Class 12 Micro Economics - Chapter Theory of Consumer Behaviour NCERT Solutions | Suppose there are 20 consumers for a goo

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?

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)?

Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2
if she spends her entire income. The prices of the two goods are Rs 6 and Rs 8
respectively. How much is the consumer’s income?

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?

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?

At which point does the SMC curve intersect the SAC curve? Give a reason in support of your answer. 

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

What is the marginal product of an input? 

What is the law of variable proportions? 

Let the production function of a firm be Q=5L1/2K1/2Q=5L1/2K1/2 Find out the maximum possible output that the firm can produce with 100 units of LL and 100 units of KK.

What is the supply curve of a firm in the short run?

Compare the effect of shift in the demand curve on the equilibrium when the number of firms in the market is fixed with the situation when entry-exit is permitted.

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

i. Above the equilibrium price

Ii. Below the equilibrium price

How are equilibrium price and quantity affected when income of the consumers

a) Increase

b) Decrease