Class 12 Micro Economics - Chapter Theory of Consumer Behaviour NCERT Solutions | How does the budget line change if the p

A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20.
(i) Write down the equation of the budget line.
(ii) How much of good 1 can the consumer consume if she spends her entire
income on that good?
(iii) How much of good 2 can she consume if she spends her entire income on
that good?
(iv) What is the slope of the budget line?
Questions 5, 6 and 7 are related to question 4.

Suppose your friend is indifferent to the bundles (5, 6) and (6, 6). Are the preferences of your friend monotonic?

Suppose there are 20 consumers for a good and they have identical demand functions: 

d(p)=10–3pd(p)=10–3p for any price less than or equal to 103103 and d1(p)=0d1(p)=0 at any price greater than 103.

What is budget line?

Explain why the budget line is downward sloping.

What do you mean by an ‘inferior good’? Give some examples

Consider the demand curve D (p) = 10 – 3p. What is the elasticity at price 53?

Suppose a consumer wants to consume two goods which are available only in
integer units. The two goods are equally priced at Rs 10 and the consumer’s
income is Rs 40.
(i) Write down all the bundles that are available to the consumer.
(ii) Among the bundles that are available to the consumer, identify those which cost her exactly Rs 40.

Suppose a consumer’s preferences are monotonic. What can you say about her preference ranking over the bundles (10, 10), (10, 9) and (9, 9)?

Explain price elasticity of demand.

Explain the concept of a production function

What would be the shape of the demand curve so that the total revenue curve is?

(a) A positively sloped straight line passing through the origin?

(b) A horizontal line?

Explain market equilibrium.

Discuss the central problems of an economy.

What are the characteristics of a perfectly competitive market?

What is the total product of input?

From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:

When do we say that there is an excess demand for a commodity in the market?

What do you mean by the production possibilities of an economy?

How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?

How are the equilibrium price and quantity affected when?

(a) Both demand and supply curves shift in the same direction?

(b) Demand and supply curves shift in opposite directions?

When does a production function satisfy increasing returns to scale? 

What do the long-run marginal cost and the average cost curves look like? 

What is the marginal product of an input? 

A shift in demand curve has a larger effect on price and smaller effect on quantity when the number of firms is fixed compared to the situation when free entry and exits is permitted. Explain.

Why is the total revenue curve of a price-taking firm an upward-sloping straight line? Why does the curve pass through the origin?

Suppose the market determined rent for apartments is too high for common people to afford. If the government comes forward to help those seeking apartments on rent by imposing control on rent, what impact will it have on the market for apartments?

At what level of price do the firms in a perfectly competitive market supply when free entry and exit is allowed in the market? How is the equilibrium quantity determined in such a market?

Comment on the shape of MR curve in case when TR curve is a

(a) Positively sloped straight line

(b) Horizontal straight line

Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.