Class 12 Micro Economics - Chapter Theory of Consumer Behaviour NCERT Solutions | Suppose a consumer can afford to buy 6 u

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?

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

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?

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.

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

Explain why the budget line is downward sloping.

What do you mean by substitutes? Give examples of two goods which are substitutes of each other.

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 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?

Explain the concept of a production function

Why does the SMC curve cut the AVC curve at the minimum point of the AVC curve? 

Explain how price is determined in a perfectly competitive market with a fixed number of firms.

What will happen if the price prevailing in the market is?

i. Above the equilibrium price

Ii. Below the equilibrium price

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?

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?

How is the optimal amount of labor determined in a perfectly competitive market?

How do the equilibrium price and the quantity of a commodity change when the price of input used in its production changes?

Can you think of any commodity on which the price ceiling is imposed in India? What may be the consequence of price-ceiling?

When does a production function satisfy increasing returns to scale?