AHSEC CLASS 12 ECONOMIC
CHAPTER:2
THEORY OF CONSUMER BEHAVIOUR
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AHSEC 12th Economic Chapter 2 Questions Banks of last 10 years |
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1. What is inferior good? 1 [2012] 2. Draw a vertical demand curve and state the nature of price elasticity of it.2(2012,15] 3.The total money income of a consumer is M ans he spends his entire money. income on the consumption of two commodities, viz X and Y. The price of X and Y are Px and Py respectively. State the equation of his budget line. 2 [2012,16] 4. Give an example of complementary goods. 1 [2013] 5. If the percentage change in demand is equal to the percentage change in price, then what will be the value of elasticity of demand. 1[2013] 6. Explain how elasticity of demand of a commodity affected by the nature of the commodity.2 [2013] 7. Why does indifference curve slope downward? 2 [2013] 8. Write down the concept of utility function? 2 [2013] 9. Define utility. 1 [2014] 10. Draw a very short run supply curve for perishable commodities. 1 [2014] 11. Why is an isoquant negatively sloped? 2 [2014] 12. State any two factors affecting the supply of a commodity. 2[2014,16]. 13. Define substitute goods. 1 [2015] 14. Define inferior goods.1 [2015,18] 15. State any two assumptions of the law of demand. 2 [2015] 16. Give one example of complementary goods. 1 [2016] 17. Mention any two determinants of market demand.2 [2016] 18. What is marginal rate of substitution?2 [2016] 19. What is a demand function?2 [2016] 1.[2017] 20. What does a vertical supply curve imply? 1 [2017] 21. Why does a budget line slope downward? 2(2017) 22. If the total utilities of 4 and 5 units of a commodity for a consumer are 56 and 60 respectively. Calculate the marginal utility of 4 unit of it for him. 2 [2017] 23.State any two exceptions of the law of demand. 2 [2017] 24. Distinguish between supply and stock.2 [2017] 25. What is indifference curve?1 [2018] |
Model Questions of 1 Mark
1. What is inferior goods? [2012,15,18]
Ans. Inferior goods are those whose demand varies inversely with the income of the consumer.
2.Give an example of complementary goods. [2013]
Ans. Pen and ink.
3. If the percentage change in demand is equal to the percentage change in price, then what will be the value elasticity of demand.[2013]
Ans. E = 1.
4. Define utility. [2014]
Ans. Utility is wants satisfying power of a commodity.
5. Draw a very short run supply curve for perishable commodities.[2014]
Ans:
6. Define substitute goods. [2015]
Ans. Substitute goods are those where one goods can be used for another goods.
7. Give one example of complementary goods. [2016]
Ans. Car and Petrol.
8. What is a demand function?[2017]
Ans. Demand function shows a functional relationship between quantity demanded for a commodity and the factors influencing it.
9.What does a vertical supply curve imply? [2017]
Ans. Perfectly inelastic supply. An indifference curve shows various combinations of two goods that give equal satisfaction to the consumer.
11. If demand for a commodity does not change with a change in price of the, commodity, what would be the elasticity of demand? [2018]
Ans. Zero.
12. What is budget line?
Ans. The budget line represents all bundles of two goods which a can buy with his income and given prices of the goods.
13. What is the slope of the budget line?
Ans. The slope of budget line is - Px/Py.
14. What do the points below the consumer's budget line indicate?
Ans. It indicates those bundles whose cost are less than his money income.
HS 2nd Year Economic Chapter 2 Theory of consumer behaviour Notes, Questions Answers, Solutions
15. What does the rate of substitution between two goods measure?
Ans. It measures the amount of good-2 sacrified to obtain an additional unit of good-1.
16. What is normal good?
Ans. A normal good is one whose demand rises as income rises.
17. Define Complementary goods.
Ans. When two or more goods are used jointly to satisfy a particular want, they are called complementary goods.
18. What is convex preference?
Ans. Convex preference is the amount of good-x increases the rate of substitution between good-y and x diminishes.
19. What is Giffen goods?
Ans. Giffen goods are those whose demand decreases with the fall in its price and vice-versa.
20. What is consumption bundle?
Ans. Consumption bundle are those combination of two goods that a consumer can buy which cost less than or equal to the income.
21. Define final goods.
Ans. Final goods are those goods which are used for final consumption and final investment.
22. Draw a consumer's budget line.
Ans.
23. Which economist have put forward the monetary measurement of utility?
Ans. Cardinalist.
24. What is total utility?
Ans. Total utility is sum total of the utilities enjoyed by a consumer from all units of the commodity.
25. What is Marginal Utility?
Ans. Marginal Utility is the addition made to total utility when a consumer consumes an additional unit of the commodity.
26.What is marginal rate of substitution?
Ans. Marginal rate of substitution implines the rate at which one good can be substituted for another.
27. Give an example of inferior good.
Ans. Low quality bread.
28. What will be the value of marginal utility when total utility is maximum?
Ans. Zero.
29. What is the slope of Indifference curve?
Ans. Marginal rate of substitution.
30. What is the slope of the budget line?
Ans. Price ratio.
Model Questions of 2 Mark
1. Draw a vertical demand curve and state the nature of price elasticity of it. [2012,15]
Ans.
2. The total money income of a consumer is M and he spends bis entire money income on the consumption of two commodities, viz x and y. The price of x and are Px and Py respectively. State the equation of his budget line. [2012,16]
Ans. The budget equation is M=Px X + Py Y.
3. Explain how elasticity of demand of a commodity affected by the nature of the commodity. 2013
Ans. In case of necessary goods, demand is generally inelastic. In case of luxury goods, demand is highly elastic.
4. Why does indifference curve slope downward? (2013)
Ans. Indifference curve slopes downward because if a consumer wants to have more quantity of a commodity, he will have to give up some quantity of other commodity in order to have same level of satisfaction.
5.Write down the concept of utility function. [2013]
Ans: Utility function shows the functional relationship between utility of a commodity and its determinants
HS 2nd Year Economic Chapter 2 Theory of consumer behaviour Notes, Questions Answers, Solutions
6.Why is an isoquant negatively sloped?[2014]
Ans: An isoquant negatively sloped because to produce the same. level of output, a producer have to give up one factor in place of the other factor.
7. State any two factors affecting the supply of a commodity. [2014,16]
Ans. (i) Price of the commodity.
(1) Input prices.
8. State any two assumptions of the law of demand.[2015]
Ans. (1) Income of the consumer is constant.
(ii) Tastes and Preference of the consumer is constant.
9. Mention any two determinants of market demand.[2016]
Ans. (a) Income of the consumers in the market.
(b) Price of the commodity
10. What is marginat rate of substitution? 2016
Ans. Manginal rate of substitution of good-1 for good 2 is defined as the amount of good-2, a consumer is willing to give up to
get an additional unit of good-1.
11.Why does a budger line slope downward? 2017
Ans. Budget line slopes downward because it represents as more of one good can be bought by decreasing some units of the other good.
12. If the total utility of 4 and 5 unit of a commodity for a consumer are 56 and 60 respectively. Calculate the marginal utility of 4 unit of it for him. [2017]
Ans. The marginal utility = 60-56 -4.
13. State any two exception of the law of demand. [2017]
Ans.
(1) The law of demand will not hold good if income of the consumer changes.
(ii) When price of alternative goods changes, the law of demand will not operate.
14. Distinguish between supply and stock. 2017
Ans. (1) Stock is related to a point of time. But supply is related to a period of time.
(2) Stock indicates total quantity of a Commodity available with the firms, whereas supply is that part which is actually brought to the market.
15. Mention any two factors that determined elasticity of
demand.[2018]
Ans. (1) Income of the consumer.
(2) Time.
16. Suppose demand of a commodity is 25 when price is 4. As price rises to 5, quantity of demand falls to 20. Calculate elasticity of demand. [2018]
Ans. Given, Q = 25.
Q1=20
P=4
P1=5
Therefore ED=Q/P X P/Q
=5/1 X 4/25
= 0.8
17. What is diminishing marginal utility?
Ans. Law of diminishing marginal utility states that when a consumer consumes more and more unit of a commodity, marginal utility goes on falling.
18. What is elasticity of demand?
Ans. Elasticity of demand can be defined as the percentage change in quantity demanded divided by percentage change in price.
AHSEC Class 12 Economic Chapter 2 Theory of consumer behaviour Notes, Questions Answers, Solutions
19. What is monotonic preference of a consumer?
Ans. A consumer's preference is monotonic if and only in between any two bundles the consumer prefers the bundle which has more of at least one good and no less of the other good as compared to the other bundles.
20. Define individual demand and market demand.
Ans. Individual demand of a commodity refers to the amount of good bought by a person at different prices. Market demand is the aggregate demand of all individuals for a commodity at various prices.
21. Draw a horizontal demand curve and write down the nature of elasticity of it.
Ans.
The elasticity of demand is perfectly elastic.
22. Write any two characteristics of Indifference curve.
Ans. (1) Indifference curve slopes downward to the right.
(2) Indifference curve is concave to the origin.
23. Write any two causes of shift in demand curve.
Ans:
(1) Change in income of the consumer.
(2) Change in tastes and preference of the consumer.
AHSEC Class 12 Economic Chapter 2 Theory of consumer behaviour Notes, Questions Answers, Solutions
24. Write any two causes of movement in demand curve.
Ans. (1) Rise in prices of the commodity.
(2) Fall in prices of the commodity.
25. Mention any two points of differences between substitute goods and complementary goods.
Ans. (1) Substitute goods can be used for one another whereas complementary goods are used jointly. (u) Substitute goods are competitive in nature. But complementary goods are demanded jointly.
Model Questions of 4 Marks
1. Suppose there are two consumers in a market. The demand function of the first consumer is___
d1(p) = 0 (when P>30)
d1(P) = 30 - P (when P <= 30
The demand function for the second consumer is__
d2(P) = 0 (when P>10)
d2(P) = 20 - 2P (when P<10)
Find out the market demand function.[2012]
Ans. Market demand function,
dm(P) = d1(P) + d2(P) (when P <= 10 =30-P+20-2P =50-3F
Again, dm(P) = 0 (when P>30)
2.The monthly income of a consumer is 400 and he spends his entire income on two commodities x and y. The price of commodity x is Rs. 20 and that of y is 25. In the basis of this__
(i) Draw the budget line of the consumer. (ii) What happen to the budget line, if the price of commodity-y decreases to 20, while the income of the consumer and price of commodity -x remain constant. [2013]
Ans:
3. Mention any three important factors determining price elasticity of demand.[2014]
Ans. (i) Price of the commodity.
(ii) Nature of the commodity.
(iii) Time period.
4. Distinguish between change in quantity supplied and change in supply. [2015]
Ans. When quantity supplied changes (increases or decreases) due to change in price it is referred to as change in quantity supplied. Here the factors affecting supply other than product price remains constant. When this assumption of other things being equal' is dropped and the supply changes as a result of these other factors affecting supply, this is known as changes in supply. Changes in supply causes supply curve to shift either rightward or leftward.
5.Explain with the help of a diagram how the shifting of the demand curve for a commodity affects the equilibrium price and 'output. [2015]
Ans. Due to increase in demand of a commodity, the demand curve shifts rightward that increase in the equilibrium price and output as shown in the diagram (A). Again, due to decrease in the demand of a commodity, the demand curve shift leftward that decrease in equilibrium price and output as shown in diagram (B).
6.What is change in demand? State any three factors that cause shift in the demand curve. [2015]
Ans. Change in demand implies increase or decrease in demand of a commodity because of the changes in other factors affecting demand of a commodity other than price.
The three factors that cause shift in the demand curve are:
(i) Changes in income of the consumer
(ii) Changes in tastes and preferences of the consumer
(iii) Changes in price of the related commodities.
AHSEC Class 12 Economic Chapter 2 Theory of consumer behaviour Notes, Questions Answers, Solutions
7. Explain briefly any four factors affecting supply of a commodity. [2017]
Ans. (i) Price of a commodity: When price rises, supply rises and vice-versa.
(ii) Technological Progress: Technological progress decreases the cost of production and increase the supply of a commodity.
(iii) Input Prices: With the increase in input prices the supply the commodity falls and vice-versa.
(iv) Unit Tax: imposition of unit tax increases the cost of production and decreases the supply of the commodity.
8. Explain the law of supply with the help of supply schedule. [2017]
Ans. The law of supply states that other things remaining constant, when price of a commodity rises, supply of the commodity also rises and vice-versa.
In the schedule, when price rises for a commodity, quantity supplied also rises.
27.Explain the law of demand with the help of a diagram.[2012,14]
Ans:
10. Show with the help of diagram law the market demand curve can be derived from individual demand curve. [2015,18]
Ans. Market demand is the horizontal addition of the individual demand.
Let us take an example that suppose there are 2 individuals (say A and B) in a market and their quantity demand of a commodity at different price is represented in the following table.
11. Distinguish between substitute Quantity goods and Complementory goods.
Ans. (i) Substitute goods are used for one another. But complementary goods are used jointly.
(ii) Substitute goods are competitive in nature whereas complementary goods are cooperative in nature.
(iii) If two goods are substitute the increase in price of one good leads to increase in quantity demand of other good. If two goods are complementary, the increase in price of one good leads to decrease in quantity demand of the other good.
(iv) The example of substitute good is tea and coffee. The example of complementary good is Car and petrol.
12. Suppose quantity demanded of a good is 20 when price is 10. As price falls to 4, the quantity demand rises to 25. Calculate elasticity of demand.
13. Explain the relationship between total utility and marginal utility.
Ans. (i) In the first unit of a commodity, total utility and marginal utility in equal.
(ii) When total utility increases, marginal utility falls.
(iii). When total utility is maximum, marginal utility is zero.
(iv) When total utility decreases, marginal utility becomes negative.
14. Mention any four characteristics of Indifference curve.
Ans. (i) Indifference curve slopes downward to the right.
(ii) Indifference curve is convex to the origin.
(iii) No two indifference curve intersect each other.
(iv) A higher indifference curve shows higher level of satisfaction than the lower indifference curve.
15. Distinguish between movement along the demand curve and shift in the demand curve.
Ans. (i) Movement along the demand curve implies a change in the demand for a commodity due to change its price. But shift in demand curve implies a change in whole demand due to change in factors other than price.
(ii) The position of demand curve doesnot change in movement along the demand curve. But the demand curve shifts to a new demand curve in shift in demand curve.
(iii) Movement along the demand curve may be upward and downward movement whereas shift in demand curve may be rightward and leftward shift.
(iv) In movement along the demand curve price affects demand. But demand affects the price in shift in the demand curve.
16. State the relationship between elasticity of demand and expenditure.
Ans. The expenditure involves in a commodity moves in opposite direction when demand is elastic with the change in price.Demand is incelastic when change in expenditure and change in price moves in same direction. Demand will be unitary elastic when expenditure remains the same.
Model Questions of 6 Marks
1. Show how can the elasticity of demand be measured graphically along a linear demand curve. [2013]
2. Prove that at consumer's optimum point on an indifference curve the marginal rate of substitution is equal to the ratio of the prices. (2013)
3. Explain with the help of a diagram why at consumer's optimum point the budget line should be tangent to an indifference curve. 2015,18
consumer is in equilibrium point 'E' where the budget line is tangent to the indifference curve IC. Bundles If IC, is not affordable to the consumer and all bundles on the IC, are inferior to the consumer. Thus, a consumer will be in equilibrium when the slope of indifference curve and the slope of budget line are equal.
HS 2nd Year Economic Chapter 2 Theory of consumer behaviour Notes, Questions Answers, Solutions
4.What is price elasticity of demand? Explain briefly any two factors determining price elasticity of demand for a good. [2016]
Ans. Price elasticity of demand measures the degree of responsiveness of quantity demand of a good to the change in price.
The two factors affecting price elasticity of demand are:
(1).Nature of a commodity: If the commodity is necessity of life, its demand will not change much when its price changes. Hence elasticity of demand will be low. The demand for luxury items are elastic.
(2) Number of uses: The demand for a commodity which ca be put to several uses, will be relatively elastic.
5.Explain the two bàsic conditions of consume equilibrium assuming that the consumer consum only two commodities.2017
Ans. The two basic conditions of consumer's equilibrium are:
(i) The budget line should be tangent to the indifference curve.
(ii) At the point of equilibrium indifference curve should be convex to the origin.
The first condition implies that the slope of indifference curve must be equal to the slope of budget line. The slope of indifference curve is called marginal rate of substitution and the slope of budger line is called the price ratio. Thus the consumer is in equilibrium where marginal rate of substitution is equal to the price ratio of two commodities. The second condition is that at the point of equilibrium
indifference curve should be convex to the origin.
6.Explain the concepts of change in quantity demanded and change in demand using suitable diagram. [2017]
Ans. Change in quantity demanded is because of the change in price where other factors like income of the consumer, price of related goods, tastes and P preferences etc remains constant. The consumer will move on a same demand curve. There O may be expansion and D Quantity contraction in demand curve. In the diagram (A), change in quantity demanded is as a result of change in price of the commodity.
Change in demand is because of the change in other factors like income of the consumer, tastes and preference of the consumer, price of related commodity etc. While the price of the commodity remains constant. In the diagram (B), as a result of change in demand curve shifts from DD0 to DD1.
AHSEC Class 12 Economic Chapter 2 Theory of consumer behaviour Notes, Questions Answers, Solutions
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Also Read : AHSEC Class 12 Economic Syllabus 2023
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