Theory of Consumer Behaviour Class 12 Extra Questions and Answers

easy

Define 'price elasticity of demand'.

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easy

Name the two conditions that determine what a consumer can afford to buy.

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easy

Justify why an indifference curve is typically convex to the origin.

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easy

Evaluate the statement: 'A movement along the demand curve and a shift in the demand curve are the same thing.'

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easy

Propose a reason why the price elasticity of demand for a necessity like salt is highly inelastic.

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easy

Calculate the Marginal Rate of Substitution (MRS) for a consumer moving from bundle A (2 bananas, 15 mangoes) to bundle B (3 bananas, 11 mangoes) on the same indifference curve.

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easy

Justify why a higher indifference curve represents a higher level of satisfaction.

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easy

Calculate the price elasticity of demand if a 10 percent increase in the price of a good leads to a 5 percent decrease in its quantity demanded.

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easy

Define the term 'utility' as it is used in the theory of consumer behaviour.

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medium

Define monotonic preferences.

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medium

Explain the concept of an indifference map.

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medium

Compare the effect of an increase in consumer income on the demand curves for a normal good and an inferior good.

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medium

Analyze why two indifference curves cannot intersect each other.

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medium

Formulate a scenario where an increase in a consumer's income leads to a leftward shift in the demand curve for a specific good. Justify the classification of this good.

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medium

List two factors that can cause a rightward shift in the demand curve for a normal good.

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medium

In a market with two consumers, their demand functions are d1(p) = 25 - p and d2(p) = 30 - 2p. Solve for the market demand when the price of the good is Rs 12.

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medium

Explain the concept of a budget line with its equation.

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medium

Explain the Law of Diminishing Marginal Utility.

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medium

Evaluate the impact on total expenditure on a good if its price increases, given that its price elasticity of demand is -0.5.

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medium

Propose a policy a government could implement to shift the demand curve for electric vehicles to the right. Justify your proposal.

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medium

Analyze whether a consumer with monotonic preferences can be indifferent between the bundle (7 pens, 9 pencils) and the bundle (7 pens, 8 pencils).

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medium

Calculate the price elasticity of demand for a commodity when its price increases from Rs 8 to Rs 10 per unit, and as a result, the quantity demanded falls from 100 units to 80 units. Also, analyze the impact on total expenditure.

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medium

Justify the assertion that for perfect substitutes, the marginal rate of substitution is constant.

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medium

Describe the relationship between Total Utility (TU) and Marginal Utility (MU).

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medium

Identify what the slope of the budget line represents.

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medium

Evaluate the effectiveness of using the Law of Diminishing Marginal Utility to explain the downward slope of the demand curve.

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medium

Explain the difference between a 'normal good' and an 'inferior good'.

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medium

Formulate a brief argument to justify why monotonic preferences imply that the indifference curve must be downward sloping.

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medium

Critique the assumption of Cardinal Utility Analysis that utility is quantifiable and can be expressed in exact numbers. Propose a more realistic alternative assumption.

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medium

Explain the difference between 'substitute goods' and 'complementary goods'.

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medium

A consumer has an income of Rs 100 to spend on two goods, X and Y. The price of good X is Rs 20 and the price of good Y is Rs 10. Analyze how the budget line will change if the price of good X falls by 50 percent.

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medium

Contrast the concepts of a 'shift in the demand curve' and a 'movement along the demand curve' using a relevant example for each.

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medium

Demonstrate how the Law of Diminishing Marginal Utility is used to explain why an individual's demand curve for a commodity is downward sloping.

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medium

Analyze the relationship between Total Utility (TU) and Marginal Utility (MU) using the provided data: Units consumed (1, 2, 3, 4), Total Utility (10, 18, 24, 28).

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hard

Examine the relationship between the price elasticity of demand and total expenditure. Demonstrate with numerical examples for elastic, inelastic, and unitary elastic demand when the price of a good falls.

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hard

Summarize how a change in a consumer's income affects the budget line, assuming prices remain constant.

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hard

Describe the condition for the consumer's optimum or equilibrium.

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hard

Examine the conditions for consumer's equilibrium using indifference curve analysis. Apply this to a situation where the Marginal Rate of Substitution (MRS) is greater than the price ratio (Px/Py).

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hard

Critique the indifference curve analysis by identifying one of its underlying assumptions that may not hold true in a real-world consumption scenario.

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hard

A consumer's income is Rs 80. She buys two goods, A and B, which are priced at Rs 10 and Rs 8 respectively. Solve for the equation of her budget line and calculate its slope.

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hard

Describe three main properties of a standard indifference curve.

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hard

Compare and contrast the effect on a consumer's budget line of a 50 percent increase in income versus a 50 percent decrease in the prices of both goods.

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hard

Justify why a rational consumer's equilibrium is achieved at the point where the budget line is tangent to an indifference curve, and not at a point where it intersects it.

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hard

Create a market demand function by aggregating the following two individual demand functions: d1(p) = 20 - 2p (for p <= 10) and d2(p) = 30 - p (for p <= 30).

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hard

Design a hypothetical budget constraint for a consumer and propose two separate changes that would cause the budget line to pivot outwards on the horizontal axis while the vertical intercept remains fixed.

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Theory of Consumer BehaviourClass 12 Introductory Microeconomics Extra Questions