assesses how much retailers
will need

Warehouse / godown / cold Holds the stock safely until it is needed; cold storage saves perishables
storage

Mandī / wholesale market The trading floor for a commodity — grain, cotton, vegetables, spices,
chemicals, automotive parts

Distributor Bridges the gap where distance or terrain makes it hard for a wholesaler to
reach many retailers

Retailer Sells small quantities to the final consumer, for consumption not resale; also
runs service retail — salons, cinemas, restaurants

Aggregator The online short-cut: manufacturers send bulk stock to its warehouse; it
packs and delivers to the buyer's door

Why it happens: production is concentrated — thousands of factories in one city —
while consumption is scattered across a billion people. The chain exists to break
large quantities into small ones, and to move them across distance and time.

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Q3 Markets are also places for interaction as they bring people together and enable
exchange of ideas and traditions.

The market's second life, the one that has nothing to do with money.

Ima Keithal, the Mother's Market of Imphal, is the chapter's best example. About 3,000
women own and run every shop, selling vegetables, traditional Manipuri attire, handloom
and handicrafts and daily essentials. It gives “employment… an important source of income
for thousands of families”, and it is also “a melting pot of cultures” where people from
different communities “exchange ideas and enjoy shared traditions”.
Relationships that outlast generations — families keep the same tailor, jeweller and
doctor for decades, and many Indian families run a monthly account with the local grocer,
settled at the end of the month on nothing but trust.
Customs of goodwill — the south Indian seller who gives a free pinch of haldi and kumkum
“as a mark of auspiciousness and good wishes to the buyer”.
Historically, markets carried ideas as well as goods — Hampi's bazaar drew Portuguese
travellers who then wrote about India for the world to read.

Why it happens: a market is one of the very few places where strangers from
different communities must meet regularly, face to face, and depend on each other.
Where people meet, language, food, festivals and ideas travel with the goods. That is
why the chapter says the market “also has non-economic significance in many
people's lives”.

Q4 The government plays a regulatory role in the markets to promote quality
standards for products and services and fair practices in the market. However,
consumers can also assess the quality of products and services through
certification marks on the products from government agencies and through online
reviews.

Two layers of protection — one from above, one in the buyer's own hands.

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THE GOVERNMENT'S LAYER THE CONSUMER'S LAYER

Sets maximum prices for essentials like life-saving drugs and Reads the label — net quantity, MRP, dates,
minimum prices for wheat, paddy and maize; fixes ingredients, allergens, batch number,
minimum wages manufacturer's address

Sets approval procedures for medicines and does sample Looks for the FSSAI mark on food and its licence
testing number

Regulates production that pollutes, such as single-use Looks for the ISI mark from BIS on appliances,
plastics construction materials, tyres and paper

Monitors weights and measures of packaged products Looks for AGMARK on vegetables, fruits,
cereals, pulses, spices and honey

Provides public goods — parks, roads, policing Compares BEE Star ratings on electronics —
more stars, less electricity

But remembers that “too many rules can make it difficult Uses word of mouth and online reviews from
for markets to function properly” other consumers

Tip: the two layers fit together. The government creates the mark and tests against
it; the consumer uses the mark. Neither works alone — a mark nobody looks for
protects no one.

Questions and activities — Pages 271–272
End-of-chapter exercise

Q1 What are the main features of a market? Recall a recent visit to a market to
purchase a product. What are the different features of a market that you observed
during this visit?

The main features of a market

1. A buyer — someone who needs the goods or services and has the money to pay.
2. A seller — someone who has the goods or services and is willing to part with them.
3. Goods or services to be exchanged.
4. A price both agree on — “price is an important feature in completing a transaction”.
5. Negotiation and bargaining, wherever the price is not fixed in advance.
6. A place or a platform — a haat, a street of shops, a mandī, a mall, or a website or app.
7. A means of payment — cash, card, or a QR code as on the guava cart in Fig. 12.4.

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8. A transaction — the actual handing over of goods and money, which completes the
co m
exchange.
e m.
m l as
.co a g
What a good answer about your own visit must contain: where and when you went, what

a s em
agl as you saw them.
you bought, how the price was decided, how you paid, and at least three of the features above
named

. c om
Sample answer: “Last Sunday I went with my mother to the weekly haat near the
ag
s e
bus stand to buy a school notebook and m vegetables.
Sellers — about forty of them, g
a la with a cart or a mat; four sold vegetables, so
each
there was competition. Buyers — a large crowd, mostly families. Goods —
vegetables, fruit, plastic buckets, stationery, bangles, and a man frying pakoras (a
co m
service, not a good). Price — the notebook had a printed MRP of ₹40 and the
em.
m l as
.co g
shopkeeper would not reduce it; the tomatoes had no printed price at all, and my

em a
a s mother brought them down from ₹40 to ₹35 a kilo by pointing out that some were

agl soft. Payment — cash for the notebook, and the vegetable seller had a QR code on a
card tied to his weighing scale. Transaction — the vegetables were weighed on a

m a s
.co agl
scale with a government stamp on it, put into our cloth bag, and paid for on the
spot.
se m
g l a
a
The most interesting thing was that bargaining worked for vegetables and not for
the notebook — because the notebook's price was printed by its manufacturer.”

co m
m .
o m l a se
Q2 .c
a g
m
Remember the epigraph from a famous economist at the beginning of the chapter?

a s e
l
Discuss its relevance in the context of the chapter you have read.

ag
se m
o m g l a
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The epigraph is by Adam Smith, the 18th-century
m
economist:
a
l a se that develops when people need goods and services that they
“Prosperity emanates from the market
can't create themselves.” ag
Three ideas are packed into that one sentence, and the chapter illustrates every one of them.

co m
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m as e
.co a g l
se m
g l a
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m a s e
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THE IDEA IN WHERE THE CHAPTER SHOWS IT
THE
EPIGRAPH

People cannot A city grows no rice; Surat's looms grow no cotton; Aakriti cannot make her own canvas or
create everything oils. The chapter says markets “help individuals, households and businesses access goods
they need and services that they need and cannot produce themselves”.

That need is what Because families needed vegetables on one particular day, the weekly haat grew. Because
makes a market manufacturers needed raw cotton, the cotton mandī grew. Because buyers wanted goods
appear without leaving home, online markets and aggregators grew.

Prosperity follows The Hampi Bazaar is the chapter's proof. Nuniz found the surrounding country “so
barren”, yet the city had “an abundance of everything therein” — and Paes called it “the
best-provided city in the world”. That abundance came from trade, not from the local soil.
Surat makes the same point today: a port, roads and railways brought trade, and trade
brought a textile industry, the world's largest diamond industry, and 15 lakh skilled jobs.

Why it matters: Smith's point is that prosperity is not created only by producing —
it is created by exchanging. When each person does the one thing they do best and
trades for the rest, everyone ends up with more than if each family made everything
for itself. That is why the chapter's very last section is about the government keeping
this exchange fair: an exchange that cheats one side destroys the trust that creates
the prosperity.

Tip: the flip side is the THINK ABOUT IT box on page 263 — imagine life without
markets, and the epigraph becomes obvious. No exchange, no specialisation, no
prosperity.

Q3 In the example of buying and selling of guavas, imagine that the seller is getting a
good price, and is able to make a profit. He will try to get more guavas from farmers
to be able to sell them at the same price and increase his earnings. What is the
farmer likely to do in this kind of a situation? Do you think he will start thinking
about the demand for guavas in the next season? What is likely to be his response?

What the farmer is likely to do. The seller's extra orders reach him as a simple, unmistakable
message: guavas are selling well. So the farmer will try to supply more.

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Seller earns a good profit → asks farmers for more guavas

→ farmer's guavas sell easily, and at a better price

→ farmer's income from guavas rises

→ farmer decides to grow more guavas next season

How he will actually do it:

Harvest and sell whatever is on his existing trees, including fruit he might earlier have left
unpicked.
Plant more guava saplings, or switch part of a field from another crop to guava.
Spend more on care of the orchard — better saplings, manure, irrigation, protection from
pests — so that each tree yields more.
Try to sell more directly to the wholesaler or the mandī, to keep a larger share of the higher
price.

Yes — he will certainly start thinking about next season's demand, and he must, for two
reasons. A guava tree takes two to three years to bear fruit, so what he plants now is a bet on
demand years ahead. And he has to choose now between guava and the other crops that field
could grow.
His likely response, and its consequence:

ROUND WHAT HAPPENS

This season High price → high profit for farmer and seller

Next season This farmer and every other farmer plants more guavas — they all saw the same high price

The season A very large harvest arrives together → supply exceeds demand → the price falls, perhaps
after sharply

And then Some farmers cut back or switch crops → supply falls → price rises again

Why it happens: price is a signal that travels backwards down the chain of Fig. 12.11
— from consumer to retailer to wholesaler to farmer. But farming has a long delay
built into it, so farmers respond to last year's price. That delay is exactly why a
bumper harvest can crash a price, as it does for the tomato farmers in Question 7.

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Tip: a wise farmer does not respond to one good season alone. He will also ask the
wholesaler what quantity is likely to be wanted, keep some land under other crops,
and look at storage or processing (guava jam, juice) so that a fall in the fresh-fruit
price does not ruin him.

Q4 Match the following types of markets with their characteristics:

Here are the correct pairs.

S.NO. MARKET CORRECT WHY
CRITERION

1 Physical Requires physical “A physical market is where buyers can meet
market presence of buyers and the seller physically” — haats, local shops,
seller malls

2 Online market Buyers and sellers meet They “can transact from a convenient
virtually and can transact location even thousands of kilometres away
at any time from each other”

3 Domestic Lies within the boundaries Buying and selling “within the geographical
market of a nation boundaries of the country” — like the paper
bought from Indian mills to print this book

4 International Goods and services flow Sellers export to another country; buyers
market outside the nation's import from one
boundaries

5 Wholesale Deals in bulk quantities Wholesalers “buy goods in large quantities
market from the producer or manufacturer”

6 Retail market Serves the final consumers Retailers “sell goods to final consumers like
with goods and services us”, in smaller quantities, for consumption
not resale

Tip: the six markets come in three pairs — physical/online (where you meet),
domestic/international (which side of the border), wholesale/retail (how much you
buy). Remember the pairs and you can never mismatch them.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Q5 Prices are generally determined by the interaction between demand from buyers
and supply by sellers. Can you think of products where prices are high despite
lesser number of buyers demanding the product? What could be the reasons for
that?

Yes — plenty. A price is high not only when many buyers want a thing, but also whenever
supply is smaller than even a small demand.

PRODUCT WHY THE PRICE IS HIGH ALTHOUGH BUYERS ARE FEW

Diamonds, gold, emeralds Extremely scarce and costly to mine, cut and polish. Surat's 15 lakh
artisans work on them precisely because the value per gram is
enormous.

An original oil painting Supply is exactly one. However few the buyers, they must bid against
(Aakriti's work, or a famous one another for that single piece.
artist's)

Rare life-saving medicines for Very few patients, but years of research and testing to develop. The
uncommon diseases cost must be recovered from a handful of buyers — which is why the
government caps such prices.

Saffron (kesar), vanilla, some Enormous labour for a tiny yield — thousands of flowers for a few
spices grams.

A Banarasi or Kanjeevaram silk Months of skilled handwork by a shrinking number of weavers.
saree, fine handloom, Pashmina

Antiques, rare coins, old No more can ever be made.
manuscripts, first-edition books

Land in the middle of a city Supply is completely fixed and cannot be increased at any price.

Custom-built machinery, a Designed for one customer; there is no second buyer to share the cost.
made-to-order surgical implant

The reasons, gathered together:

1. Very limited supply — natural scarcity, or a fixed quantity that cannot be increased.
2. High cost of production — rare skill, long training, expensive raw material, years of
research.
3. Uniqueness — one of a kind, so there is nothing cheaper to switch to.
4. Buyers who are willing and able to pay a lot — few in number but with deep pockets.
5. Buyers who have no choice — a patient who needs one particular medicine cannot walk
away.

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as e
Class 7 Social Science Chapter 12 Understanding Markets
a g l AglaSem · NCERT Solutions

6. Brand and reputation, built through word of mouth, which itself adds to what people will
co m
pay.
e m.
m l as
.co a g
s em
Why it happens: price depends on demand and supply relative to each other, not
a
gl demand alone. Ten buyers chasing one diamond will push the price higher than a
aon
thousand buyers chasing a lakh of guavas.

com
m . ag
l a se
Q6 ag that a retail seller of vegetables encountered: A family
Look at the real life situation
came to shop for vegetables. The price of beans that the seller on the cart was

c o m
.
offering was ₹30 / kg. The lady started to bargain with the seller to bring the price

s e m saying he
down to ₹25 / kg. The seller protested and refused to sell at that price

. c
would la then goes to a
ommake a loss at that price. The lady walks away. Theafamily
g
a em
s kg for the beans that is neatly packed in a plastic bag. What are the reasons that
super bazaar nearby. They buy vegetables in the super bazaar where they pay ₹40 /

agl the family does this? Are there factors that affect buying and selling which are not

m a s
agl
directly connected to price?

m.co
l a se
g
a
First, look at what the family actually did with its money.

c o m
.
m paid: ₹40/kg
s e
Cart price: ₹30/kg · Price the lady demanded: ₹25/kg · Super bazaar price
m a 10 ÷ 30 = 33% more
₹40.c−o₹30 = ₹10 more per kg than the cart she walked away from
a gl→
em
as ₹40 − ₹25 = ₹15 more per kg than the price she was fighting for → 15 ÷ 25 = 60% more
a g l
She refused to pay ₹5 extra on the cart, then willingly paid ₹15 extra in the shop.
se m
com g l a
m . a
ase
agl
Why the family does this. Clearly the decision was not about the price at all.

Convenience. All the vegetables, groceries and other needs of the week are under one roof,

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in one trip, with one bill.

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Packaging and hygiene. The beans are “neatly packed”, weighed and sealed — they look

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clean and are easy to carry home.
o l a se
aghas to argue, and nobody
.cTrust in a fixed price. A printed price feels honest. Nobody
m worries that another customer got it cheaper.
l a se
ag
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Trust in the weight. An electronic weighing machine and a printed bill feel more reliable
than a hand-held balance.
s e m
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Perceived quality. Graded, sorted, uniform beans in a chilled display look better than a
a gla
a s emthe same beans.
heap on a cart, even if they are

a l conditioning, lighting, trolleys, no crowd, no dust, no standing in
Comfort of the place.gAir
the sun. Shopping becomes an outing.

com
m .
m ase
.co


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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Extras that come with a shop. A bill for any complaint, card and UPI payment, an exchange
if something is bad, sometimes home delivery, membership discounts and offers.
Bargaining is unpleasant for some people. Arguing over ₹5 with a cart seller can feel
awkward; paying a fixed price avoids it.

Yes — many factors affect buying and selling that are not directly connected to price:

FACTOR PULLS THE BUYER TOWARDS…

Quality, freshness and grading Whichever seller's goods look better

Packaging, hygiene and appearance The packed and sealed product

Convenience — distance, parking, one- The shop closest to the rest of the errands
stop shopping

Trust and long relationship The seller the family has known for years — which is why some families
stay loyal to the cart instead

Reputation, brand and word of mouth The name others recommend

Certification marks, bills and the chance The seller who can be held responsible
to return goods

Comfort of the shopping experience The air-conditioned aisle

Habit and social image Wherever the family already shops

Why it happens: the buyer is never paying for the beans alone. She is paying for
beans plus packaging, comfort, trust, a bill and a guarantee. The cart seller sells only
beans, so his price must be lower. The ₹15 difference is the price of everything else.

Think about it: the cart seller was telling the truth — at ₹25 he would make a loss,
because he too had to buy from a wholesaler. The family did not disbelieve him; it
simply valued convenience more than ₹15. That is a fair market outcome, but it is
worth noticing who ended up with the sale.

Page 55 of 64

Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Q7 There are some districts in India that are famous for growing tomatoes. However,
during some seasons, the situation is not good for farmers. With a large quantity of
harvest, there are reports of farmers throwing away their produce and all their
hard work going to waste. Why do you think farmers do this? What role can
wholesalers play in such situations? What are the possible ways of ensuring that
the tomatoes are not wasted, and the farmers are also not at a loss?

Why farmers throw away their tomatoes. It sounds mad until you do the arithmetic.

A bumper harvest → supply far exceeds demand → the price crashes

Suppose the mandī price falls to ₹2 per kg

But it costs the farmer about ₹4 per kg to pick, crate and transport the tomatoes to the mandī

Selling: he receives ₹2 and spends ₹4 → loses ₹2 on every kilo he sells

Throwing them away: he receives ₹0 and spends ₹0 → loses only what he has already

spent on growing them

→ Selling costs him more than dumping

Three other facts make it worse:

Tomatoes are highly perishable — they rot within days, so there is no option of waiting for
the price to recover.
There is nowhere to keep them. Cold storage is limited and often full or far away.
Everyone harvests at the same time. Every farmer in the district planted after last year's
high price, so all the tomatoes arrive in the mandī in the same fortnight.

What wholesalers can do. The chapter gives them exactly the right job: they “assess how much
product is required by retailers”, which “helps maintain the stock of products with the
manufacturers and ensures an uninterrupted supply of products to the end consumers”.

Buy in bulk and move the surplus out of the district to cities and states where tomatoes
are short — turning a local glut into a national supply.
Store in cold storage and release the stock gradually, so the price does not collapse in one
week.
Tell farmers in advance how much is likely to be needed, so they do not all plant the same
crop.
Contract farming — agree a price with the farmer before the sowing season, so he is
protected from the crash.
Sell to processing units — tomato purée, ketchup, paste and dried tomato factories can
absorb enormous quantities.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Export to neighbouring countries where the crop has failed.

Ways to make sure the tomatoes are not wasted and the farmer is not at a loss

WHAT TO DO HOW IT HELPS

Build cold storage and pack- The chapter's own definition — specialised warehouses that keep low
houses near the growing districts temperatures “to preserve perishable goods”. Storage converts a one-week
glut into three months of supply.

Food processing — purée, ketchup, Processed tomato keeps for a year and can be sold anywhere; it also creates
paste, sun-dried and powdered jobs in the district
tomato

Better transport and a proper cold Refrigerated trucks and good roads let the surplus reach distant markets
chain before it rots

Government price support and Just as it sets a minimum price for wheat, paddy and maize “so that
procurement farmers do not incur losses”, it can buy tomatoes at a floor price when the
market crashes

Farmer producer organisations Selling together gives farmers bargaining power and lets them own their
and co-operatives own storage and processing units — the AMUL idea applied to tomatoes

Staggered planting and crop If the whole district does not sow on the same date, the harvest does not
advice arrive on the same date either

Direct and online selling Selling straight to consumers, apps or big retail chains removes several
middle links and leaves more of the price with the farmer

Crop insurance and market Insurance cushions the bad year; live mandī prices on a phone tell the
information farmer which market is paying most today

Why it happens: the tomato crash is the guava lesson taken to its extreme. Price is
settled by supply and demand — and when supply explodes while demand stays the
same, the price falls below the cost of even bringing the crop to market. Every
solution above works by doing one of three things: storing the surplus,
transforming it, or moving it to where it is wanted.

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Class 7 Social Science Chapter 12 Understanding Markets AglaSem · NCERT Solutions

Q8 Have you heard about or visited a school carnival / fair organized by your school or
any other school? Discuss with your friends and teachers about the kind of
activities organized by students there. How do they conduct selling and negotiation
with the buyers?

Why this activity is set. A school fair is a real market in miniature — students become sellers,
parents and classmates become buyers, and every feature from the chapter appears in one
afternoon.
Typical stalls and activities

TYPE OF EXAMPLES WHICH MARKET IDEA IT
STALL SHOWS

Selling goods Food stall — chaat, lemonade, cakes; craft stall — Producers selling finished
bookmarks, greeting cards, potted plants; a book and goods directly to consumers
toy exchange

Selling Face painting, mehndi, a photo booth, a fortune- Retail of services — like the
services teller's tent, a magic show salons and cinemas in the
chapter

Games Ring toss, housie, dart the balloon, lucky dip Pricing per attempt and prizes
as an incentive

Organisation Buying raw materials in bulk from a wholesaler, Inputs, wholesale buying, a
printing coupons, keeping accounts, advertising with means of payment, and
posters marketing

How students conduct selling and negotiation

Fixing the opening price. They add up what the ingredients cost and add a margin — the
same “cost floor” the guava seller had. Prices are kept in round numbers (₹10, ₹20) so that
change is easy.
Attracting buyers. Calling out, posters, music, free samples of the food, decorated stalls —
competition among stalls is real, because a visitor has only so much money.
Bundling. “Two for ₹15 instead of ₹10 each” — the quantity bargain from the guava skit.
Negotiating. With teachers and parents students usually hold the price; with friends they
give discounts. Sometimes a group buying together gets a better rate.
End-of-day discounts. Exactly the late-night vegetable market of page 254 — unsold
cupcakes are sold half price in the last half-hour rather than wasted.
Payment. Many schools use printed coupons bought at the gate instead of cash, which
keeps accounts clean — a small lesson in how a common means of payment makes a market
work.

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Class 7 Social Science Chapter 12 Understanding Markets
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co m
m.
Sample answer: “Our school held a carnival in December. My class ran a lemonade

m l a se
and sandwich stall. We pooled ₹500, bought lemons, bread and butter from the
o
wholesale.cmarket near the mandī — much cheaper than the corner a g shop — and
m
se out that each glass cost us ₹6 to make. We priced it at ₹10. In the first hour
g l a
worked
anobody came, so we made a poster and stood outside calling out, and after that we
sold steadily. A group of six senior students asked for a discount, and we agreed to
com
.
₹50 for six glasses. In the last twenty minutes we sold the remaining sandwiches at
m ag
l a se
₹5 instead of ₹15 because they would have been thrown away. We ended with
g to the school library fund. What surprised me
₹1,180, a profit of ₹680, whichawent
most was how quickly we started thinking like the guava seller in our textbook —

co m
m.
watching what was left on the table and changing the price because of it.”

m as e
.co a g l
a s em
a glQ9 Choose any 5 products and check out the label with the certification signs discussed
in the chapter. Did you find products that did not have a logo? Why do you think

m a s
agl
this is so?

m .co
l a se
g
a
Method. Pick five products of different kinds, so that different marks come into play — one

m
packaged food, one farm product, one electrical appliance, one electronic device, and one

. co
m
everyday item such as soap, a notebook or a plastic bucket. Then look on the packet or on a

m ase
.co l
metal plate at the back of the appliance.
a g
s m
ePRODUCT
gl a MARK YOU SHOULD WHERE TO LOOK
a EXPECT

se m
Packet of biscuits, atta, milk, spices
com
FSSAI + licence number Back of the packet, near the
g l a
m . a
e
ingredients

a s
Honey, pulses, mustard oil, ghee
agl AGMARK Front label

co m
Moulded on the body or printed
Electric iron, helmet, cement bag, LPG ISI Mark (BIS)
cylinder, water pipe, tyre
m .
on the bag

m l a se
.co
m LED bulb
Refrigerator, air conditioner, TV, ceiling fan, BEE Star rating
ag
Red-and-white “Power Savings

s e
la
Guide” sticker

ag c
Tiny stamp on the inner surface
.
Gold jewellery BIS hallmark

s e m
m a
m . co
Yes, you will certainly find products with no logo. There are several honest reasons and one
e agl
l as
dishonest one.

a g
1. No mark exists for that product. A steel plate, a cotton towel, a wooden stool or a school

m
notebook has no compulsory certification mark, because there is no safety risk to certify.

. co
e m
m l as
.co a g
Page 59 of 64